A multi-unit freehold block (MUFB) is defined as multiple, separate, independent residential units held under a single title. This means that no one unit is subject to a lease. Examples might include:

• Purpose built blocks of flats
• Houses converted into flats
• A number of houses all held under one freehold title

Properties which fall under this category have the following characteristics:

• Multiple houses, each with their own AST agreement.
• Private areas that are the personal space of each resident/household into which no one else has right of access
• Separate entrances for each resident/household
• Some also have common areas that all residents/households have the right to use, such as a hallway or garden area

Landlords will have to stop letting rooms that fall below the nationally prescribed standard. If they do not, then they will be in breach of licence condition and could be prosecuted by the local authority or alternatively receive a civil penalty under the new Housing and Planning Act 2016 provisions. Rooms below the prescribed standard that have previously been found suitable for occupation will no longer be capable of being let separately as sleeping accommodation by any person aged over 10 (4.64 for children under 10).

Rooms under 4.64sqm cannot be used for sleeping. Floor area under a height standard of 1.5m is not included in the calculation

Does my client’s property need a HMO Licence?

There are three types of licence applicable to HMO’s as defined in the Housing Act.

Mandatory Licencing

All large HMOs must be licensed by the local council. A property defined as a large HMO if all of the following apply:

• It is at least 3 storeys high.
• At least 5 tenants live in the property, forming more than 1 household.
• The toilet, bathroom or kitchen facilities are shared amongst tenants.

Additional Licencing

The local authority can impose licencing additional types of HMO property, e.g a 2 storey property or a flat, to be licenced as an HMO.

Selective Licencing

Where the local authority has the power to require designated roads to be licenced which could include non-HMO properties occupied by a single family.

Advantages of investing in a HMO:

Higher returns – combined rent of individual rooms would usually generate a higher rental yield than the same property would as a single home

Reduced void periods – unless the property is a student let, it is unlikely all tenants in the property will leave at the same time. This means that there will always be an income if not at full capacity.

Disadvantages of investing in a HMO:

More regulations and administration– Your client will have to manage multiple tenancy contracts and deposits, higher tenant turnovers and will have to ensure compliance with extra regulations. These include fire safety measures, provision of safety certificates for gas and electrical appliances, as well as responsibility for cleanliness and repairs in the communal areas of the house. Under the new HMO legislation, local authorities are able to take action against landlords.

Higher upfront investments– HMOs are likely to be larger properties and therefore have a higher purchase price, higher maintenance costs and extra expenses from letting agents.