Bedsit bedlam: why landlords face fines of £20,000

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Thousands of landlords with flats in converted houses could be in trouble when a little-known clause of the Housing Act comes into force.

Earlier this year, it was made compulsory to register shared buildings such as hostels as Houses of Multiple Occuptation (HMOs) or face a £20,000 fine or even prison. Now the system is to be expanded to houses converted into self-contained flats.

The aim is to bring up to standard thousands of houses that were shoddily converted into flats in the 1960s and 70s. But it's feared the regulations will criminalise landlords whose only offence is to be unaware of the ratio between rented and owner-occupier flats in their block.

Section 257 of the Housing Act stipulates that any converted building that fails to comply with the 1991 Building Regulations, and where more than a third of the units are let out, will be classified as an HMO. The rule could come into force as early as next month.

"The problem is that most self-contained flats were sold on long leases and very often the leases do not require permission to sublet, so there is no easy way of knowing whether the occupant of any particular flat is the owner or a tenant," says David Hewett, executive secretary of the Association of Residential Managing Agents.

"It is also unclear who will be held responsible for registration as an HMO -- the freeholder, the leaseholders or the managing agent."

The result may well be that professional managing agents will refuse to handle houses converted into flats. Small landlords who manage their own properties must also watch out. A house made into two rented flats, may qualify as an HMO if the conversion is at all suspect.

The situation is even worse in places with numerous HMOs such as Brighton, which have been designated "additional licensing areas".

"Then full licensing is necessary, with the installation of fire-proof doors, emergency lighting and everything as well as bringing the property up to Building Regulation standards," Hewett says. Despite a hard-hitting advertising campaign featuring a hole in a house where your nest-egg used to be, fewer than 25 per cent of owners of Britain's estimated 400,000 HMOs have registered. It is believed most either do not know of the legislation or do not understand it.

Local authorities have also taken a very inconsistent approach. Some have set very high registration fees, up to £1,000, and have set up expensive enforcement units. Others have set modest fees in the region of £300 and show little sign of making special efforts to root out offenders.

Chris Town of the Residential Landlords Association even accuses some councils of trying to use HMOs as a new source of income, only to be left high and dry by the dearth of registrations.

"I've had reports of finance officers budgeting several millions of pounds in projected income from licence fees - and spending it - only to find it not forthcoming," he says.

"Even more disturbingly, local officials and councillors are said to be gunning for a test-case prosecution to scare unlicensed landlords out of the woodwork with their licence fee cheques."

However, Elizabeth Brogan of the National Landlords Association points out that there is a real need to control housing at the bottom of the heap.

"The legislation is trying to get at some really appalling properties where maintenance is not done because nobody can agree on paying to upgrade the common parts," she says.

Gary Porter, leader of South Holland District Council and spokesman for the Local Government Association on HMO legislation, believes that the dispute over the fine print masks a failure on the law's main aim, to make safe the hostels and doss houses occupied by vulnerable low-paid workers.

"HMO registration should have been compulsory as they form a vital role in filling housing need, especially with workers coming in from Poland and the other EU accession countries. Now we have the worst of all worlds," he says.