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What is a small HMO to a lender?

• A HMO with C4 planning use specifically relates to smaller HMOs

• The classification of C4 originates from C3 with the added benefit of permitted development.

• Permitted development allows for a change of use from C3, up to a maximum of 6 occupants, without a full planning application as long as there is no Article 4 direction in the area.

• Valued on a “vacant possession” basis by most lenders: the property is valued in its present condition with full benefit of vacant possession. The surveyor uses comparable evidence to support the valuation figure.

• Article 4 is whereby the local authority is looking to restrict the number of HMOs and restrict permitted development in a geographical area

• This may affect the valuation in the sense that if a HMO has the benefit of planning in an area then there is a value in the scarcity of the HMO

• Valuers confirm whether a property sits within an A4D area, and if so, how much proportion of the MV is in essence ‘scarcity value’

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Searchlight Finance Limited is registered in England and Wales No.07929050 Searchlight Finance Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (http://www.fca.org.uk/register) under reference 743220. The FCA do not regulate Business Buy to Let Mortgages or most Commercial Mortgages and Bridging Finance. ICO Number Z3109319. Your property may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it.

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