April 2010 – HMO Legislation

For residential property investors and for those looking at the sector, 2010 saw the introduction of a new Legislation in April. This was hastily followed by its temporary suspension within the Newcastle upon Tyne boundaries pending the introduction of an Article 4 Direction which we understand is likely to come into force in around 12 months time.

The Town & Country Planning (Use Classes) (Amendment) (England) Order 2010 which became effective on or after 06 April 2010 introduced a new classification under Class C3 of the Use Classes Order.

Specifically the changes to the Order brought the definition of a house in multiple occupation in line with the definition in the Housing Act 2004 and states that a House in Multiple Occupation (HMO) is a house or flat occupied by 3 or more people who rent a property and are not related and share a kitchen, bathroom or toilet.

Where between 3 and 6 unrelated people who satisfy the criteria of an HMO as outlined above, live in a property and share one or more basic amenities the property will be classed under a new Use Class C4.

More than 6 unrelated people living in a property with shared basic amenities needs to be classified as a Sui Generis use.

The introduction of this new definition within the Legislation basically requires that any new house in multiple occupation proposals in line with the definition of the above would require planning to convert to this use. Regulations which came into force on 06 April 2010 do not apply retrospectively, however, you will be required to prove that the use existed prior to 06 April 2010. The Council have suggested that you might wish to apply for lawful development certificate.

The introduction of this change to the Use Class Order provided a major hurdle to investors seeking to purchase new properties for investment and convert them into houses in multiple occupation. In particular this use is most prevalent in central Jesmond, Heaton and parts of Fenham.

This legislation is probably too little too late. The core residential suburbs, for example Jesmond, have become dominated by investor owned property, many now HMO’s. The new Use Class is aimed at protecting the remaining areas of owner occupation within the city boundaries, particularly in the prime suburb of Jesmond, and also Heaton and Fenham.

As a follow up to the introduction of the Legislation, the rules have now been relaxed once again so that a change of use for example from a dwelling house (Class C3) to a small house in multiple occupation (Class C4) occupied by 3 to 6 people remains permitted development and will not require formal planning permission.

Following the introduction of the Article 4 Direction all types of development listed within the direction will require the submission of a planning application and the granting of planning permission by the Council.

Until such time as the Article 4 direction is introduced, which will effectively remove the permitted development exemption, there is an opportunity for investor purchasers, both existing and new to add to their property holdings.