Everything You Need To Know About HMOs in UK

Nikka Sulton

Everything You Need To Know About HMOs in UK

An HMO, or House in Multiple Occupation, is a property rented by a group of at least three people who aren’t from a single household. A household can be a single person, a couple, parents with children, foster parents, or carers.

In an HMO, occupants often share communal spaces like the kitchen, bathroom, and sometimes living areas too. This arrangement allows multiple individuals or households to live in the same property, sharing essential facilities while maintaining separate living spaces.

What is an HMO?

A house in multiple occupation (HMO) is a property shared by 3 or more unrelated tenants who share facilities like bathrooms and kitchens. If you plan to rent out an HMO in England or Wales, contact your council to confirm if a license is required.

A license is necessary for large HMOs in England or Wales, defined as follows:

Rented to 5 or more people from more than one household.
Tenants share bathroom, toilet, or kitchen facilities.
At least one tenant pays rent (or it’s paid by their employer).

Various accommodations can be considered HMOs, including:

Student housing
Bedsits
Hostels
Guesthouses
Houses with lodgers

Generally, if three or more unrelated people share facilities like a bathroom or kitchen, it’s considered an HMO.

What makes HMOs different to other rental properties?

HMOs can accommodate many people, with local authorities emphasizing safety. Tenant complaints are promptly addressed, and non-compliant landlords may face prosecution or council management takeover.

Additionally, running an HMO may necessitate obtaining a license for compliance with regulations.

Pros And Cons Of HMOs

When deciding whether to rent out your property as an HMO or opt for a standard buy-to-let, it’s essential to consider the pros and cons for HMO landlords:

Pros of HMOs

Typically, you’ll generate higher profits by renting your property as an HMO.
Even if one tenant fails to pay their rent, you may still have income from others.
Evicting a tenant is often more straightforward, especially if you reside in the property.

Cons of HMOs

HMOs often experience higher tenant turnover, which means more time spent on tenant search.
There may be increased paperwork and administrative tasks, such as acquiring an HMO license and planning permissions.
HMO landlords are usually responsible for covering bills and council tax.

HMO features

To be officially categorized as an HMO, a property must meet four specific criteria:

Occupants must come from different households.
Occupants must use the property as their primary or sole residence.
The accommodation should be exclusively for habitation.
At least one occupant is paying rent.

These criteria can also apply to individual flats. However, different standards may come into play when dealing with entire converted blocks. Unless a local authority has officially designated a property as an HMO, all the above requirements must be satisfied for it to be legally classified as one.

Landlord responsibilities when managing an HMO

Landlords of HMOs must prioritize safety and compliance. Key aspects to manage include:

Gas safety – annual checks required.
Electrical safety – checks every five years.
Fire safety – install and maintain smoke and carbon monoxide alarms.
Provide rubbish disposal facilities.
Ensure functioning cooking, cleaning, and washing facilities.
Keep communal areas clear and clean.
Address overcrowding concerns.

Why convert property into an HMO?

Many landlords opt for HMOs as they see them as an efficient way to manage their rental portfolios and increase income. Collecting rent from multiple tenants and the potential for higher rental yield is enticing.

It offers more security for landlords as they aren’t reliant on a single household for income. If one tenant leaves or falls behind on payments, rent from the others continues to flow.

HMOs can be a win-win for tenants and landlords. Tenants may appreciate the potential for lower rent and the chance to live with more people.

Does your property need to be converted to an HMO?

To prepare your property for HMO rental, adjustments may be necessary. Apart from compliance requirements mentioned earlier, factors to consider include space, layout, facilities, furniture, and appliances.

Upon conversion to an HMO, your local authority will inspect it within five years. They’ll conduct a Housing Health and Safety Rating System (HHSRS) risk assessment. It’s essential to be aware that the HHSRS guidelines have been updated since 2019.

Should the assessment reveal unacceptable risks like asbestos and radiation, prompt action will be required to address these issues.

Four quick HMO renovation tips

Utilize outdoor space – To attract long-term tenants seeking a home, outdoor areas are vital. Consider adding seating and BBQ spaces for modern renters.
Focus on kitchens and bathrooms – These rooms can make or break a rental choice. Furnish them to high standards and add thoughtful details to meet tenants’ high expectations.
Invest in essential appliances – While cost-cutting is necessary, crucial features like fridges, sofas, and beds should not be compromised. Skimping on these can lead to higher expenses in the long run.
Ensure readiness for occupancy – Tenants prefer a finished property, not a construction site. Have everything ready before they move in to reduce the risk of damage or early tenancy issues.

Types of properties to convert into HMO types

When considering HMO conversions, it’s essential to choose suitable properties. Converting an old countryside farmhouse wouldn’t attract tenants unless they are wealthy and not in need of work, defeating the HMO’s purpose.

Properties like old police stations, fire stations, guest houses, shops, churches, factories, theaters, GP surgeries, or even former prisons often find a second life as HMOs due to their multiple rooms and communal spaces. It’s easier to gain local authority approval for such conversions without risking the area.

Larger Buy To Lets (BTL) with 3+ bedrooms and at least 1 living room are also good candidates for HMO conversions. This can significantly boost your monthly cash flow.

HMO fines and do you need an HMO licence?

To rent out your property as an HMO in England or Wales, contact your council to determine if a licence is required. Generally, large HMOs need licences unless they qualify for an exemption. Licences are valid for up to 5 years and must be renewed. Each HMO you own requires a separate licence.

You must have a licence for large HMOs if:

It’s rented to 5 or more people from different households.
Some or all tenants share bathroom, toilet, or kitchen facilities.
At least 1 tenant pays rent.

Ensure HMO compliance, including preventing overcrowding and providing adequate facilities. You’re responsible for communal area repairs.

Penalties vary by council and may include:

Prosecution with unlimited fines.
Rent repayment orders, allowing tenants to reclaim up to 12 months’ rent.
Management orders, enabling the council to take over HMO management.

When Does a Property Require an HMO Licence?

To determine if an HMO license is needed for your property, consider the following checklist:

The property accommodates five or more tenants from two or more unrelated households.
Tenants share facilities like a kitchen or bathroom.

Keep in mind new licence conditions, specifying minimum bedroom sizes:

At least 4.64m2 for a child under ten.
At least 6.51m2 for a single person over ten.
At least 10.22m2 for two people sharing.

Ensure the property has these safety certificates:

GSC Gas Safety Certificate.
EPC Energy Performance Certificate.
At least one smoke alarm on each habitable floor.
Carbon monoxide detectors in rooms with solid fuel-burning appliances.

There are 3 types of property licensing:

Mandatory licensing of large HMOs, additional licensing, and selective licensing.

1. Mandatory Licensing

Mandatory licensing applies nationwide to HMOs with five or more occupants from two or more households. Starting on October 1st, this definition will change, requiring single-story flats and two-story maisonettes with five or more occupants to obtain a mandatory license. New conditions will set national minimum room sizes for sleeping accommodation, and landlords must follow local refuse schemes.

2. Additional Licensing

Some councils introduce additional licensing policies, extending licensing requirements to other sizes of HMOs beyond the mandatory ones. This means all HMOs in that area must be licensed.

3. Selective Licensing

Selective licensing is at the discretion of the borough and can apply to all rental properties in a given area. For example, a council may implement compulsory licensing for all residential rental properties on a specific street.

Before granting a license, the local authority must ensure that the property owner and any managing agent are fit and proper to hold a license and that the property meets the required physical standards.