Article 4 compensation for HMO landlords: can you claim, and by when?

By · Solicitor, qualified 2003 · Founder, Bonsai Law

Published

Your council has made an Article 4 direction, and the house you bought to let as a small HMO now needs planning permission. Can you get any money back?

Sometimes. Compensation is usually only available where the council made an immediate direction, you applied for planning permission within 12 months of it taking effect, the council refused or imposed tighter conditions, and you made a written claim within 12 months of that decision. Miss either deadline and the claim is normally lost.

This guide covers England. Different rules apply in Wales.

What does an Article 4 direction do to small HMOs?

Normally you can change a family house (Use Class C3) into a small house in multiple occupation for up to six residents (Use Class C4) without a planning application. That is a permitted development right, under Class L of Part 3 of Schedule 2 to the Town and Country Planning (General Permitted Development) (England) Order 2015.

An Article 4 direction switches that right off in a defined area (GPDO 2015, article 4). You can still apply for planning permission, and the council decides each application against its local policies. It is not a ban.

National policy expects councils to use these directions only where necessary, on robust evidence and over the smallest area needed. It names "preventing an over-concentration of uses ... such as small Houses in Multiple Occupation" as an example (National Planning Policy Framework, policy DM10).

Large HMOs, with seven or more residents, fall outside Class C4 and have always needed planning permission. Article 4 changes nothing for them, so there is nothing to compensate.

HMO licensing is a separate regime. A licence does not mean you have planning permission, and planning permission does not mean you have a licence.

Why does it matter whether the direction is "immediate"?

Because it usually decides whether compensation is possible at all.

Some councils use both: an immediate direction for particular wards and a non-immediate one for the rest of the borough. Check the council's map for each property, and note the dates the direction was made, took effect and was confirmed.

What are the two 12-month deadlines?

Deadline 1: the planning application. This deadline applies to permitted development rights of a "prescribed description", and the C3 to C4 right under Class L is one of them (Town and Country Planning (Compensation) (England) Regulations 2015, reg 2(c)). You must apply for planning permission for the development that the direction took away "before the end of the period of 12 months beginning with the date on which the directions took effect" (TCPA 1990, s.108(2A)). If the direction took effect on 1 March 2026, the last day is 28 February 2027.

Deadline 2: the compensation claim. If the council refuses permission, or grants it on conditions tighter than permitted development would have imposed, your written claim must be delivered to the council's offices or sent by pre-paid post within 12 months of the date of that decision (Town and Country Planning General Regulations 1992, reg 12). The Secretary of State can allow longer, but you should not plan on it.

Do I have to apply even if I know the council will refuse?

Yes. The right to compensation arises only when permission is refused or granted subject to conditions other than those the permitted development right would have imposed (TCPA 1990, s.108(1)). Without a timely application and a decision, there is normally no claim.

The application should mirror what you could have done under permitted development: the same property, a C4 use for up to six residents. An enlarged scheme, such as a seven-bed HMO, is a different development and does not support a claim.

Keep the application proportionate to a small change of use. National policy says councils should only ask for information beyond the national requirements where a development plan policy calls for a specific further assessment, and any extra requirements should be proportionate to the scale and impact of the development (NPPF, policy DM2). If the council's validation list asks for more than that, query it rather than let it delay your application past the deadline.

If the council grants permission on terms equivalent to permitted development, there is no claim, because you have what the right would have given you. Commercially, that is often the better outcome.

Who can claim?

A person with an interest in the land, such as the freeholder or a leaseholder (TCPA 1990, s.107(1), applied by s.108). If the property is owned by a company, the company is the claimant.

What can you claim for?

The statute allows two kinds of loss (TCPA 1990, s.107(1) and (2)):

1. Abortive expenditure. Money spent on work that the loss of the right has made pointless. This expressly includes "expenditure incurred in the preparation of plans ... or upon other similar matters preparatory to it". In practice that can include architects', planning consultants' and engineers' fees, surveys and reports (building regulations, fire, acoustic), and preparatory works done to get the house ready for C4 use. 2. Other loss or damage "directly attributable" to the withdrawal. In practice this is mainly the fall in value of your interest: the property's value with the C4 right compared with its value without it. That needs an independent valuation from a suitably qualified surveyor, and the statutory valuation rules apply (TCPA 1990, s.107(4) and s.117).

