HMO & Private Rental Guide for Landlords

hmo

IN THIS ARTICLE

Your property may be deemed a ‘House in Multiple Occupation’ (HMO) if you rent it out to numerous tenants who aren’t family members and who share certain communal areas and facilities.

HMO properties have become increasingly common in the private rental market as they are generally more profitable for landlords than conventional renting options.

However, HMO landlords are required to meet additional obligations, such as having an HMO licence in certain circumstances.

In this HMO & private rental guide for landlords, we will help you understand your rights and obligations as an HMO landlord.

What does HMO stand for?

HMO is an abbreviation for House in Multiple Occupation.

HMO housing consists of at least three tenants from at least two households that share a toilet, bathroom and kitchen facilities within a property.

The term “household” can refer to a married couple, those in a relationship living together, or to relatives, including half-relatives, stepparents, stepchildren, aunts, uncles, foster parents, foster children and siblings.

Types of HMO

There are several types of HMO. These include:

Large HMOs

A property is considered to be a ‘large HMO’ if all of the following apply:

  • it is rented to 5 or more people forming more than 1 household
  • some or all tenants share toilet, bathroom or kitchen facilities
  • rent is paid by at least 1 tenant

Live-in landlords

It is possible to have an HMO as a live-in landlord, where you rent rooms and share common areas with your tenants.

With three or more ‘non-family’ tenants paying rent, forming two or more households (including you as the live-in landlord), the property would be considered an HMO.

You can have two non-relatives living and renting in your property before the HMO threshold is triggered.

Student accommodation

Since the Housing Act 2004, certain student accommodation might be classed as an HMO. This applies to properties that are privately owned and shared by students from separate households.

Do you need an HMO licence?

It is a legal requirement to obtain an HMO licence from your local council if you are renting out a large HMO. This means the property is occupied by 5 or more people from more than 1 household, with some or all tenants sharing toilet, bathroom or kitchen facilities and where at least 1 tenant is paying rent.

Councils can also include other types of HMOs for licensing. As such, it is advisable to check with the local council as to what is required for your specific property.

An HMO license must be granted before renting out the accommodation.

Once granted, licences typically last for five years, though some councils can grant them for shorter periods.

You need a separate HMO licence for each HMO you rent.

The council has the right to revoke an HMO licence at any time if they believe you are violating the conditions.

It is also your duty to maintain the licence and renew it before it expires.

How to apply for an HMO licence

You can request an HMO licence from your local authority online.

You, as the landlord, or your property manager can complete the application. There will usually be an application fee for the licence and a standard rate charge covering the period of the licence validity. These fees vary by council. The application fee is also generally nonrefundable.

Most councils have criteria to follow, which can involve an inspector visiting your property to ensure that it is suitable and meets all requirements. This includes that there are enough shared, suitable facilities for the total number of people living there.

Councils will check that the bedrooms meet the minimum room sizes:

  • One person aged over 10 years – room must be not less than 6.51 sqm
  • Two persons over 10 years – room must be not less than 10.22 sqm
  • One person aged under 10 years – room must be not less than 4.64 sqm
  • Any room used as sleeping accommodation must be not less than 4.64 sqm

Councils will also check that there are:

  • up-to-date annual gas safety checks
  • a reasonable number of tenants for the size of the property
  • appropriate fire safety measures in place
  • storage and disposal facilities
  • adequate washing and cooking facilities
  • safety checks for electric wiring and appliances carried out every five years
  • clean and well-presented communal and shared areas

You will also undergo checks that you are fit to be a landlord. This can include running a background and criminal record check on you.

The council will examine whether the property’s size is large enough for all occupants and if you are properly managing it. They will take the property’s structural build into consideration.

What if your HMO licence application is refused?

Your HMO licence application can be refused, for example, if the council decides that your property is not up to standard.

The council is obliged to provide reasons for denying an HMO licence.

Depending on the circumstances, you may be able to dispute and appeal the refusal. Should the appeal find in your favour, you will receive your licence without any additional fee or another application.

Can you avoid an HMO licence?

There are certain situations that can make your property exempt from an HMO licence.

These include:

  • if you let your property to two people in two households
  • you, the landlord, live-in with two lodgers in the same household
  • some buildings controlled by a co-operative society
  • educational institution-owned student accommodation
  • care homes, bail hostels and domestic refuges
  • buildings owned by the police or NHS

What if a landlord does not have an HMO licence?

Under the Housing Act 2004, it is a criminal offence to not have an HMO licence if you rent out a qualifying property. If you do so, you risk an unlimited fine, criminal conviction and your tenants may be able to reclaim up to 12 months of rent.

