Why is my house in multiple occupation (HMO) property causing problems?

I am selling my investment property which is in multiple occupation - an HMO. I am selling the house to an investor but he now says that his lender will not lend to him because the property is an HMO. Why has this issue arisen at this stage?
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Question: I inherited an investment property from my father. It is tenanted, and is a house in multiple occupation — an HMO. There is an HMO licence in place. I am selling the house to an investor who is happy to buy with the tenants living there. I accepted his offer a couple of months ago but he now says his lender will not lend to him because the property is an HMO. Is this likely to be true? Why has this issue arisen at this stage? 

Answer: Many property investors do not understand HMOs. Basically, a property is an HMO if at least three tenants live there, form more than one household, and share the toilet, bathroom or kitchen facilities. While quite a few mortgage companies will not lend where an HMO licence is needed, some specialist mortgage firms will, as will some providers of buy-to-let mortgages.

Your buyer should have made sure from the outset that his broker, if he was using one, had all the relevant information, including the fact that the property was an HMO. The broker could then have found a suitable lender.

The situation may have arisen at this late stage because the lender has only just been told by the buyer, his broker or the buyer's solicitor that the house is an HMO. Your buyer will have to find another lender who will consider an HMO — or you could remarket the property and find a suitable alternative buyer who gets it right from the start.

An HMO licence is issued to a person for a specific property, and is not transferable. Notify your local HMO officer when you sell. Your buyer will need a new licence.

These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor. 

What's your problem? If you have a question for Fiona McNulty, please email legalsolutions@standard.co.uk or write to Legal Solutions, Homes & Property, London Evening Standard, 2 Derry Street, W8 5EE. We regret that questions cannot be answered individually but we will try to feature them here. Fiona McNulty is a partner in the residential property, farms and estates team at Withy King LLP (withyking.co.uk).

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