In a separate category to multi-let and multi-family properties, a house in multiple occupation (HMO) is a shared property with multiple occupants who donât comprise a single family or household.
This will be the case if three or more people from distinct families or households live in the property, with at least one person paying some form of rental agreement. Landlords, property managers, and tenants must comply with relevant HMO regulations, registering for the appropriate license before such a property is let.
In this blog, weâll share distinctions between the different types of licenses, the properties they apply to, and the conditions under which each is required. Details of the application process, landlord obligations, and the consequences of non-compliance will also be covered.
Different types of HMO Licenses
- Mandatory license
- Additional HMO license
- Selective license
Mandatory License
A mandatory license must be obtained for the rental of certain HMOs as per the Housing Act 2004. This applies to properties with five or more people (including children of any age) forming two or more separate households regardless of how many floors there are. However, properties that donât fulfill the standard, converted building or self-contained flat test but are subject to an HMO declaration will be exempt from mandatory licensing.
Additional HMO License
A local authority may offer extended licensing for those HMOs that donât meet the terms of the tests mentioned above. Such additional licensing could be extended to all HMOs within a particular area or district.
It will apply to properties that are shared by three or more unrelated people who form two or more households and share facilities such as kitchens and bathrooms. Additional licensing is typically arranged where there are concerns over the management of such properties, which may be raised by the residents or the wider public.
Selective Licensing
HMO landlords may also have to obtain selective licenses, which will apply to all specified properties within a designated area under the Housing Act 2004. Such licenses were also introduced as a result of concerns over the poor standards of housing maintenance and the impacts of anti-social tenant behavior.
HMO properties do not have to be licensed if theyâre rented from:
- The council
- A cooperative
- The health service
- A housing association
- The police or fire authority.
Applying for a HMO license: process & cost
The local authorities have responsibility for ensuring that HMO licensing applications are made. These applications may be completed either online or in paper form, with the relevant documentation having to be provided alongside the application.
A fee must also be paid for the processing of the application and this will depend on the number of people living at the property, with the standard fee for a five-year license being £185 per occupant.
A first-time application must specify the category of HMO and disclose the details of any other licensed properties owned or managed by the applicant. The number of property floors and rooms must be confirmed, together with the number of occupants and relevant health and safety precautions that have been taken.
You might find it helpful to have an HMO checklist specifying the need for additional details, such as:
- Name of the property owner and those involved in the propertyâs management
- Name of the designated legal license holder
- Name of the mortgage provider
- Letting agent details
- HMO property address
- Intended category of HMO (e.g. shared house or self-contained rooms)
- Building type and room dimensions (these will have to be shared in specified formats)
Proof of planning permission must also be acquired if the property isnât licensed as an HMO at the time of application. A a certificate of lawful use or development (rather than full planning permission) may be granted if the property is operating as an HMO, has been occupied under this status for the past five years, and relevant evidence can be provided (e.g. current and previous tenancy agreements).
The local authority may only issue the license if they are satisfied that the:
- property is reasonably suitable for occupation by no more than the maximum number in the application (or the number determined by the local authority) or can be made suitable
- proposed license holder is a ‘fit and proper person’ and the most appropriate person to be granted a license (persons with particular convictions may not become license holders)
- proposed manager is the person having control, or is an agent or employee of the person having control and is a ‘fit and proper person’
- proposed management arrangements are satisfactory.
Such an application will be subject to committee review, with the potential of a hearing if there are a number of licensing objections. HMO inspections will also be carried out by local authority representatives, ensuring that essential living standards are met.
Landlord obligations and compliance
The local authority must be satisfied that proper management arrangements have been made and that the accommodation meets the relevant standards. They will make checks to ensure that the applicant has the required competency and is a fit and proper person. Such an individual will be registered with the Landlord Recognition Scheme, with appropriate management and financial structures in place.
The local authority will demand commitment to the following codes of practice:
- Maintaining accommodation standards
- Ensuring compliance with standards, such as those of the Building Safety Act
- Fulfilling repair responsibilities
- Cleaning and disposing of rubbish
- Sharing relevant information with tenants.
These codes must be visibly displayed within the property, with tenant understanding being confirmed. The tenants must also fulfill responsibilities such as allowing the HMO manager reasonable access and following rubbish disposal instructions. The breaking of such codes may be seen as reasonable grounds for tenant eviction.
Penalties for non-compliance
It is against the law for a person to control and/or manage a licensable HMO if they donât hold a valid license. An illegal offence may also be committed if such a person knowingly allows occupation by more tenants than permitted or breaches the conditions of the license. Penalties might include the issuing of a statutory or fixed penalty notice, as well as prosecution and the revoking of the license.
Without an HMO license a landlord may not be permitted to make evictions or let out any applicable properties. However, a temporary exemption may be made where the HMO landlord is given time to bring their property up to licensable standards or is converting the property from an HMO into a family home. If such criteria donât apply then the landlord might be ordered to pay a fine of as much as £30,000, plus up to 12 monthsâ rent. The local authority is also liable to ban such landlords from operation.
Managing HMOs legally and effectively
Landlords, property managers, and tenants must understand and comply with HMO law. Mandatory, additional, or selective licenses must be arranged for the legal rental of such properties and the avoidance of significant penalties.
HMO inspections are vital when it comes to ensuring the fulfillment of safety standards and compliance with regulations. HMO landlords can meet these stringent requirement with the all-in-one Property Inspect app.
Accessible from any location and on any device, Property Inspect allows for the capture of vital property condition details. Whether in the form of photographs or written records, these details can be converted into digital reports for sharing and alerting relevant stakeholders such as investors or property managers, ensuring that the property meets the standards needed for HMO licensing.
Book a demo and ensure the compliance of your HMO with Property Inspect.
