If you’re a landlord who lets your property to several tenants who are not members of the same family, it may be classed as a ‘House in Multiple Occupation’ (HMO), and additional regulations may apply.

In this post, we will uncover how to ascertain what is a house in multiple occupation, and answer the question ‘Do I need an HMO licence?’.

What is an HMO?

Your property will be classed as an HMO if BOTH of the following apply:

1. At least three tenants, including children, live there, forming more than one household
2. The bathroom, toilet or kitchen facilities are shared

A ‘household’ consists of either a single person, or members of the same family living together. A family could be:

• People who are married or living together, including people in same-sex relationships
• Relatives or half-relatives, e.g. aunts or uncles, grandparents, siblings or half-siblings
• Step children and step parents

Examples:

• One family is a single household
• A couple sharing with a third person is classified as two households
• Three friends sharing would constitute three separate households

What is a ‘large HMO’?

A property is considered a large HMO if BOTH of the following apply:

1. At least five tenants live there, forming more than one household
2. The bathroom, toilet or kitchen facilities are shared

Who tends to occupy HMOs and what are the pros and cons for landlords?

Houses in multiple occupation are typically occupied by single professionals, as well as local long term contract workers and students.

For landlords, there are various benefits of investing in an HMO. These include:

• Profitability – rent is charged per room rather than for the entire property
• Reduced void risk – if a tenant decides to leave, you still have rent coming in from the others
• HMOs usually fall into the high-demand, low void category

However, renting an HMO can also have its downsides:

• HMOs tend to require more hands-on management and maintenance
• Proving individual responsibility for damage or negligence can be tricky
• Additional standards and legal obligations must be met

Do I need an HMO licence?

An HMO must have a licence if it is occupied by five or more people. In other words, if it is a ‘large HMO’, a licence will be required as standard.

Individual councils may also include other types of HMOs in their licensing regulations, so it is important to check with the local authority as to their specific rules.

An HMO licence is only valid for five years, so it must be updated before it expires.

It is often worth contacting the local council’s Planning Services before applying for an HMO licence to check whether planning consent is required for any aspect of the property being used, or modified for use, as an HMO.

Anyone operating an HMO without the necessary licence will be considered as committing an offence and could be subject to a civil penalty, an unlimited fine and/or a criminal record.

Landlords must comply with HMO licence conditions to ensure properties are safe and that they meet minimum space requirements in order to prevent overcrowding.

What other rules and regulations must I follow when renting out an HMO?

Following on from the question, do I need an HMO licence, there are other legally binding rules and regulations that must be adhered to when renting out an HMO.

Health and safety

Once you have submitted your HMO licence application, the council will conduct a Housing Health and Safety Rating System (England) Regulations 20025 (HHSRS) risk assessment on the property within five years.

Should the inspector find any unacceptable risks during the assessment, you will be required to take suitable steps to resolve them so that the property can be considered fit for human habitation.

All privately rented properties, including HMOs, must be free from Category 1 hazards as assessed under the HHSRS.

There are 29 hazards listed, including damp and mould, excess cold or heat, lack of adequate space or lighting, exposure to noise or pests, inadequate provision of facilities to store, prepare and cook food, and inadequate facilities to maintain good personal hygiene.

Changes to the property

Should you plan to make any changes to your HMO, your tenants make changes, or your tenants’ circumstances change (for example they have a child), then you must inform the council.

HMO standards

HMO standards are detailed within the Housing Act 2004. But in particular, HMOs must comply with The Management of Houses in Multiple Occupation (England) Regulations 2006.

These provide that the HMO owner or manager must:

• Provide their contact details to tenants, and display them somewhere prominent within the property
• Undertake safety measures, such as maintaining firefighting equipment and fire alarms, and keeping escape routes clear
• Provide and maintain an adequate water supply and draining system
• Provide an uninterrupted supply of electricity or gas to the property
• Provide sufficient waste storage and disposal facilities
• Supply a current Gas Safety Certificate and Electrical Inspection & Testing Certificate
• Adequately maintain the common parts, living quarters and fixtures and fittings in safe and good repair  

Some local authorities will have their own ‘Amenity Standards’. These set down the minimum number of toilets, bathrooms and kitchen facilities the property should have, together with room sizes for sleeping and communal living space where appropriate.

Investing in an HMO rental property?

Now we’ve answered the questions, what is a house in multiple occupation, and do I need an HMO licence, you may be clearer on whether an HMO is a suitable investment prospect.

Another question asked by landlords looking to reduce their risk factor is, are HMOs suitable for guaranteed rent?

The fact is, if you are renting your property to the council via a guaranteed rent scheme, which is most often the case, the property types they usually request are 1-4 bedroomed, self-contained family homes.

However, that’s not to say that HMOs won’t be in demand in certain locations, and for other types of guaranteed rent agreement. University towns and cities and areas with large populations of young people, students and new graduates will often see higher demand for HMOs.

Guaranteed rent from City Borough Housing

City Borough Housing offers a guaranteed rent service for landlords throughout London, Kent and Surrey.

Our scheme incorporates a professional property management service, covering the costs of everyday repairs and maintenance and day to day tenant queries.

Under our scheme, landlords will also receive their properties back in their pre-let condition when the agreement comes to an end, allowing for fair wear and tear. Regular property inspections are also included so we can check that your property is being looked after in line with the tenancy agreement.

To find out more about the City Borough Housing guaranteed rent scheme and how it could benefit you as a landlord, and to find out whether your HMO may be of interest, please get in touch.