Houses with multiple tenants, often falling in to the Houses in Multiple Occupation (HMO) category are unsurprisingly growing in popularity all the time. One of the most popular examples of such multiple occupancy accommodation is student property – where a large house or residential property is divided into rooms so that several rent paying students can live there.

Improving Rental Incomes with Houses in Multiple Occupation

The reason for the popularity in such multi-let properties is the fact that a property investor or buy-to-let landlord can receive more income from the same property… and from a tenant’s point of view, the rents can be reduced as more people are chipping in to meet the costs.

 

Houses in multiple occupation appear to be a real win-win situation for both landlords and tenants.

Legal & Regulatory Compliance Issues for HMO

From a landlords or property investors perspective however, even though there may be some good income prospects from owning such a multi-tenanted HMO property, there is still a lot of work to do when it comes to regulatory compliance issues, building maintenance and ensuring that general standards are maintained throughout.

As a buy-to-let landlord, irrespective of the property type, there is a duty to ensure that the health and safety of your tenants is given top priority.

More Information about Houses in Multiple Occupation

If you are a landlord, property owner or investor and require further information or support on property management issues like those covered here please contact us to discuss how Harvey W James can help.

Do you rent a property? If you do, you may need a licence.

A property is a house in multiple occupation (HMO) if at least three tenants live there forming more than one household (i.e. they are not related or in a relationship) and they share toilet, bathroom or kitchen facilities with other tenants. A two-person flat-share is not classed as an HMO.

Landlords tend to be drawn to the idea of renting out on an HMO basis because it can prove more profitable than traditional rental methods. However, it must be considered that this type of renting does come with a range of special requirements and that a raft of legislation and regulations apply, which can in many ways increase costs as well as time investment.

Meeting legal standards will incur additional costs, as will acquiring the necessary licences and planning permissions. Also bear in mind that HMO council tax is payable by the landlord rather than the tenants.

It’s the local authorities which are responsible for enforcing and regulating HMO management. They hold powers that enable them to levy their own individual licensing requirements for the locality, which makes them the first contact point for any landlord with queries about the regulations with which they are required to comply.

Type of Landlord Licences

Mandatory licensing – This scheme covers houses in multiple occupation (HMOs) with three or more storeys and are occupied by five or more people with at least two households. This is regulated under the Housing Act 2004 and has been in force since 2006.

Additional licensing - requires landlords and letting agents across the borough who let a property, of any number of storeys, occupied by at least three people, who do not make up a single household and who share a kitchen, bathroom or toilet, to get a licence

Selective licensing - requires landlords letting a property that does not meet the criteria for mandatory or additional licensing, and is in the designated selective licensing area, to get a licence.

N.B. Please note that some council The type of licence you need will be determined by the answers you give on the application form.

What is a household?

'Households' for the purposes of the Housing Act 2004 includes members of the same family living together who are:

  • couples married to each other or living together as husband and wife (or in an equivalent relationship in the case of persons of the same sex)

  • relatives living together, including parents, grandparents, children (and step-children), grandchildren, brothers, sisters, uncles, aunts, nephews, nieces or cousins

  • half-relatives who are treated as full relatives

  • a foster child living with his foster parent is treated as living in the same household as his foster parent.

How do I work out how many storeys there are?

 

When counting the number of storeys in the building you need to include:

  • basements and attics if they are occupied or have been converted for occupation by residents

  • any storeys which are occupied by you and your family if you are a resident landlord

  • all the storeys in residential occupation, even if they are self-contained 
    any business premises or storage space on the ground floor or any upper floor.

How will it work?

  • All private landlords with residential property in the selected area will need to apply for a licence.

  • The cost of a licence is paid.

  • The licence holder and manager will need to meet the ‘fit and proper’ person requirement.

  • The application is assessed by an environmental health officer.

  • An inspection of the property may be carried out.

  • A licence will be issued with mandatory conditions that must be followed.

How long is the licence valid for?

Licences can be granted for up to five years. The council may grant licences for shorter periods in certain circumstances. If your licence period is less than five years you will be informed in writing why the council has limited the period. If the licence holder wants to apply for a lesser period this should be discussed with the council as soon as possible

Do I need a licence?

 

Q1. How many people live at your privately rented property?

  •  2 or fewer, go to Q3 or  3 or more, go to Q2

Q2. How many households live at the property?

  • 1, go to Q3 or 2 or more, go to Q4

Q3. If the property is in one of the streets on the council list, you will need a 'selective' licence

  • Please refer to your local authority website 

Q4. How many storeys does the property have?

  • 1 or 2, go to Q6 or 3 or more, go to Q5

Q5. How many people live at your privately rented property?

  • 4 or fewer, go to Q6 or 5 or more, go to Q7

 

Q6. You will need an 'additional' licence

Q7. You will need a mandatory HMO licence

Below is a table to show some examples of what does and does not constitute a HMO.

