Introduction
This article explains the law in relation to HMOs and how it affects landlords.
We have two other articles on HMOs – one for tenants, and one general article summarising the law
.
The article will be useful to residential landlords, social landlords, management agents, and chartered surveyors in England and Wales - Scotland and Northern Ireland have their own schemes.
The law has effect from 1 October 2007.
Do I need a licence?
- do you rent out property?
- does your property have three or more storeys (including attics or basements)
- does your property have five or more unrelated tenants?
If you answered yes to any of the questions, you probably need a license. You should check with the local authority to be sure as some local authorities may also licence smaller HMOs.
Simply, an HMO must be licensed if it is a building consisting of three or more storeys and is occupied by five or more tenants in two or more households.
How do I work out how many storeys there are?
When counting the number of storeys in the building you should include:
- basements and attics (if they are habitable);
- any storeys which are occupied by you and your family if you are a resident landlord;
- all the storeys in residential occupation, even if they are self-contained;
- any business premises or storage space on the ground floor or any upper floor. There is no need to count basements used for business or storage unless the basement is the only, or principal, entrance to the HMO from the street.
- If you have a mezzanine floor you should check with your local housing authority.
Are there any exceptions to the definition of HMOs?
Certain types of properties are not classed as HMOs and are therefore exempt. These include:
- two person flat share; a property, or part of a property, lived in by no more than two ‘households’ each of which consists of just one person;
- a property where the landlord and his household is resident with up to 2 tenants;
- buildings occupied entirely by freeholders or long leaseholders;
- buildings managed or controlled by a public body (such as the police or the NHS), a local housing authority or a registered social landlord;
- a building where the residential accommodation is ancillary to the main use of the building, for example, religious buildings, conference centres etc.
- buildings which are already regulated (and where the description of the building is specified in regulations), such as care homes, bail hostels etc.
Purpose built blocks of flats are not HMOs but individual flats within them might be if they are shared by more than 2 tenants in two or more households.
Houses which are converted entirely into self-contained flats will only be HMOs if the conversion did not meet the standard of the 1991 Building Regulations and more than one-third of the flats are let out on short term tenancies.
Is the licence per landlord or per property?
A separate licence is needed for each property.
The licence holder and the person who manage the property will have to be considered ‘fit and proper’ for the licence to be granted. A licence may not relate to more than one property and is not transferable to a different property, or to a different person.
Is the licence for the owner or the manager of the property?
The landlord can hold the licence or nominate someone else such as a manager or agent (with their agreement) to be the licence holder. Whoever holds a licence must be the person who is most appropriate to hold the licence for the property and this is likely to be the person who receives the rent for the property. A licence may not relate to more than one property and is not transferable.
How long will the application process take?
This varies – depending on mainly the complexity of the case and how many other applications there are at that time.
As long as you submit a valid application, the HMO can continue to operate legally until the local housing authority reaches its decision and any appeals against that decision are complete. However, the property may need to be inspected in order for the local housing authority to be satisfied that it is suitable for licensing.
An HMO licence will usually last for up to five years.
How much will a licence cost?
Local authorities have been allowed to set fees at their own discretion but these fees must reflect the actual costs to the local authority.
Will council tax be increased to pay for the scheme?
The Housing Act 2004 enables local housing authorities to recover the full cost of licensing from licence fees. However, local housing authorities may also choose to subsidise licensing from council tax. They may not use the licensing income to subsidise other projects.
Penalties for non compliance
Failure to apply for a licence is a criminal offence and can result in a fine of up to £20,000.
Rent from housing benefit or paid by tenants themselves can be reclaimed if a landlord is found to be operating a licensable HMO without a licence.
Relevant Net Lawman document templates:
All Net Lawman property documents
Landlord Packs – buy in bulk and save
PR505 Deposit protection details
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