Houses in Multiple Occupation – HMO’s

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The mandatory licensing of some Houses in Multiple Occupation (HMO’s) came in to force 18 months ago, however there is still some confusion over the different definitions of a HMO.

The maximum fine for non-compliance with the law is a fine of up to £20,000, which means that it is imperative that landlords are made aware of the regulations.  It is also very important that brokers and lenders are also aware of the rules so as to avoid giving their clients bad advice.

What is an HMO?

Not an easy question to answer in a clear way.  The simple answer would be that a HMO is any property which has three or more tenants from two or more households and who share a kitchen, bathroom or toilet.  Although there are actually five definitions stipulated by the government the above answer will cover most scenarios.

Probably the most relevant aspect about HMO’s is the licensing process.  There are three different types of licensing required:

  1. Mandatory Licences are required on HMOs that contain three or more storeys and are occupied by five or more persons from two or more households.
  2. Discretionary Licences are required if any Local Housing Authority (LHA) deems a certain type of HMO to be in need of a license.  The LHA can actually choose its own definitions.
  3. Selective Licences are required if any LHA deems a specified area to be in need of licensing.  Such areas may have a reputation for low housing quality or have significant levels of anti-social behaviour.  Interestingly the selective licensing designation would apply to all rented property in an area and not just HMOs.

Although it can be quite straightforward to identify a property that definitely is a HMO by virtue of the mandatory license, getting a definitive answer about the Discretionary or Selective licencing of a property is not quite so easy.  In the first instance a prospective purchaser would need to approach the Local Housing Authority for guidance on the HMO licensing status.

There is a huge variation in interpretation of The Housing Act 2004, largely because much of the implementation and enforcement of HMO licencing rests with the LHAs.  For this reason it is vital to carry out your own research into any HMO you are considering purchasing.