From HMOs to anti-social behaviour - here’s the regulation student landlords need to know
The student rental market is growing, reliable and offers landlords the best rental yields in the UK. But landlords who are considering student letting need to do their homework.
The student market differs from the traditional private rented sector (PRS) market in a few important ways and there is regulation around HMOs that you need to comply with. Landlords who don’t fulfil their responsibilities as student landlords could face hefty fines. And those who don’t research the market and build the right relationships may struggle to fill their property or turn a profit.
In this post, we’ll discuss the legal, regulatory and tax implications of renting your property to student tenants. If you have any questions on anything below, feel free to drop us a line on Twitter or LinkedIn for more information.
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Homes in multiple occupation
The majority of student accommodation is made up of homes in multiple occupancy (HMOs). The rules around what constitutes an HMO vary from council to council. As a general rule, if you’re renting to three or more tenants with shared facilities such as bathroom and kitchen, that counts as an HMO. If a property houses more than five tenants and is over three storeys this qualifies as a ‘large HMO’.
Landlords renting out large HMOs need to apply for a licence in order to do so. Landlords with three or more tenants may also have to apply for a licence depending on where they live. You can use this handy GOV.UK portal to find out which rules apply in your area.
If you’re applying for your licence you will need to prove that the facilities provided are suitable for the number of tenants.
You will also need to provide gas and electrical safety certificates for all appliances and maintain smoke and carbon monoxide alarms throughout the property. As of 2018, you also need to provide bedrooms of a certain size: 6.51 metres square for single rooms and 10.22 for doubles.
Landlords who rent out an HMO without the proper licence could receive an ‘unlimited fine’. As we reported at the time, one landlord in Burnley received a £56,000 fine for not complying with HMO regulations, the largest fine ever handed out in the UK for that kind of offence.
While not specific to student lets, it’s also worth mentioning that all landlords need to obtain an Energy Performance Certificate (EPC) for their property. The certificate should be renewed every ten years and properties must achieve a grade of at least E in order to be fit to rent.
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Tenants in full-time education and their landlords are exempt from paying council tax on rental properties. However, it is your responsibility to prove that all of your tenants are in full-time higher education. If you can’t or don’t prove that your tenants are exempt, you may be left responsible for the bill.
Codes of good practice
Lettings agents and landlords can choose to work directly with universities to find tenants. It’s in the university’s interest to help their students find quality accommodation, after all. Most universities will provide guidelines or codes of practice that landlords and agents need to adhere to in order to be recommended. The criteria will differ from uni to uni.
Surrey University, for instance, allows landlords to advertise properties on their website as long as they’re part of a recognised landlord accreditation scheme. Click here to learn more about how they work with trusted local landlords.
It’s worth researching the universities in your area to see if they have similar schemes and, if so, how you can get involved. Working with universities in this way may end up cheaper than finding tenants through lettings agents.
Tenant fee ban
The tenant fee ban affects all landlords, but this new regulation will be particularly hard on those operating HMOs. The upshot of HMOs is obvious – more tenants usually equates to greater yields. However, more tenants also equates to more admin. In the past, this time could be offset against tenant fees, but this is no longer the case.
As some commentators have already pointed out, it’s likely that agents will simply pass the costs that the tenants used to pay onto the landlords. And the landlords will probably pass these costs onto the tenants in the form of increased rents.
So the tenant still pays, at the end of the day. But student landlords need to factor the tenant fee ban into their financial planning and, potentially, adjust rents accordingly.
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A lot of UK universities will have anti-social behaviour policies for their students. These are in place to ensure that students are able to live alongside non-students and help both sides to resolve disputes should they occur.
When students are drawn into an anti-social behaviour dispute, their landlords may become involved as well. The most common anti-social behaviour complaints are due to noise, but can include refusal to empty bins, intruding on others’ property or privacy, and abusive behaviour.
Landlords need to exercise careful judgment in disputes between their tenants and their tenants’ neighbours. As property owners, they are obliged to make sure that the occupants of their property don’t distress members of the community.
However, they also need to maintain a good relationship with their tenants. Rather than picking sides, landlords should try to facilitate the discussion and encourage both sides to reach a resolution.
If landlords do decide to take action against tenants because of persistent anti-social behaviour, they have a number of options. They can contact the university or local council. They can serve their tenants a section 21 (eviction) notice. Or, in extreme cases, they can contact the police.
Buy-to-let landlords are having to adjust to a raft of new regulation, and greater regulation may well be introduced over the coming years. It’s up to every landlord to stay up-to-date or they could end up facing severe penalties. It’s also important to keep up with the changing tastes of tenants. You can learn more about what today’s student renters want from their accommodation here.