How do I get around my HMO license?

Nikka Sulton

How do I get around my HMO license?

In London, landlords and property managers must grasp the regulatory landscape governing Houses in Multiple Occupation (HMOs). These are properties rented by a minimum of three individuals from different households who share amenities like kitchens or bathrooms. Special regulations govern HMOs to ensure tenant safety and habitability.

One crucial aspect to understand is the HMO licensing scheme. In London, properties meeting specific criteria require HMO licensing from the local authority. Failing to obtain a license can lead to fines, legal repercussions, and potential imprisonment. Nevertheless, due to the time and cost involved, some landlords and property managers seek ways to sidestep this process.

What is an HMO?

In the UK, a rental property qualifies as an HMO when it meets the following criteria:

It is inhabited by at least three tenants who form more than one household.
Facilities such as toilets, bathrooms, or kitchens are shared among the occupants.

The term ‘household’ refers to either a single person or individuals from the same family residing together. This includes married couples, couples living together, and same-sex couples.

Therefore, a property is categorized as an HMO if it is shared by two or more individuals or groups who are not family members, a married couple, or in a relationship. This arrangement is commonly referred to as a ‘house share.’

HMOs represent around 10% of the entire private rental housing supply in the UK, with almost half a million properties of this type throughout the country. Although the number of HMOs has seen a decrease, with approximately 21,000 fewer HMOs in the UK in 2022/23 compared to two years prior, they still constitute a significant portion of the UK’s rental housing inventory.

There are many types of accommodation that could be deemed an HMO. These may include, but are not limited to:

Student accommodation
Bedsits
Bed and breakfast
Hostels
Guesthouses
Houses let to lodgers

As you can see the term covers a broad range of potential properties. A good rule of thumb though is if the occupants (three or more not from the same household) share facilities such as bathroom or kitchen the property could be deemed an HMO.

What is an HMO licence?

How do I get around my HMO license? There are two types of HMO licenses that may be relevant to your property, depending on its size and location within the UK: mandatory and additional licenses.

Mandatory HMO License:

The most common type is the ‘mandatory license,’ and its requirements vary based on the UK region.

In England:

All HMOs with five or more tenants from two or more households must obtain a mandatory HMO license. The license duration and cost depend on your property’s location. In general, any HMO with five or more occupants in England falls under the mandatory licensing rule.

In Wales:

Wales has slightly different criteria. A property requires a mandatory HMO license if it meets both of the following conditions:

It has three or more storeys.
It houses five or more occupants from more than one household. The Welsh government provides a comprehensive guide to HMOs in Wales with detailed licensing rules.

In Northern Ireland:

Northern Ireland doesn’t differentiate between mandatory and additional licenses for HMOs. All houses in multiple occupation (with three or more tenants from two or more households) must be licensed by the local council.

In Scotland:

Similarly, in Scotland, there is no separation between mandatory and additional licenses. All HMOs must be licensed, and the landlord’s details are added to the Scottish Landlord Register.

How to avoid HMO licence and comply with London property regulations

How do I get around my HMO license? As a landlord or property manager in London, it’s crucial to grasp the regulatory landscape concerning Houses in Multiple Occupation (HMOs). HMOs are properties rented by a minimum of three unrelated individuals who share common facilities like kitchens or bathrooms. Special regulations are in place to ensure these properties are safe and habitable for tenants.

Notably, the HMO licensing scheme is a pivotal regulation to understand. In London, properties meeting specific criteria must obtain HMO licenses from the local authority. Failing to do so can result in fines, legal actions, and even imprisonment. However, licensing can be a time-consuming and costly process, leading many landlords and property managers to seek alternatives.

Here are strategies to potentially avoid the need for an HMO license while complying with London property regulations:

Limit the number of unrelated tenants: HMO regulations typically apply when a property houses at least three people from distinct households. Having fewer tenants may exempt your property from licensing.
Adhere to occupancy limits: HMOs have occupancy restrictions based on property size and available facilities. Staying within these limits can help bypass licensing requirements.
Be cautious with student tenants: Some HMOs, particularly those exclusively for students, may qualify for exemptions from licensing. However, these exceptions have specific conditions, so a thorough review of the rules is essential.
Consider using a managing agent or renting to a single tenant: If managing an HMO seems daunting, employing a managing agent or renting to a single tenant or household, not subject to HMO regulations, could simplify the process.
Maintain the property: Regardless of licensing requirements, you must uphold your property to certain standards, ensuring it’s hazard-free and equipped for the number of occupants.

Following these strategies can reduce the likelihood of needing an HMO license while upholding regulatory compliance for London rental properties. Nonetheless, it’s essential to acknowledge the complexity of the rules, which may vary based on your location and circumstances. When in doubt, seeking guidance from a proficient property lawyer or specialist is advisable.

Penalties for letting out an HMO without the correct licence

Renting out an HMO property without the required license is a grave violation that carries substantial penalties.

In Scotland, the fine for unlicensed HMO letting can reach £50,000. Meanwhile, in Northern Ireland, the penalty stands at £5,000, which escalates to £20,000 if legal action becomes necessary. In England and Wales, failure to possess an HMO license can result in an unrestricted fine.