The property owner had owned the property for 20 years or so and two years previously had rented it to a corporation that had put 5 occupants into the property.

From the 1st October 2018, all properties with 5 occupants, not all related, were required to have a Mandatory HMO (House in Multiple Occupation) Licence applied for by that date.  The corporation had agreed that it would carry out the works required to comply with licensing and make the application for any licences during its occupation.  So all should have been well.

But, No! – Unfortunately, this was not the case.

As part of the HMO licence application, you are required to serve notice to a number of parties which include, Lessors, Security Holders, Mortgage Companies and any other party that has an interest such as management companies etc.  A legal declaration is required as part of the application to confirm that the all the parties have been informed that an HMO licence is/has being applied for and to provide these details to the Council, as the Council is obliged under the legislation to inform them of the Licence Application decision and provide them with copies of the Licence if successful.

Problem:  In the process the owner did not want anyone to contact the mortgage company and, despite it being a requirement of the corporate tenant’s 5-year contract, this created a stalemate whereby making the application for the HMO Licence was impossible if the Owner continued to maintain this stance. The Corporation needed to continue its occupation under its agreement for the contracted period but could not legally operate it without an HMO licence.

The Company got in contact with Landlords Defence for advice on how to proceed, to find out what recourse they had, and what the consequences would be if they applied against the owner’s wishes.

As is often the case with large residential houses, this owner had once lived in the property as his principal family residence though he moved on, some years ago, to another property. He had retained the former family home and put the property on the rental market back in the time where there was little accountability from mortgage companies and authorities to ensure properties were being occupied as per their mortgage terms.  This property had continued to be let out despite being on a residential owner-occupier mortgage many years. 

In fact, the owner had been in breach of his mortgage terms for 12 years!  If the mortgage company was to discover this, they would most likely foreclose immediately at vast cost to the owner or at the very least look for compensation for the years it had been deceived.

We were able to explain to the owner that it was only a matter of time until his mortgage fraud (for that’s what it is at law) was discovered and then he would probably forfeit the property altogether.  

Our proposed solution was to work with the owner, the corporation and a mortgage advisor.   Firstly, the HMO Licence application would proceed immediately as it was required to by law. We briefed the owner how to declare his situation in a particular way that would allow him time to re-finance the property with the correct mortgage product form a different provider and redeem the mortgage with his current provider.  This took careful understanding of each party’s situation and then working out how to execute each action at the right time to leverage process and procedure and allow each to move forward.

With disaster averted, the owner was saved from probable calamity and the Corporate Tenant was able to put in place the required HMO licence and avoid Civil Penalties of £10,000 upwards.