Not all rental properties are the same. While you may think of a rental home as a house or flat owned by a single tenant or family, this isn’t always the case.
For example, HMOs see multiple tenants or families renting within the same building.
But what does this mean for landlords? And what are their legal obligations and key considerations when it comes to these types of rental properties?
What is a house in multiple occupation (Hmo)?
The Government’s definition of an HMO is a property in which at least three tenants live permanently in more than one household – AND share a toilet, bathroom or kitchen facilities.
In this context, a household is a single person, or a group of people who are related, married or living together– and the property may be configured as bedsits, shared houses, lodgings, hostels or residential homes.
This type of living arrangement is often called a ‘house share’ among tenants.
licensed hmos
Larger HMOs – which are occupied by five or more people and are three or more storeys high – need to be licensed with your local council. Licenses are usually valid for five years.
Licensed HMOs must have a Housing Health and Safety Rating System (HHSRS) risk assessment carried out by the council within five years of the landlord receiving an HMO licence. You are then required to carry out any remedial works needed to eliminate the risks identified.
Whether or not your HMO requires a license depends on two factors – if it meets the minimum size and tenancy requirements, and whether the local authority requires a license regardless of tenancy numbers.
In some areas, even if your property doesn’t meet the size or tenancy requirements for a license, it may still be required by the local authority. And the landlord may still be at risk of fines if they don’t hold the appropriate HMO license.
Landlords should always check the exact licensing requirements with their local authority to avoid being non-compliant.
what is an unlicensed hmo?
As its name suggests, an unlicensed HMO is one which does not meet the minimum requirements for a license within its local authority area – or is required to have a license and doesn’t.
Unlicensed HMOs that are legally required to have a license put the landlord at risk of an unlimited fine from their local council, as well as tenants being able to reclaim up to 12 months’ rent.
do i need an hmo license?
If your rental property meets the minimum size and tenancy conditions above, you’ll need a license.
Even if it falls below these requirements, it’s still important to contact your local authority to check there are no additional or selective licensing requirements that apply to your HMO.
You can apply for an HMO license through the government portal. Below, we look at the requirements you’ll need to successfully qualify for an HMO license.
For successful applicants, the license will remain valid for a maximum of five years – after which, you’ll need to reapply.
what are the hmo regulations?
Before you apply for an HMO license, it’s worth checking your property meets the requirements – and that you’re willing and able to provide the relevant information as required by your local authority.
Here, we take a look at the HMO standards that landlords must meet to qualify for, and maintain, a license:
hmo standards
The law states that you must meet certain standards as a landlord of an HMO to ensure that:
- Fire safety measures are in place including working smoke alarms (and fire extinguishers in the case of licensed HMOs).
- Furniture complies with relevant fire safety laws.
- Gas safety checks are carried out annually.
- A professional electrical safety check is done every five years.
- The property is not overcrowded.
- There are adequate amenities for the number living there.
- Communal areas and shared facilities are clean and in good repair.
- There are enough rubbish bins/bags.
- The manager of the house (which could be you or an agent whom you appoint) is a ‘fit and proper’ person, which means they should not have a criminal record or have previously breached any landlord law or code of practice.
The Housing Act also includes significant detail behind each of these points, so it’s worth checking the precise rules with your local council. However, some of the key areas are covered below:
- AMENITY STANDARDS – The required standard for amenities – toilets, personal washing facilities and cooking facilities – changes according to the number of people living in the property. For most amenities, the ratio is approximately 1 to 5, e.g. one shower or bath, one kitchen sink, and one four-ring hob and oven with an adjacent fire blanket for every five tenants. Personal washing facilities should include both hot and cold water, while each kitchen should include a fridge and freezer, and a sink with an adequate supply of cold drinking water.
- LIGHTING – All habitable rooms must have an adequate level of natural light but also have electrical lighting. All entrances to the property should be well-lit.
- HEATING – There must be an acceptable means of maintaining habitable rooms at a reasonable temperature.
hmo exemptions
So, when does a rental property become an HMO? And are there any situations in which a property meets the definition of an HMO, but is exempt from the rules and requirements?
In short – yes. There are some situations in which an HMO may be exempt from the category and, therefore, from the licensing requirements. These exemptions typically depend on the tenants and their relationships.