  • 2 bedroom house or flat with 2 unrelated tenants 

  • HMO? No 
     

  • 2 bedroom flat, 1 cohabiting couple living and 1 unrelated tenant 

  • HMO? Yes 
     

  • 3 bedroom house, 3 unrelated tenants 

  • HMO? Yes 
     

  • 3 bedroom house, brother, sister and cousin sharing 

  • HMO? No 

Are there conditions attached to the licence?


There will be a number of conditions attached to licences, some of which are set out in the Act and some of which will be prescribed by the council in individual cases. Those conditions that will apply to all licences are:

  1. the house is suitable for the number of occupants (eg size and facilities)

  2. the manager of the house - you or an agent - is considered to be ‘fit and proper’, eg no criminal record, or breach of landlord laws or code of practice

  3. licence holders will be required to produce to the council annually for our inspection an in date gas safety certificate (gas safety inspections are required yearly)

  4. licence holders will be required to keep electrical appliances and furniture made available by them in a safe condition

  5. licence holders will be required to ensure that smoke alarms are installed in the HMO and are kept in proper working order and make declarations to this effect to the council

  6. licence holders will be required to supply to occupiers of the HMO a written statement of terms on which they occupy the house and make declarations to this effect to the council.

  7. Making sure all fire escapes are clear of obstacles and that they are well maintained

Fire safety measures are as follows:

​​The council may add other conditions to your licence, eg improving the standard of your facilities. They will let you know when you apply.

Standards

Any licensed property must meet the following standards and conditions including fire safety, room sizes and managing refuse. Our standards our set out in the document linked below.

If you wish to operate a house as an HMO, it must have the correct class of planning use. You may need to apply for planning permission to change it from C3 (dwelling house) to C4 (house in multiple occupation). 

There is no guarantee that your planning application will be approved, but if you rent out your property you must have a property licence. If you are refused planning permission for an HMO councils typically do not refund your licensing fee.

Landlord penalties for not having an HMO licence

It is a criminal offence to let a property that is required to be licensed on a certain date by law without applying for a licence. There is a range of sanctions that could be applicable depending on the individual circumstances; these are detailed below:

  • Failure to apply for a licence can lead to a fine of up to £30,000 on conviction.

  • If the council cannot grant a licence or a licence is revoked, the council has the powers to make an Interim Management Order (IMO). This will transfer the Guidance Notes for Private Rented Property Licensing Page 10 management of the property to the council for a specified period after which a Final Management Order (FMO) may be made.

  • An unlicensed landlord is not able to use the section 21 Possession Procedure. The section 21 procedure entitles a landlord to regain possession of the property without a court hearing, following the service of a valid notice giving the tenant at least 2 months notice.

  • For any period where an unlicensed property is being privately rented, an application can be made to the Residential Property Tribunal for a Rent Repayment Order. This could mean a landlord having to repay up to 12 months of rent. Where the council has had to take enforcement action, a licence may be revoked or varied and may require a new application for all licence types. Failure to obtain the correct licence for your property type could result in the loss of your application fee

Many people living in HMOs have an assured shorthold tenancy. If you're an assured shorthold tenant and the HMO should be licensed but isn't, any section 21 notice (two months' notice to leave) your landlord gives you is not valid.

 

Who can apply for a property licence?

The most appropriate person to apply for a Private Rented Property licence will normally be the owner or a manager employed by the owner, or an agent employed by the landlord. Anyone can apply for a licence on behalf of the most appropriate person. The most appropriate person is the person in receipt of rent or in control of the property. If it is a limited company please give the full company name and address of a UK registered office and listed director who will be the proposed licence holder. At the very least, the council expects the licence holder to have the power to:

  • Let and terminate the tenancies;

  • Access all parts of the premises to the same extent as the owner.

 

The council also requires details of all interested parties involved in the ownership or management of the property to be provided at the time of application.

What documents do I need to provide

  • Floor Plans for the property (showing layout, facilities, bedrooms and where the fire precautions are)

  • latest gas safety certificate if the property has gas

  • latest Electrical Installation Condition Report (EICR - previously known as Periodic Electrical Inspection Report)

  • Portal Appliance Test (PAT) reports if you provide portable electrical equipment such as kettles and microwave ovens

  • latest Energy Performance Certificate

  • latest inspection certificates and/or log book records for your automatic fire detection or emergency lighting systems, if applicable

  • evidence the furniture and fittings you provide comply with fire safety regulations

  • copies of current tenancy agreements

  • copies of inventory lists

  • copy of management contract if you use a managing agent

  • latest asbestos report if there is asbestos in your HMO

  • copy of criminal convictions disclosure for both the licence holder and the manager of the property.

Useful Information

Local Authorities

 

To search for your local authority on the Directgov website

How to draw a plan for an HMO licence application

Use this information to assist you in your application to license, which includes creating a floor plan for your HMO.

HMO fire and safety guidance

To ensure your property complies with the relevant safety standards

Harvey

Warren

James

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