The most recent amendments to the Renters Reform Bill passed on the 25th April 2024 signal a transformative shift in the regulation of Houses in Multiple Occupation (HMOs), specifically affecting the roles and responsibilities of superior and immediate landlords in regards to property licensing.
This post delves into the evolving landscape of HMO property management and outlines the implications of these legislative changes for property licensing, helping you prepare for future compliance.
Expanded Accountability for Superior Landlords in Property Licensing non-compliance:
Under the April 2024 amendments, the scope of accountability for licensing HMOs has broadened significantly. The changes mean that not only the immediate landlords—those directly managing or controlling the property—but also superior landlords who may not engage in day-to-day management but have a significant legal interest or control, are responsible for ensuring that the property is properly licensed.
Key Change to the Renters Reform Bill:
Proposed Legal Text: “If an HMO is required to be licensed under this Part, but is not so licensed, an offence is committed by—(a) any person within subsection (1A), and (b) any person who as landlord under a tenancy or licensor under a licence to occupy has an estate or interest in, or a right in relation to, the HMO that is superior (whether directly or indirectly) to the estate, interest, or right of any person within subsection (1A).”
Why have the rules for property licensing changed?
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Recent legal cases and market practices have exposed vulnerabilities in the current regulatory framework, particularly concerning rent-to-rent arrangements. In rent-to-rent scenarios, a property owner (superior landlord) leases out their property to an individual or company (immediate landlord) who then sublets it to tenants. This setup has often resulted in regulatory ambiguities, especially regarding accountability for HMO property licensing and tenant protection.
For instance, the Supreme Court case, Rakusen v Jepsen, highlighted a significant gap where tenants could not claim Rent Repayment Orders (RROs) against a superior landlord since they hadn’t directly received rent from the tenants. The immediate landlords, often ‘front companies,’ could potentially evade legal and financial responsibilities by dissolving, leaving tenants without recourse for unlicensed operations and other infractions.
The future of selective licensing
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During debates on the discussion regarding the new bill amendments, further insights into the future of selective licensing were provided. The minister emphasised the distinct roles of the new property portal and selective licensing, promising a thorough review to streamline processes.
- Minister’s Statement: “The portal will be a resource for local authorities and to help landlords understand their legal obligations, while selective licensing gives councils powers to licence properties to address issues such as poor housing and crime. There will be overlap with data. We don’t want to see selective licensing abolished but want to ensure the processes are streamlined – that’s why we’re committing to a review of selective licensing and HMOs.”
This commitment reflects an ongoing effort to refine the framework governing property licensing, ensuring that it serves the dual purpose of simplifying compliance for landlords and strengthening local authorities’ ability to improve housing standards.
The Financial Risks of Licensing Non-Compliance
Recent data underscores the critical nature of compliance; fines for rogue landlords in London alone have exceeded £10 million according to our analysis, signalling robust enforcement by councils. This stark figure serves as a warning of the financial perils associated with non-compliance for property licensing.
Leveraging Kamma for Automated Property Licensing Compliance
In this complex regulatory environment, maintaining compliance can be daunting. Kamma’s automated licensing compliance solution simplifies this task through:
- 24/7 Real-Time Monitoring: Ensures continuous oversight of your property’s licensing status.
- Instant Notifications: Keeps you informed about upcoming licensing schemes affecting properties in your portfolio, helping you prepare in advance.
- Outsource Your Applications: Kamma’s dedicated team handles licensing applications, removing the administrative burden from your shoulders and ensuring compliance.
Conclusion
The proposed amendments to the Renters Reform Bill reflect a move towards tighter regulation of HMOs, emphasising the need for all landlords to actively ensure their properties are compliant. For superior landlords, this means a more hands-on approach is necessary regardless of their direct involvement in daily property management.
With tools like Kamma, superior landlords can effectively manage their properties’ compliance, avoiding hefty fines and enhancing tenant safety. By preparing now and leveraging advanced compliance solutions, you can navigate the upcoming changes successfully and uphold high management standards.
Contact us or book a demo now to understand how Kamma can solve property licensing for you.
