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HMOs can be an excellent investment opportunity but may also need to be regulated, licensed and inspected for the safety of the occupants. Below is a definition of what may be classed as an HMO but guidance should be taken from your local authority. For further guidance just ask a member of the Lauristons Lettings Team.
A House in Multiple Occupation (HMO) is classed as a property where three or more people live, who make up two or more households and share basic facilities such as a kitchen or bathroom. A household is either a single person or members of the same family. Professional sharers and students are the most common example of tenants where more than one household live in the same property.
A guide to HMOs
What is an HMO?
A House in Multiple Occupation (HMO) is any residential property occupied by three or more people sharing facilities like a bathroom and/or kitchen who form two or more 'households'.
What is meant by the term 'Household'?
A household is either a single person or members of the same family who live together. A family includes people who are:
Married couples or couples living together as married (including people in same-sex relationships)
Relatives or half-relatives e.g. grandparents, aunts, uncles, siblings, nieces, cousins
Step-parents and step-children and half-relatives
Foster parents and foster children
Some domestic staff would be included in the household if they are living in the house as a result of the terms of their contract e.g. an adult carer and up to three people receiving care are a single household.
What is meant by the term 'Household'?
There are three types of HMO licensing
Mandatory licensing of large HMOs Applies nationwide for HMOs where there are five or more occupants in a property of three or more storeys and the tenants comprise of two or more households.
Additional licensing When a council imposes a policy requiring other sizes of HMOs to also be licenced. For example, a council can bring in additional licensing requiring all HMOs to be licenced.
Selective licensing This is at the discretion of the borough and can affect all rental properties regardless of size, number of storeys, or number of occupants. For example, a council can instigate compulsory licensing of all residential rental properties within a street, ward or the whole borough.
Before granting a licence, the local authority must be satisfied that the owner and any managing agent of the property is fit and proper to hold a licence and that the property meets required physical standards.
A licence will normally be granted where...
Appropriate fire safety measures are in place such as smoke detectors, extinguishers etc
Annual gas safety checks are up-to-date
The electrical wiring and appliances have been checked and certified as safe every five years
The property is not overcrowded
There are adequate cooking and washing facilities
Communal and shared areas are kept clean and in good repair
There are appropriate refuse storage and disposal facilities
Once granted the licence must be clearly displayed within the communal areas along with the name, address and telephone number of the licensee or property manager of the premises. A copy of the current gas safety certificate must also be on display.
How can I check if a property needs to be licenced?
If you are not sure whether it needs to be licenced then contact the local borough council in question - often their website contains the relevant information.
Can a landlord evict a tenant to avoid licensing?
No. Landlords are not allowed to evict existing tenants in order to avoid licensing. Any attempt to get a tenant out of a property that should be licenced but isn't may be considered a crime under the Protection from Eviction Act 1977, and the landlord or anyone else involved may be prosecuted. The Deregulation Act 2015 has also changed the law so a valid notice cannot be served to end a tenancy if the property should be licenced but isn't currently.
What will the council take into account when deciding whether or not to grant a licence?
The suitability of the HMO for the number of occupiers
The suitability of the facilities within the HMO, such as toilets, bathrooms and cooking facilities
The suitability of the landlord and/or the managing agent to manage the HMO (this is called the "fit and proper" test)
The general suitability of existing management arrangements of the property
The council also has to carry out a Housing Health and Safety Rating System (HHSRS) risk assessment on a HMO within five years of receiving a licence application. If the inspector finds any unacceptable risks during the assessment then the landlord will be instructed to carry out works to eliminate them. The landlord must also notify the council if they plan to make changes to a HMO (structural or decorative), if the tenants make changes to the property, or if the tenants' circumstances change (e.g. they have a child).
The council must ensure that a licenced HMO is not overcrowded and has suitable shared amenities and facilities for the number of persons occupying it. If there are too many people living in the HMO at the time the licence is granted, the landlord must take reasonable steps to reduce the number of occupiers to the permitted number. Existing tenants will not normally be evicted. Instead, when they move out, it will be an offence for the landlord to allow new tenants to move in if that would bring the total number of occupiers above the maximum number allowed.
