Nikka Sulton

Exploring the potential of letting your buy-to-let property in Redbridge or Ilford as a House in Multiple Occupation (HMO) can be financially beneficial. HMOs often yield higher rental returns, with reduced payment risks as tenants are individually responsible for their room rents.

However, it’s essential to grasp the intricacies of HMO requirements and regulations, which are more complex than those for standard buy-to-let properties. Being an HMO landlord involves specific responsibilities, including obtaining an HMO license and ensuring compliance with additional fire safety rules. Take into account potential expenses such as council tax and insurance.

To navigate through the complexities of being an HMO landlord, we’ve compiled a comprehensive guide covering everything you need to know about HMO requirements. This guide is designed to provide essential insights into your responsibilities and considerations before deciding on the HMO investment route.

What is an HMO?

An HMO, as per the Housing Act 2004, is a house or flat leased to three or more tenants from two or more households, sharing kitchen, bathroom, or toilet facilities. It includes fully converted houses into non-self-contained units, occupied by three or more tenants from two or more households. Additionally, a converted house with flats lacking full self-containment, occupied by three or more tenants from two or more households, falls under HMO. If a building is entirely converted into self-contained flats without meeting Building Regulations 1991 standards and over one-third are on short-term tenancies, it qualifies as an HMO.

What being an HMO means

For property owners exploring uses beyond holiday letting, seeking advice from local authorities is essential. If the property falls under the HMO category, it must meet strict standards, potentially requiring a license for compliance. Holiday homes usually don’t come under HMO regulations, but bed and breakfasts might if rented to individuals without another residence.

It’s noteworthy that some local authorities classify certain guesthouses, bed and breakfasts, and holiday flats as HMOs. This designation can have significant implications for proprietors, emphasizing the importance of understanding and complying with local regulations. Seeking guidance ensures property owners navigate the complexities and responsibilities associated with their specific situation.

Houses in multiple occupation requirements

Your property falls under the classification of a House in Multiple Occupation (HMO) when it fulfills the following criteria:

A minimum of 3 tenants inhabit the space, forming more than 1 household.
Shared toilet, bathroom, or kitchen facilities are in place for the tenants.

For larger HMO status, the property must accommodate at least 5 tenants, forming more than 1 household, with shared amenities. A household can consist of a single person or individuals from the same family, encompassing married or cohabiting couples, relatives, half-relatives, and step-family members.

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.

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.

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.

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.