Case Study – Purchase of a Property to Convert into a House in Multiple Occupation (HMO)
Introduction:
In this case study, we look at our client Company that purchases large residential properties to convert into a House in Multiple Occupation (HMO). This case study outlines the legal process they navigated to ensure a smooth acquisition of the property.
Background:
Our client Company has experience in the sector and conducts thorough market research to identify the ideal location for their HMO investment. They consider local demand, rental yields, and the existing regulatory landscape for HMO’s.
Lee Gaddes, Property Solicitor, is the ‘go to’ solicitor for each property purchase, ensuring that his client’s needs are met in terms of legal due diligence, effective communication, and efficiency of delivery to meet tight timescales
- Legal Due Diligence:
- Before making an offer, the Buyer engaged with Lee Gaddes to perform the initial legal due diligence. This involved reviewing the property’s title deeds, local planning regulations, and any existing licences or permits. As part of the process Lee checked historic legal documents (Leases and Transfers) to ensure there were no restrictive covenants to prevent the use of the Property as a HMO. Lee also checked the HMO licensing requirements pertinent to the locality.
- Offer and Negotiations:
- With legal due diligence complete and financing in place, the client submitted an offer on the selected HMO property. Negotiations ensued, covering price adjustments, repairs, and any outstanding legal or regulatory matters.
- Further Due Dilligence:
- A comprehensive purchase agreement was drafted and amended to be fit for purpose. A Hazard summary report was compiled resulting in Searches being conducted. A Report on Title and a Report on Searches were sent to the client together with replies to enquiries.
- Exchange of Contracts:
- Once matters were finalised, the buyer and the seller exchanged contracts. This legally binding document outlined the conditions of the sale, including timelines, responsibilities, and any agreed-upon adjustments to the property. A deposit was paid upon exchange and a completion date was agreed.
- Completion and Transfer of Ownership:
- On the agreed-upon completion date, we facilitated the transfer of ownership. This involved the settlement of the remaining balance, the payment of applicable taxes, and the formal transfer of the property’s title. We ensured compliance with all legal requirements, which included Land Registry, SDLT and Companies House.
- HMO Licensing and Compliance:
- With ownership secured, our client commenced with their renovation works then embarked on the process of obtaining the necessary HMO licence. This involved meeting specific safety standards, ensuring adequate facilities for tenants, and complying with local regulations governing HMO properties.
- Ongoing Compliance and Management:
- Our client is aware of the importance of ongoing compliance with changing regulations. They implemented a robust property management plan, including regular inspections, maintenance, and tenant communication, to ensure continued adherence to legal requirements.
Conclusion:
The successful purchase of the Property to convert into a HMO added another income producing asset to our client’s portfolio.
