Article 4 direction – a new era for Bath

On the 12th June 2013 the Cabinet of Bath and North East Somerset Council made the decision to confirm the Article 4 Direction on HMOs from 1st July 2013 and adopt the Supplementary Planning Document ( click here to see the HMO supplementary planning document ).

A House in Multiple Occupation (HMO) is defined by the Housing Act 2004 as:

  • A house or flat which is let to 3 or more unrelated tenants who share a kitchen, bathroom; or toilets. For example, properties let to students or bedsits; or
  • A building which is converted into non self contained flats; or
  • A building which is converted entirely into self-contained flats and the conversion does not  meet the standards of the 1991 Building Regulations and more than one-third of the flats are let on short-term tenancies.

So, what does this mean for Bath property owners and buyers?

  • If you live within an area of high density HMOs (ie more than 25% of the properties within 100m are shared houses) then you will not be able to change the use of your property (from C3 to C4) without planning permission (which is likely to be immediately refused).
  • If you live outside of a high density area, you will still have to apply for planning permission for change of use.

This legislation is very likely to create a two tier market in high density areas (like Oldfield Park, Westmoreland, Lower Weston and Newbridge). Properties currently in residential use will no longer be of interest to investors whilst properties currently in use as HMOs will be a rare and sought after commodity if they come to the market. This will increase prices of the latter and could decrease prices for the former. There are even some roads where residential owners may become financially disadvantaged (if the road is for example 88% students and the owner cannot sell their property to an investor, what price would a new residential buyer pay to live in such a high density student road?).

Having been aware and involved with this discussion for more than a year (see previous Article 4 blog posts), our partners at Madison Oakley have been carefully monitoring the effect on house sales in the run up to the decision. It seems the majority of investors realized in February or March 2013 that it was too late to buy, convert and rent out the property before the implementation date. This has decreased overall demand for homes in the local area but thankfully there is enough pent up demand from residential buyers to hold prices at present. Conversely, current HMO properties have increased in value and are primarily valued on rent achieved instead of bricks and mortar.

As a footnote, we have heard of other local agents have been informing buyers that historical use for letting is enough to bypass the impending legislation – it is not and any property will need to be an occupied HMO with appropriate documentation/evidence during the 30th June/1st July changeover to avoid the necessity of applying for change of use.