What is an HMO?
According to GOV.UK, “A house in multiple occupation (HMO) is a property rented out by at least 3 people who are not from 1 ‘household’ (for example a family) but share facilities like the bathroom and kitchen. It’s sometimes called a ‘house share’.”
If your landlord is renting out a large HMO in England or Wales, then they must have a licence if all of the following are true:
- It is rented to 5 or more people who form more than 1 household
- Some or all tenants share toilet, bathroom or kitchen facilities
- At least 1 tenant pays rent (or their employer pays it for them)
Each HMO a landlord runs will require a separate licence and each is valid for a maximum of 5 years.
GOV.UK goes on to clarify that; “Even if your property is smaller and rented to fewer people, you may still need a licence depending on the area. Check with your council.”
HMOs were defined by The Housing Acts 1985 and 1989. They provided the first guidelines for safety requirements and licensing. The Housing Act 2004 was introduced and two years later, licensing for large HMOs became mandatory. These were defined as having five or more tenants from more than one household.
In October 2018, this was further developed to where the ‘3 storey’ requirement for HMOs was scrapped.
What’s the benefit of HMO licences managed by local councils?
HMO (House in Multiple Occupation) licensing laws are typically managed at the local council level for several reasons:
- Local Knowledge and Control: Local councils have a deep understanding of their specific housing markets and the unique needs and challenges of their communities. Managing HMO licensing at the local level allows councils to tailor regulations to address the specific housing issues and demand for HMOs in their areas.
- Local Accountability: Being accountable to their residents, local councils are better positioned to respond to local concerns and ensure that HMO properties are managed in a way that is consistent with the needs and preferences of the local population. This local accountability fosters greater transparency and responsiveness in managing HMO licenses.
- Enforcement: HMO licensing often involves regular inspections and enforcement of safety and quality standards. Local councils are more readily able to monitor and inspect properties within their jurisdiction, ensuring that landlords comply with regulations and that tenants are safe and well-cared-for.
- Varied Local Conditions: Housing markets and conditions can vary significantly from one locality to another. What works well in one area may not be suitable for another. Local councils can adjust HMO licensing requirements to account for these variations, ensuring that regulations are appropriate for the specific circumstances of each area.
- Community Engagement: Local councils can engage with local residents, landlords, and other stakeholders to gather input on HMO regulations. This engagement helps in the development of balanced and effective licensing policies that take into account the needs and concerns of the local community.
- Rapid Response to Local Issues: Housing conditions and demand can change over time. Local councils have the flexibility to adapt HMO licensing regulations quickly in response to changing local conditions or emerging issues.
Decentralised Decision-Making: By managing HMO licensing at the local level, authorities can avoid one-size-fits-all approaches that may not be appropriate for all areas. It allows for decentralised decision-making that considers the specific circumstances of each council’s jurisdiction.
How to get an HMO Licence
According to Kamma, a PropTech platform which helps landlords and letting agents navigate the complexity of property licencing:
“Applying for a licence is a complex, multi-step process and can be daunting for inexperienced as well as seasoned landlords. The first step is to verify if the property needs to be licensed and to find out if you need to apply for a mandatory, additional or selective licence. Second, speak to the council to double-check licensing requirements.” They emphasise the importance for the landlord or agent to “carefully check each time as ignorance is no defence against being fined. A property inspection then usually needs to be set up and the licence applicant needs to meet and liaise with the council and manage the application through to a decision.”
The penalties for non-compliance?
The National HMO network provides a helpful summary of the penalties under the Housing Act 2004 which was modified by the housing and planning act 2016. They state that:
“Letting a licensable HMO without a licence is an offence and can result in unlimited fines (often in the range of £10,000-£40000) or the civil penalty as an alternative to prosecution. The penalties apply to any person(s)/company(s) having control and/or managing the property.
Landlords who operate a licensable HMO without a licence may also, in certain cases, have to repay rent – known as a Rent Repayment Order (RRO). This applies to rent paid by tenants or by local authorities in housing benefit during a maximum 12 month period. An RRO is awarded by the FTT on application.
Anyone failing to comply with licence conditions placed on them or breaches any of the HMO Management Regulations commits an offence which could result in a fine of up to £5,000 per offence or an alternative civil penalty.”
The largest recent HMO fines:
One of the clearest, most obvious deterrents for landlords and agents from incorrect licencing is the enforcement of large fines. However an additional pressure to comply to the licencing comes from industry news reports. Every reader gets drawn in by big headings quoting huge fines and misdemeanours. But for the company in the firing-line, especially those who made a mistake with the licencing rather than acting criminally, the consequence to industry reputation can be devastating.
“A buy to let investor has been found guilty of 35 HMO-related offences – and has to pay a total fine of £182,314.90, thought to be one of the largest penalties ever for an individual landlord.”
“But Babar unwisely ignored the requests and the property inspected under warrant in June 2019 where multiple breaches of regulations were uncovered.”
“Such obvious offences breached the HMO licence and a prosecution began.
The licence was revoked immediately and a prohibition order prevents anyone staying at the house until it was made safe and the family relocated.”
“In 2021 when the licences expired, despite repeated contact by the council, no application was received to renew either licence. Inspections in October 2022 confirmed that both properties needed a new HMO licence and that the works had not been done.”
The regulations surrounding HMOs vary by location, but in England and Wales, large HMOs (housing five or more people from different households) require licensing. These licenses are typically managed by local councils, offering benefits such as tailored regulations, local accountability, enforcement, and community engagement.
Obtaining an HMO license can be a complex process involving verification, council communication, property inspections, and application management. Non-compliance with HMO licensing regulations can result in substantial fines, potentially damaging a landlord’s reputation.
The examples of large fines serve as a deterrent to landlords and agents, reflecting the importance of adhering to HMO licensing requirements. The consequences of non-compliance extend beyond financial penalties, impacting property safety and the reputation of those involved. It is crucial for landlords and agents to stay informed about and adhere to HMO licensing regulations to ensure the well-being of tenants and avoid legal consequences.