It is also worth noting that without an official HMO licence, you may not be unable to evict tenants under the Section 21 Notice.

From April 2017, a landlord who fails to obtain a licence or breaches it, could be subject to a banning order. This prohibits you from renting out accommodation.

What if a landlord breaches the HMO licence?

Breaking any terms of the licence can lead to fines, rent repayment orders, management orders and sometimes even prosecution.

What is a landlord exceeds the maximum number of persons or households?

Allowing more than the maximum number of tenants and households in a licenced HMO is an offence punishable by an unlimited fine, or the local council may issue a Civil Penalty Notice for up to £30,000.

HMO landlord legal responsibilities

Many of the legal obligations on HMO landlords are the same as those placed on single lets, since both arrangements relate to assured shorthold tenancies (ASTs), which are governed by the Housing Act 1988 and Housing Act 2004.

However, HMO landlords are also subject to additional regulations under the Management of Houses in Multiple Occupation Regulations 2006.

As an HMO landlord, you must:

  • Have an HMO licence if renting out a large HMO in England or Wales.
  • Ensure that the property is not overcrowded. It is an offence to have an overcrowded HMO (more on minimum room sizes later).
  • Provide your name, address and contact number for tenants. You should display this information in a prominent position within the property for all tenants to easily see.
  • Conduct health and safety inspections and keep records of all inspections and work carried out to provide to the council.
  • Provide working smoke alarms and easily accessible fire escapes. You will also need to carry out a fire risk assessment and keep all copies. Otherwise, you can face criminal charges in the event of harm or death to any or all tenants.
  • Ensure a clean water supply.
  • Provide adequate draining including protecting pipes from frost.
  • Inspect electrical equipment at least once every five years and hold a copy of the record.
  • Ensure that all communal areas are safe and clean.
  • Supply a gas or electrical safety record annual to the council, and, if requested by the council, supply this record within one week.
  • Keep the interior and exterior of the property in tidy, working order.
  • Have an up-to-date risk assessment.
  • Ensure that tenants have access to the minimum number of bathrooms and kitchens.
  • Be able to verify that you have the correct landlord insurance.

HMO tenants’ obligations

HMO tenants must also follow certain rules. These include, amongst others, not intentionally damaging items that the landlord has a duty to provide and to repair
comply with all fire safety instructions.

HMO tenancy agreements

HMO tenancies can vary in length, but they are typically a minimum of 6–12 months. It is important that you have a written tenancy agreement to outline this timeframe as well as both parties’ rights and obligations. This agreement will also inform your tenants what is required of them and provides protection against both parties in the event of eviction.

It is common to include utility bills and other amenities, like broadband, with the rent. If you choose to do this, make sure to include any details and costs in the agreement.

The advantages of HMOs

Reasons to consider HMOs include:

  • higher rental yields compared to single-let properties
  • demand for single-room lets is becoming increasingly more popular due to the increased rental market
  • if one tenant leaves, you still have other occupants to fall back on for regular rent income

The disadvantages of HMOs

Potential disadvantages to HMOs include:

  • HMO mortgages typically have a higher interest rate compared to buy-to-let mortgages
    some tenants might prefer council tax and utility bills to be included, which can make it harder for you to manage
  • you will need to maintain repairs in communal areas, which, with more people in a property, can be more common than you would hope
  • it is common to fully furnish the property. This can put a lot of financial pressure on you at the beginning of the tenancy

Mortgages for HMO properties

Importantly, HMO mortgages are different to ordinary buy-to-let mortgages because they relate to renting multiple rooms in one property to multiple residents.

If you took out a buy-to-let mortgage on an HMO property, you may be breaching the terms and conditions, which could require leaders to take legal action. You can, however, request to switch mortgage types at any point.

It is important that you acquire the right HMO mortgage for you, as one with a high rate will quickly eat away at your potential profit.

Before applying, research the maximum number of rooms lenders will accept.

During the application stage, lenders will take into consideration your experience and background as a landlord.

They will also look into the number of lettable rooms, whether you require a licence to rent the property, rental income and types of tenants you are targeting (for example, professionals or students).

The HMO’s location, management type (letting agency or landlord) and personal or limited company mortgage can also play factors in approving an HMO mortgage.

HMO FAQs

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Legal disclaimer

The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal advice, nor is it a complete or authoritative statement of the law, and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.

 

Author

HMO & Private Rental Guide for Landlords 1

Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.

Gill is a Multiple Business Owner and the Managing Director of Prof Services - a Marketing Agency for the Professional Services Sector.

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