What is unlikely to be recovered:

  • your own time, inconvenience and general business risk;
  • profits you hoped to make, beyond what the valuation captures;
  • ordinary purchase costs, such as stamp duty and conveyancing fees;
  • costs of a scheme that always needed permission, such as a large HMO;
  • finance costs, such as loan extensions and interest, unless you can show they were directly caused by the direction.

Each item needs an invoice, receipt or contract, and you need to be able to show it related to the C4 scheme.

Worked example: an immediate direction (illustrative)

Invented for illustration. Not a real case or client.

Sam buys a four-bedroom terrace in January 2026, planning to let it as a five-person HMO. Sam pays an architect £2,800 for layout drawings and a fire consultant £950 for a fire strategy. On 1 March 2026, before anyone moves in, the council makes an immediate Article 4 direction covering Sam's ward.

  • Deadline 1. Sam applies for planning permission for a five-person C4 use on 10 September 2026, comfortably before 28 February 2027.
  • The decision. On 20 December 2026 the council refuses, citing the concentration of HMOs in the area.
  • Deadline 2. Sam has 12 months from 20 December 2026 to serve a written claim. We would diarise it well before then, because building a claim takes time.
  • The claim. Sam claims the £3,750 of fees as abortive expenditure. Sam also instructs a surveyor to value the house with and without the C4 right, and claims the difference.

If Sam had applied in March 2027, after the first deadline had passed, the refusal would have given no right to compensation.

Worked example: an HMO that was already running (illustrative)

Invented for illustration. Not a real case or client.

Priya's five-person HMO was fully let from June 2025. The council's direction took effect on 1 March 2026.

An Article 4 direction does not stop a use that has already begun. Government guidance says directions "cannot prevent development which has been commenced, or which has already been carried out" (Planning Practice Guidance, paragraph 046). Priya's HMO use can continue, so there is nothing to claim.

What matters is that the HMO use had actually started, with people living there. Finished building works, or a house ready to let, are usually not enough. Priya keeps her tenancy agreements, council tax records and licensing correspondence, and can apply for a Certificate of Lawfulness of Existing Use as formal proof.

What if the council and I can't agree?

The council may accept, partly accept or dispute the claim. A disputed claim is referred to the Upper Tribunal (Lands Chamber), which decides land compensation cases (TCPA 1990, s.118). We have not found a reported Upper Tribunal decision on compensation following an Article 4 direction, so expect each claim to turn on its own evidence.

There is no fixed payment date, so do not plan refinancing around a compensation payment.

Which councils have made immediate directions?

Our tracker of immediate HMO Article 4 directions lists the councils we know of, with the dates each direction took effect and the date the 12-month application window closes. For the short answers to common questions, see our Article 4 and HMO compensation hub.

Before you do anything else

  • Find out whether the direction is immediate or non-immediate, and the date it took effect.
  • Diarise the 12-month planning application deadline today.
  • Gather every invoice, receipt and contract for the C4 scheme.
  • Apply for permission for the same C4 scheme you could have carried out, not an enlarged one.
  • When the decision arrives, diarise the 12-month claim deadline.
  • Deliver the claim by hand or pre-paid post, and keep proof of delivery or posting.
  • Instruct a surveyor to value the fall in value.

If your property is in an Article 4 area, Bonsai Law can review the direction, your timeline and your costs, and tell you whether a claim is possible and what needs to happen, and by when.

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Sources

1. Town and Country Planning Act 1990, section 107 2. Town and Country Planning Act 1990, section 108 3. Town and Country Planning Act 1990, sections 117 and 118 4. Town and Country Planning (General Permitted Development) (England) Order 2015, article 4 and Schedule 3 5. GPDO 2015, Schedule 2, Part 3, Class L 6. Town and Country Planning (Compensation) (England) Regulations 2015 7. Town and Country Planning General Regulations 1992, regulation 12 8. Planning Practice Guidance: When is permission required? 9. National Planning Policy Framework, Chapter 3, policies DM2 and DM10