Exemptions to the HMO classification may include:
- Tenants that include live-in employees, such as nannies and care workers.
- Student housing directly managed by educational institutions.
- Live-in landlords with up to two tenants may not be considered an HMO.
- Situations in which the tenants are from the same family – including couples, foster families and other relationships – may be excluded.
- Special purpose tenancies – such as religious communities, emergency services buildings, halls of residence and more – may be excluded.
*Note – this list is not exhaustive and may also be subject to review by local authorities.
should i let my property by room or as a house?
Whether you let your property as an HMO or as a whole house depends on various factors – and each option comes with unique benefits and potential risks.
Here, we take a look at the key considerations for letting your property as an HMO or a house, and their respective pros and cons.
renting by room
Renting your home as an HMO – with each tenant or household individually renting a single room, instead of communally renting the whole property – can present some attractive benefits for landlords.
The most obvious is the financial reward. For example, where a four-bed property could be let for £2,000 per month, landlords could instead rent each room for £700 per month – totalling £2,800 and representing an £800 increase in rental income per month.
It is also generally less disruptive to rent on a by-room basis – as it can be both easier to evict a single tenant if needed and is also less likely that all tenants would move out at once, meaning you only need to replace one room at a time.
Renting by room can also prove more attractive to prospective tenants – with a steady stream of single tenants or couples able to live in a single room, compared with finding a family or group large enough to fill a larger property.
There are also potential downsides to renting an HMO, though – including the potential for more regular tenant turnover. This can come with additional admin processes associated with HMO licensing, as well as processes for onboarding new tenants, including conducting background checks and marketing and advertising tenancies.
There is also the risk of conflict between tenants who do not know each other.
Another consideration is that – unlike renting a whole property – the landlord is typically responsible for managing and paying bills in an HMO. And while these finances can be recouped through rent, it can represent an additional monthly task.
renting as a house
Like renting an HMO, renting out a whole property also has its advantages and disadvantages.
Overall, it can often be simpler to manage whole-property lets. Not only do landlords not have to negotiate multiple different rooms, but there are also fewer regulations and licensing considerations when letting a whole property.
Most of the potential downsides to renting a whole property, however, are financial. Not only can it represent a lower monthly rental income, but landlords are also concentrating their risk – with the potential to lose their entire rent payments if the whole group or family vacates the home.
tenancy agreements in hmos
Most landlords of HMOs find it sensible to issue their tenants with a formal, written tenancy agreement. One of the most common forms of these is the ‘room only’ Assured Shorthold Tenancy (AST).
These should cover everything from keeping pets to arrangements for access, procedures when repairs are required and responsibility for paying water/sewerage charges and other utility bills.
If you take a deposit, this must be protected under one of the Government’s approved tenancy deposit schemes.
landlord insurance from homeprotect
Are you a landlord renting an HMO? Or currently renting a whole property and considering switching to individual room letting?
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Your Questions Answered
No, an HMO license cannot be transferred to either another person or another property. Each license is granted to the applying landlord for the applying property only.
If the property changes hands, the new owner must apply for a new HMO license. Similarly, if the landlord sells the property and buys another HMO, they must also apply for a new license.
The exact cost of an HMO license varies by local authority – however, they typically cost anywhere from hundreds to over one thousand pounds for a new license. However, this cost is relatively minor compared with the potential fine for failing to present a valid license.
It’s important to remember that HMO licenses expire after a maximum of five years, and landlords will need to reapply to extend this license – paying an additional fee for the license each time. However, this cost is often reduced for previous license holders.
Yes, landlords can live in their HMOs. For landlords living with up to two other tenant households, they may actually be exempt from HMO licensing regulations – as they are typically discounted as a ‘tenant’ counting towards the limit.
However, living with three or more unrelated tenants will typically require landlords to comply with HMO regulations and apply for a license.
An HMO is defined as a rented property with at least three tenants from more than one household – with this being the minimum number to be classed as an HMO. However, there is no upper limit on how many people can live in an HMO.
The exact number of people that can live in an HMO depends on the size of the property and its facilities, as well as the landlord’s HMO license and any specific local authority regulations.