Landlord Legal Advice:

Houses in Multiple Occupation - The Rules

If you own or are planning to buy a property to rent out, and it will be rented out to more than one household then you need to be aware of the rules governing Houses in Multiple Occupation (HMO's).

From the government’s perspective, houses with lots of occupants are often in a worse physical condition than smaller premises and are also often rented out to the more vulnerable members of society. The rules around HMO’s are set up to ensure that these people are protected by making sure that their accommodation reaches certain standards. The classification of HMO’s has existed for some time now, but as from 1st April 2006 the rules were considerably tightened up
with the introduction of licensing, as certain properties now have to be licensed.

Whether or not a property is licensable is governed by the Housing Act 2004. The main test is where the property is occupied by more than one household who then share basic amenities (such as shared living space, toilets, washing or cooking facilities). Certain categories of housing must be licensed (namely where there are 3 or more storeys, and it’s occupied by 5 or more people forming 2 or more households). However in addition to this the local council have a lot of discretion to introduce their own specific criteria, so it’s wise to check with your local authority what the rules are in your area. If the property is a licensable HMO then the Landlord must apply to the local council for a licence. There is a fee payable for the application which varies from council to council. The licence will not relate to more than one property and is not transferable. In considering whether to grant a licence the council will consider whether the applicant is a fit and proper person to hold a license, considering how the property is managed, and whether the property itself is suitable (or can be made suitable).
If a license is granted, this normally lasts for 5 years, but it can be for less. The licence will usually contain restrictions on the number of occupants, and may require certain works to be carried out. If a licence is refused then reasons must be given and you can appeal against that decision.

Failure to obtain a licence or breaching the terms of a licence can bring harsh penalties, including fines up to £20,000, repayment of rent paid to the Landlord, and the Landlord losing their right to evict tenants. There are also some basic regulations that apply to all HMO’s whether or not these have to be licensed. These regulations are set out in “The Management of Houses in Multiple Occupation (England) Regulations 2006”. They apply to all properties with facilities shared by two or more households whether or not they also have to have a license. These cover a number of different areas, including obtaining 5 yearly electrical certificates.
Practical considerations if you’re thinking of buying a house that might be an HMO, you need to check with the council whether a licence is needed, and if so what works are required (the cost of these works could be very expensive). If there is already a licence then you need to check the procedure for getting a fresh licence for yourself.

Conclusion
Rental yield may be higher from houses containing a large number of people, but they can bring with them a number of different regulations which can mean higher costs for the Landlord.

If you need any help we offer a FREE initial advice interview, so for more information please contact Rebecca Brough direct on 01623 448 331 or email .

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