|November 21, 2019||No Comments|
HMO (Houses in Multiple Occupation) licensed properties achieve higher rents and higher asking prices in comparison with similar non-HMO properties when they are put for sale. It means that obtaining an HMO licence, in Edinburgh or elsewhere, can add value to the property and boost rental income. It is all true for the current owners/sellers but what about potential buyers? Does paying a premium for an HMO licensed property make sense? It could – assuming that an HMO licence could be transferred. So the big question is:
The answer is quite complex. Yes, HMO licences in Scotland could be transferred to another person, but only under certain conditions and short term (initially for 1 month). Let’s check Housing (Scotland) 2006 Act and its Explanatory Notes.
Section 136 states that an existing HMO licence transfers to the new owner of a licensed property and lasts for one month from the date of purchase, provided that the new owner is already entered on the local authority’s register of landlords.Housing (Scotland) 2006 Act Explanatory Notes
If the new owner submits a licence application before the end of that month, the licence will continue in force until that application is determined, as for renewals.
If the new owner is not a registered landlord, the licence expires on the date that ownership transfers.
So, lets assume we have an HMO licenced property on the market in Edinburgh. If the new owner is already a landlord registered in Edinburgh, the HMO licence will transfer to the new owner for 1 month from the date of purchase. The new owner should apply for a new HMO licence within the first month of purchase and the old HMO licence will be in force until the application has been processed.
If the buyer was not a landlord registered with Edinburgh Council, the old HMO licence will expire on purchase.
Yes, it usually does as, as new owners will have to comply with ‘old’ HMO requirements, not the current ones. Legislation is more and more stringent every year, so any grandfather clause tends to be beneficial. For example: if the third bedroom’s width is less than 2.25m, such room would not be suitable under current HMO regulations. However, if the property has a valid HMO licence issued in the past, old criteria would apply and a room with less than 2.25m width could become a bedroom.
Please note that although this post covers HMO licences all over Scotland, not only in Edinburgh, different regional authorities (councils) may use different interpretations of the legislation. Before making any decisions, we would advice you to discuss any questions with the licencing team within your council or to contact a local letting agent / property management company specializing in HMO properties.
We have prepared another guide on what to do with a lapsed HMO licence.