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This was a discussion point at a recent meeting with a prominent Buy-to-Let lender.
Having considered the topic, we are now recommending that it would be beneficial for landlords to apply for and obtain a certificate of lawful usage, for properties where Article 4 has been implemented by a local authority, removing the ability for landlords to use permitted developed rights to move from C3 to C4 (HMO of up to 6 rooms).
C3 to HMO C4 – A summary for HMO landlords not familiar with the topic
Let’s start with the planning classes. C3 is a residential house and C4 is a HMO up to 6 rooms. A landlord can move from C3 to C4 under permitted development rights without the need to obtain planning permission.
A local authority can remove this right to move to C4 and operate a HMO if they implement an Article 4 direction. Local authorities tend to do this if they view there are too many HMOs in a given area. If this is the case, you would need to apply for full planning permission to operate a HMO in an area where an article 4 is in place.
This affects any property let to 3 or more people who are not 1 household but share facilities. Sometimes, there is a view that a property is classed as a HMO when it is let to 5 or more people, but this relates to HMO licensing and article 4 relates to planning permission, so therefore, the definition of 3 or more shared needs to be used.
For HMOs operating before article 4 comes in place, they are protected and do not need to obtain planning permission as long as the property is used continually as a HMO. Without a certificate of lawful usage, you need to prove “continued usage” and this can be difficult if you do not have the documentation to do this.
Why are we recommending you obtain a HMO certificate of lawful usage?
When we refinance a HMO within an article 4 area, the client and their solicitor will need to provide a certificate of lawful usage or proof of “continued use” as a HMO to the lender.
This can, at times, prove problematic and can involve the mortgage applicant needing to scan and email multiple tenancy agreements to prove the property has been used continually as a HMO. If this information is not available then the solicitor will not be able to prove continued use and the mortgage cannot proceed.
For the small admin costs of obtaining a HMO certificate of lawful usage, the benefits include:
| 1. Be able to prove the correct planning is in place for mortgage lenders without the need to prove “continued use” |
| 2. Be able to prove to a potential purchaser that the property has the correct planning, without the risk in the future that they will not be able to provide “continued use”. |
| 3. Be able to prove to a valuer of the property that the correct planning is in place, and ensure the valuation premium that a HMO within an article 4 can achieve is factored into the valuation. |
How can Advocate Finance help?
If you need any further information on this topic, the points discussed within this article or any matter relating to HMO and HMO mortgages, please do not hesitate to contact us.
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