Considering a Multi-Let Strategy in Sunderland? Don’t Get Caught Out By Article 4 As It Could Seriously Affect Your Profits!

I’ve been contacted by a number of investors in recent weeks who have purchased properties in Sunderland to rent out on a Multi-Let room-by-room basis

I suspect this Multi-Let strategy is going to become much more popular in years to come as it is a great way to maximise rental income from a property, which will become even more vital when the Landlords mortgage interest relief changes start to bite

It may be a coincidence but all the investors I’ve recently spoken to who’ve purchased properties in Sunderland with a view to “Multi-Letting” them have been from outside the area and all seemed to be somewhat in the dark about the important requirement to obtain planning permission before changing the use of properties in certain areas in Sunderland from a ‘single dwelling’ to an HMO

You have to question the advice they’ve been given prior to purchase so I thought it worth spelling this out as it has important implications that could seriously affect the profitability of a potential property purchase

So what are Article 4 Directions? Essentially councils have been given the power to restrict the change of use from single dwellings to HMO’s in areas where they think too many HMOs may cause a problem

In Sunderland, this has been applied since December 2013 in the following Wards - Barnes, Hendon, Millfield, St. Michael's and St. Peter's

Outside of these areas you’re still OK to move between Use Class C3 (single dwelling) and Class C4 (Small HMO) without the need for planning permission to be obtained

Planning permission will normally be required to change from a Class C4 HMO (3 to 6 occupants) to a large HMO (more than six occupants)

If the property has previously been used as an HMO then there is no change of use so you do not need to apply for planning permission

The advice from the Sunderland City Council website is pretty clear

The impact of an Article 4 Direction is that all new HMO accommodation commencing from 16 December 2013 in the wards covered by the Directions will require planning permission. For this reason If you are considering purchasing an HMO, establishing a new HMO or increasing the number of occupants in an existing HMO then you should seek advice from the Development Management Section as to whether the use could be considered lawful or if it requires planning permission

The council website has lots of useful information here http://www.sunderland.gov.uk/index.aspx?articleid=7577

Applying for planning permission for the above change of use is free and should take around 6 – 8 weeks from the point of application

Crucially you don’t need to own the property to apply, so investors considering purchasing a property for a Multi-Let (that has previously been used as a single dwelling) in one of the affected areas should consider applying for planning permission prior to exchanging contracts as part of their due dilligence

Not to do so risks taking a serious dent in your rental income!

For example a good standard 4 bedroom mid-terraced property in Sydenham Terrace in the Barnes Ward could be rented as a single dwelling for between £595 - £695pcm (depending on condition etc)

Renting the 4 rooms (assuming 3 good size doubles and a single) on a Multi-Let room by room basis can return around £1,200pcm – getting close to double the maximum single dwelling rent!

So if you’ve based your purchase on Multi-Let strategy returns, either ensure you get planning permission for the change of use before exchanging or make sure that the Plan B of renting it as a single dwelling also works for you

Finally there does appear to be confusion over whether this change of use permission is linked to needing an HMO License – let me make it clear – it isn’t

In Sunderland you would currently only need to apply for an HMO License if the property had over 3 useable stories and was rented by 5 or more individuals from 2 or more households

So a 4 bedroom property rented room-by-room in one of the affected Wards would be an HMO but wouldn’t need a license, but it would require change of use permission if previously used only as a single dwelling

I hope this makes the position a little more clear for those considering a property to rent out as a Multi-Let in Sunderland

Please feel free to give me a call on 0191 567 8577 or drop me an email (neil.whitfield@belvoirlettings.com) if you’d like to discuss any aspect of property investment in Sunderland