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Last month it was reported that only 600 applications for HMO licences had been received by Sefton Council from private landlords and agents. With the deadline of the end of August fast approaching, the Merseyside authority stressed the regulatory powers it holds to step in and deal with what it called “poor [property] management and the thousands of hazards being faced by tenants.”

Councils can set their own rules when issuing HMO licences, in the hope that the quality of Private Rented Sector (PRS) housing stock is increased, while at the same time elevating the reputation of private landlords. This local initiative in Sefton is one of over 100 Selective Licence Schemes (SLS) found across the country today.

In this article, we’ll introduce the essential information for landlords and agents regarding the fundamentals of HMO licensing, helping them to understand their responsibilities and not fall foul of any regulations and laws.

What is a HMO licence?

The term Houses in Multiple Occupation (HMO) refers to a rental property located in England or Wales that is let to several people. However, unlike family homes, these tenants are not classed as a single household, and they often share common areas, like kitchens, toilets or bathrooms.

Depending on the council where the property is located, house shares can qualify as HMOs with a different number of tenants. However, a large HMO of five or more house sharers will mean that it is mandatory to obtain an HMO licence before letting the property.

The website stipulates that these properties are rented to a minimum of five people who share the above facilities and where one person or more is responsible for paying rent. There are however situations where letting a property to fewer people – more than two and not a family – would qualify as needing an HMO licence. This would qualify as ‘additional licensing’. In addition, other areas require every private landlord to obtain an HMO licence, known as ‘selective licensing’.

The UK Government’s site features many resources, including a useful postcode checker that allows landlords and their agents to confirm the minimum numbers for their area, highlighting any rules or regulations specific to the relevant local council.

It is important to consult the Government’s guidance before renting a property, as an HMO licence now needs to be in place to stay within the law.

In 2018, we covered the changes to rental properties that needed HMO licences. At the time, the number of properties classed as HMOs rose significantly, subsequently falling under the mandatory licensing scheme.

The rules, which had been approved by Parliament, meant that properties of any height which are occupied by five or more people from at least two different households will need the mandatory licence.

Before this, the scheme only applied to properties of at least three storeys. But the new ruling in 2018 added a further 160,000 properties to the licensing program, including flats and bungalows.

How does HMO licensing work?

Both landlords and agents that manage rental properties need to be clear on how HMO licences operate. Councils can impose a benchmark of landlord and residential conditions including mandatory national minimum sleeping room sizes and waste disposal provision requirements, under the Licensing of Houses in Multiple Occupation (Mandatory Conditions of Licences) Regulations 2018.

As described by Shelter, these minimum bedroom sizes are set at 4.64 square metres (for children under 10 years old), 6.51 square metres (for a person aged 10 or over) and 10.22 square metres for two people aged 10 or over.

Again, it’s important to stress that these numbers can vary from council to council, so it is recommended that prospective HMO landlords confirm with them as to who can occupy the rooms in the property.

Ultimately these health and safety guidelines help landlords understand which tenants they can accept in their HMO property and avoid overcrowding.

Where five or more people are sharing a house or flat, HMO properties must have an adequate number of rubbish bins to maintain living standards. Communal areas need to be maintained and kept clean. There should also be sufficient washing and cooking facilities to obtain an HMO licence.

Ensuring the safety of the tenants should be prioritised, with fire safety measures such as fully-functional smoke alarms, annual gas safety checks and electrical checks undertaken every five years. Some councils will expect these minimum standards before granting HMO licences in properties with fewer tenants, too.

Councils also assess HMO licence applications in terms of the landlord’s character. Checks are made to assess whether they are a ‘fit and proper’ person. Their character and any convictions can result in the council not granting an HMO licence. Equally, the council has the power to remove an HMO licence should they be given a criminal conviction or the landlord breaks the codes of practice.

Landlords that own several properties which qualify as HMOs must obtain an HMO licence for each individual property. An HMO licence is non-transferrable should the property be sold. It lasts five years, once awarded, in most council-run areas and landlords or agents must reapply before this period ends. However, this too can vary depending on the specific council.

In the granting of a licence, a risk assessment will be undertaken by the appropriate local authority or council. Conducting a Housing Health and Safety Rating System (HHSRS) risk assessment within five years of receiving a licence application ensures that the property is suitable to accommodate multiple households. Here a ‘household’ is defined as families, single people as well as couples who live together or are married.

Any health and safety issues identified by the council’s inspector will need to be resolved to remove any hazards. This also ensures that a property is safe for tenants and seeks to remove rogue landlords from the market.

HMO licence scheme UK

How much is a HMO licence?

HMO licence costs depend on which local authority their HMO property is located in. Examples of these figures can be found on the HMO hub website, with Your Move suggesting that the amount landlords are expected to pay usually being £500 to £1,500. Landlords and their advising agents also need to be aware that there is an application fee to be paid.

In a previous article, we reported that the expanded pool of 160,000 additional properties needing to obtain a HMO licence would generate an extra £120 million in the first year. This would then level off at £80 million every five years afterwards, due to HMO licence renewals.

Which HMOs don’t need a licence?

Landlords Defence highlights how purpose-built flats are exempt from needing a HMO licence. Buildings with more than two self-contained flats shouldn’t therefore need HMO licences, in theory. Yet, those councils that have selective or additional licensing schemes will still require landlords to apply for a HMO licence, so be mindful.

On the matter of private student housing, this will usually be classed as an HMO unless it is owned by an institution such as a college or university.

The risks of avoiding a HMO licence

It goes without saying that landlords have a moral and legal responsibility to follow legislation and council rules, just as any other business owner would. After all, a HMO is a business, so a HMO licence is designed to ensure the safety and welfare of tenants, while at the same time protecting landlords and the agents managing their properties.

Governed by the Housing Act 2004 and other laws, there are no upper limits in terms of how much these parties can be fined for letting out an HMO property without a licence. The National HMO Network stresses that, aside from the financial implications, risks include banning orders, confiscation of goods/property under the Proceeds of Crime Act, and even imprisonment.

It also stresses that non-compliant landlords may also have to repay rent – known as a Rent Repayment Order (RRO). This applies to rent paid by tenants or by local authorities in housing benefits during a maximum 12-month period.

These potential consequences are intended to deter rogue landlords from offering substandard accommodation. However, we reported in 2020 how the Residential Landlords Association has claimed that criminal and rogue landlords would simply ignore the scheme, similar to how other rules were ignored by “bad landlords.” Although views towards HMO licences remain mixed, it seems unlikely that the majority of landlords would risk the penalties outlined above.

In addition to the changes in the previous years, the addition of a further clause was laid out, meaning non-criminal action may also be brought against landlords and their agents. Fixed penalty notices were introduced under revisions to the Housing Act 2004, in the form of the Housing and Planning Act of 2016.

With the scope granted to issue this civil route and give non-compliant HMO landlords fines of up to £30,000, there really is little incentive to ignore HMO licences.

Inventory Base helps you manage your HMO licence

Landlords and agents can use Inventory Base’s HMO audits and block management reports to ensure that their HMO properties comply with the regulations surrounding HMO licensing.

Book a demo today to find out more about protecting your HMO investment.