HMOs: what landlords need to know

 

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4 minutes

Houses in multiple occupation (HMOs) form a vital part of the private rental sector. They often provide cheaper options for people whose housing options may be more limited and are typically recognised as being popular among students. However, there’s also a growing number of young professionals sharing houses and flats in the UK.

HMOs can be an attractive option for landlords, as they typically generate higher rental yields, at 7.0% on average vs. 5.8% for landlords without HMOs.* However, there are cons that come with the pros, such as higher running costs. HMOs cost an average of £21k a year more to manage than non-HMOs.*

There are also a lot of regulations that HMO landlords must follow in order to be compliant, we've put together a round-up of the key things HMO landlords, or those thinking of becoming one, need to think about.

To successfully rent out a compliant HMO, one of the first things you need to understand as a landlord is how the government and your local authority defines a HMO, whether a licence is required or not and if you require planning permission.

*Landlord Trends Report Q1 2024 - Pegasus Insight

What is an HMO

The UK government defines an HMO as a property that is let to three or more tenants who form two or more separate households and share facilities such as kitchen, bathroom or toilet.

The government classifies an HMO as any home where people from different households live together in the same building and sharing facilities.

A property is classed as an HMO when:

  • at least 3 tenants live there, forming more than one household
  • and all tenants share a toilet, bathroom or kitchen

If your property is occupied by only two unrelated tenants, it isn't classed as an HMO. A building (or part of a building) only becomes an HMO when at least three unrelated people live there.

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Licences

Mandatory licensing of HMOs came into force in 2006 and originally applied to properties of 3 storeys or more, with 5 or more people making up 2 or more separate households living in them.

Since being introduced, licensing has largely been successful in helping to drive up standards in the sector.

As it stands an HMO must have a licence if it is occupied by 5 or more people. A council can also include other types of HMOs for licensing. The best way to check this is finding out from your local council.

Risk assessment

The council must also carry out a Housing Health and Safety Rating System (HHSRS) risk assessment on your HMO within 5 years of receiving a licence application.

If the inspector finds any unacceptable risks during the assessment, you must carry out work to eliminate them.

How do I make sure I am a compliant landlord?

Any privately rented property must meet all government rules and regulations. As a landlord, it's essential to make sure the home is safe and suitable to live in. This includes providing a valid gas safety certificate, keeping the EPC up to date, and following smoke and carbon monoxide alarm regulations.

You should also make sure the property is free from damp and mould, and check for any uneven flooring or other hazards that could increase the risk of slips, trips or accidents.

You must make sure all tenants have a 'Right to Rent' in England and provide them with all the required information, such as the government's 'How to Rent Guide'.

You must tell the council if you plan to make changes to an HMO, if your tenants make any changes, or if their circumstances change, for example if they have a child.

With an HMO, you are subject to more rules and regulations and some could even be specific to your local authority. Key areas to think about are health and safety, minimum room size and tenant checks.

Minimum room size

Since 1 October 2018, a room smaller than the specified size must not be used as sleeping accommodation in HMOs.

The minimum sleeping room floor area sizes are:

  • 6.51 m2 for one person over 10 years of age
  • 10.22 m2 for two persons over 10 years
  • 4.64 m2 for one child under the age of 10 years 

Any room smaller than 4.64 m2 may not be used as sleeping accommodation. Landlords must tell their local housing authority of any room in the HMO with a floor area of less than 4.64 m2.

In addition, local housing authorities must set conditions that specify the maximum number of people aged over 10 and/or under 10 who can occupy any room used for sleeping in an HMO. They can apply higher standards within their HMO licence conditions, but they must not set standards lower than those listed above.

Further Government guidance on these standards is available here

Tenant checks

It's not always easy to keep track of the number of people living in a home, especially if you have multiple properties.

As a landlord, you must carry out Right to Rent checks on all tenants before they move in.

It is essential to regularly check on who is living in your HMO.

For example, a tenant may move out and let someone else move in and not notify you. This can put you in breach of the rules.

Health and safety

As a landlord, you'll need a gas safety certificate, an electrical inspection every five years, and a fire risk assessment for the property.

Things to consider:

  • are fire doors fitted on escape routes?
  • are communal areas kept clear so tenants can escape safely in the event of a fire?
  • are furnishings compliant with the Furniture and Furnishings (Fire) (Safety) Regulations 1988, and are fire blankets and extinguishers required?

What happens if a landlord doesn't have a compliant HMO?

Councils can issue large fines for each breach of the rules. In August 2023, Haringey Council issued more than £200,000 in fines to unlicensed HMOs.

When it comes to breaching minimum room sizes, a licence holder commits an offence if, without reasonable excuse, they breach the licence by:

  • knowingly allowing the HMO to be occupied by more people or households than is authorised by the licence
  • failing to comply with a licence condition, such as a rule preventing a room being used as a sleeping accommodation

If convicted for such an offence, the licence holder can face an unlimited fine.

Alternatively, the local housing authority may impose a financial penalty of up to £30,000 instead of prosecution.

Using a letting agent

The law surrounding HMOs can be complicated and there are many elements to think about, resulting in a higher percentage of HMO landlords leaning on the services of letting agents.

According to the Landlord Trends Report Q1 2024 from Pegasus Insight:

  • HMO landlords are more likely to use letting agents on a full‑management basis (35%)
  • A higher proportion of non‑HMO landlords choose to self‑manage (48%).

Whether you are an HMO landlord who uses a letting agent, or if you self‑manage, it's key that you put the safety of your tenants first.

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