What happens if a landlord doesn't apply for a licence?
It is a criminal offence to operate a HMO that should be licenced but isn't and if convicted, the fines for non-compliance can easily run into the thousands.
Local authorities also have a range of other enforcement options including the power to vary the terms of a granted HMO licence or to revoke an HMO licence.
Landlords may have to pay back to the council any housing benefit they have received during the period of the offence, up to a maximum 12 months. The tenancy itself will not be affected if the landlord has failed to apply for or obtain an HMO licence, although the council may take over the management of the property as another method of enforcement.
Can a tenant withhold rent if the landlord has not applied for a licence?
No, a tenant cannot withhold rent. Under the terms of an AST there is never an valid reason for a tenant withholding rent, instead the lack of a license needs addressing.
What happens if a landlord breaches the terms or conditions of the licence?
If a landlord or managing agent allows a HMO to be occupied by more people/households than it is licenced for then unless there is a reasonable excuse they are committing a criminal offence and could be fined up to £20,000. If the landlord/managing agent breach the licence conditions then they are committing a criminal offence and could be fined up to £5,000 per breach. If the breach is serious or persistent the licence may be entirely revoked. If the council revokes a licence it must take over the HMO management.
What happens if the council refuses to grant a licence?
If the council is unable to grant a licence for a HMO then it will need to take over the management responsibility for the property until circumstances change and it can then be licenced. There are special rules that apply when a council takes over the management of a HMO.
What happens if the conditions in a HMO are poor?
Whether or not the HMO is licenced it should be reasonably free from hazards that might affect a tenant's health and safety. The council is responsible for enforcing those standards and can require a landlord to take appropriate action to remedy any defects. In some emergency cases the council may do the works itself.
An HMO can be a building or part of a building if it is:
Occupied by persons who form more than one household, and where those persons share (or lack) one of more basic amenities, such as a WC, personal washing and cooking facilities; or
A converted building containing one or more units of accommodation that do not consist entirely of self-contained flats. (There is no requirement that the occupiers share facilities); or
A converted building consisting entirely of self-contained flats, where the building work undertaken in connection with the conversion did not comply with the 1991 Building Regulations and more than one third of the flats are occupied under short tenancies.
The HMO must be occupied by more than one household:
As their only or main residence; or
As a refuge by persons escaping domestic refuge; or
During term time students; or
For some other purpose that is described in regulations.
In all cases:
Occupation of the living accommodation must be the only use of that accommodation; and
Rents are payable or other considerations are provided.
Under the act, a household comprises:
A single person; or
Co-habiting couples (whether or not of the opposite sex); or
A family (including foster children and children being cared for) and current domestic employees.
Certain types of buildings will not be HMO’s for the purpose of the Act. They include:
Buildings, or parts of buildings, occupied by no more than two households, each of which comprise a single person only (for example, two person house or flat shares); or
Buildings occupied by a resident landlord with up to two tenants; or
Buildings managed or owned by a public sector body, such as the police, local authority, registered social landlords, fire and rescue authority and the NHS; or
Buildings occupied by religious communities; or
Student halls of residence where the education establishment has signed up to an Approved Code of Practice; or
Buildings occupied entirely by freeholders or long leaseholders;
Buildings regulated otherwise than under the Act, such as care homes, bail hostels, etc, and the description of which are specified in regulations.
Definition of an HMO requiring a licence:
The act requires landlords of many Houses in Multiple Occupation (HMOs) to apply for licences. The HMOs that need to be licensed are those with:
Three or more storeys, which are:
Occupied by five or more people forming two or more households (ie people not related, living together as a couple, etc), and
Which have an element of shared facilities (eg kitchen, bathroom, etc).
How do I know if my property needs a license?
Mandatory Licensing will apply to you if you have five or more occupants in a property that is three or more storeys high, as long as the occupants are not just made up of one household.
However, licensing may also apply to you even if the Mandatory Licensing does not, depending on whether Additional or Selective Licensing is in place.
The only way that you can check if your property needs a licence is to look at the specific licensing rules in place for your borough.
Local Councils in the areas we cover can be contacted below