As landlords know, there's a huge demand for small self-contain units, especially in University towns. But as from the start of this tax year, landlords are faced with the necessity to have a building licensed for occupation if the property is on at least 3 floors and several unrelated tenants occupy it.



Whilst this represents a problem for those less scrupulous landlords, it will serve to help those landlords wanting to enter that market. That's because the tighter regulation will help to convince more mortgage lenders that these larger properties which are suitable for division into smaller units, are acceptable for a buy to let mortgage.

The licences introduced on 6th January this year are just one part of a three prolonged attack on properties in multiple occupation.

Licence for Multiple Occupation

These licences are a move to improve the standard of housing. The licences are issued by your Local Authority and are expected to cost around £100 for each occupant for a five-year license. The preceding inspection will be concerned about fire regulations and the size and arrangement of rooms and facilities. Even the landlord will be assessed with regards to the ongoing arrangements for the management of the properties. And what if a landlord tries to dodge this licence? That'll be a fine of up to £20,000!

Landlords will find more information about this at: www.propertylicensing.gov.uk

Housing Health and Safety Rating System

This regulation is concerned about how the building's condition can affect the health of its residents. Tenants will be able to call in inspectors who will be empowered to demand repairs and fine landlords £5,000

Tenancy Deposit Scheme

This forthcoming regulation affects the way deposits are held and administered. This results from research that showed that some Landlords refused to return deposits and some concocted dubious reasons for deductions. So from October all deposits will have to be held in official Tenancy Deposit Schemes. This basically means that the deposit must be held by a scheme administrator who is, in practice, neutral. Then at the end of the tenancy, both the landlord and the tenant have to inform the scheme administrator that either the whole deposit is returned to one party or part of the deposit returned to both parties and the scheme administrator must pay out in accordance with the agreement within 10 days of receiving notification.

If agreement cannot be reached between the landlord and the tenant the scheme administrator will retain the deposit until either the tenant or landlord obtains a final court order specifying the proportion of the deposit to which each is entitled. The scheme administrator will then immediately pay out in accordance with the court order.

Where a scheme administrator returns a deposit, they must do so with interest added at a rate yet to be specified by Government. Any interest additional to this will be retained by the scheme administrator and can be used to fund the administration of the TDS scheme.

The TDS Scheme is being introduced as an ammendment to the Housing Act 2004.

In our view, the short-term result of all these regulations will be that poorer standard properties will close as the landlord will be either unable or unwilling to comply. In the longer term, the number of properties may well rise again and be at a higher standard than the current stock of such properties.

Having said that, landlords are certain to increase rents in a move to offset the additional compliance costs they are faced with.