Houses of Multiple Occupation are an area of growth for investors, with 43% of these landlords in acquisition mode. So what do landlords need to know about HMOs, and about the rules and regulations that govern them? We answer some the key questions here.
What is an HMO?
HMO stands for House in Multiple Occupation. An HMO is generally defined as any property (house of flat) occupied by three or more people comprising two or more households who share facilities (kitchen, bathroom and/or toilet).
Who needs an HMO licence?
Not all HMOs need a licence from the local authority.
There are however two types of HMO license that operate in England – Mandatory and Additional.
- Mandatory HMO licensing
Mandatory HMO licensing is restricted to larger properties under Part II of the Housing Act 2004. This would be any multi let property with 5 or more occupiers creating two or more households regardless of the size of the building.
Major changes to the rules and regulations around these properties came into force on 1 October 2018 and changed both the definition and some key conditions.
Before this date, there were an estimated 60,000 properties across England which needed a mandatory HMO licence. Following the changes, upwards of 220,000 properties may now need a licence.
- Additional licensing
Additional licencing, often called Part 2 Licensing, is a discretionary scheme that many local authorities have adopted to help regulate HMOs that are not covered by mandatory licensing.
This varies from authority to authority, but typically includes smaller privately rented shared houses and flats, designed to capture multi let properties with less than 5 occupiers
Simple Tip: If you are not sure if your property requires a licence, get in touch with your local authority as soon as possible to discuss it.
What kind of properties need an HMO licence?
Prior to 1 October 2018 landlords needed a mandatory HMO licence if the property was:
- Three or more storeys high
- Contained five or more pople creating two or more households
- Contained shared facilities such as a kitchen, bathroom or toilet
The new rules bring many more properties into the mandatory HMO classification and the main changes are:
- The removal of the three-storey rule
- The inclusion of certain flats that are situated above or below commercial premises
- New minimum room sizes.
What are the minimum statutory conditions for an HMO licence?
Since 1 October 2018 the minimum conditions a property has to meet include:
- Minimum bedroom size:
The new statutory minimum requirement is 6.52 square meters or 10 square meters for HMO’s in which all tenants have their own bathroom but share other facilities such as a kitchen.
Simple Tip: This is the MINIMUM requirement and local authorities may well insist on larger room sizes.
- Fit & Proper Person Test
Landlords must undergo a Fit & Proper Person Test. They must not have convictions which might affect their suitability for the licence or have breached the landlord laws or code of conduct.
- New waste management obligations
Landlords must also provide enough storage facilities to deal with the holding and disposal of all household waste. Landlords must comply with the scheme issued by the local authority (if one exists) for the storage and disposal of domestic refuse pending collection. A failure to comply with the scheme is a breach of the licence and a criminal offence.
Landlords must install smoke and carbon monoxide alarms;
- Gas Safety
Landlords must send the council an updated gas safety certificate every year
- Electrical appliances
Landlords must provide safety certificates for all electrical appliances when requested.
Who might be caught out by the changes?
- Landlords who are operating HMOs that are only 2 storey or less, with 5 or more occupiers. Traditionally these Landlords would have been exempt from requiring a licence.
- Those running properties with smaller rooms may also have to reconfigure based on the new minimum room sizes.
I already have an HMO licence – do the new rules apply to me?
The new conditions will not apply to existing HMO licences – those issued before 1 October 2018 – until the current licence expires. In other words, if you already have a licence the changes will only apply when this is due for renewal. At renewal the new statutory conditions will apply.
Landlords who already have an additional or selective license but whose properties will now come under the extended scope of mandatory HMO licensing will need to contact their local authority to determine if they need to be migrated to a HMO licence or not.
I have an additional HMO licence – will the new conditions apply to me?
The new minimum room size conditions apply to all Part 2 or additional licences. That includes HMOs that are required to be licensed under additional licensing provisions as well as the mandatory licensing regime.
The new rules will only apply, however, once that licence expires and is renewed or if it taken out for the first time.
How long do landlords have to comply with the new conditions?
Landlords falling into the mandatory HMO licence criteria generally have a grace period of six months, from 1 October, to make changes to their properties so that they comply with the new conditions. That might mean reconfiguring properties, for instance to comply with minimum bedroom sizes. It’s recommended that landlords check with their local authorities to ensure the national approach has been adopted.
Simple tip: After this, those that do not comply will be subject to a fine of up to £30, 000 as well as possible criminal prosecution.
For those with licences issued before 1 October, an authority has no grounds to act against an existing license holder that is not compliant with the new standards. Landlords that do not comply with the new minimum room standards at the time of renewal will be given a notice period of up to, but most likely less than, 18 months to comply.
What are the penalties for failing to apply for, or meet, HMO licence conditions?
Landlords of HMOs that fall under the new definition – and do not yet have a licence – have committed a criminal offence by failing to apply for a licence or a temporary exemption before 1 October 2018.
Landlords can be subject to a civil penalty notice (fine) up to £30,000 or risk being prosecuted by the council and if found guilty given a criminal record, be fined an unlimited amount and/or ordered to pay court costs and a victim surcharge.
Simple tip: It’s worth noting that whilst the property is unlicensed, landlords cannot issue a Notice of Seeking Possession under Section 21 Housing Act 1988 to evict tenants.
How do you apply for an HMO Licence?
Landlords or their agents need to submit a licence application to the local council using the council’s application form. Councils usually ask for a floorplan of the property in addition to other supporting documentation.
You will also need to pay an application fee which is normally non-refundable. These vary but the average licence fee is around £1,000 for a first-time application. Renewals are normally less than the first-time fee.
A licence will normally be granted for a five-year period.
What if a landlord has a problem getting an HMO licence?
A local authority will normally only refuse to grant a licence if it has serious concerns regarding the HMO, its management, or the landlords inability to pass a fit and proper person check.
Councils will try to resolve any problems with the applicant before refusing a licence. Resolution of such problems may include proposing a different licence holder or imposing certain conditions.
Landlords can disagree with the conditions set out in a licence, for example, those which state a maximum number of occupiers or a requirement for work to be carried out. The council must consult with the applicant, giving its reasons and allowing them a period of 14 days to make their case.
A right of appeal to a residential property tribunal is available to HMO licence applicants if they disagree with a council’s final decision.
Is an HMO right for me?
Carl Agar, landlord, letting agent, developer and Chief Exec of the Home Safe licensing scheme, talks about some of the pros and cons of running an HMO in this video.
Source: Simple Landlords Insurance