Tessa's 2017 Tips for Landlords - 6. Is your property an HMO?

With the general shortage of property in many areas of the country, HMOs (short for Houses in Multiple Occupation) are becoming more and more important.

However, they are probably more important than many people think - as many landlords may not realise that their property IS an HMO.

 

What is an HMO

There are actually four separate types of HMO -  but the sort of HMO we are talking about here is the sort which may result in licensing.

These are:

  • Where there are three or more occupiers who form more than one household
  • Where a building does not comply with the Building Regulations 1991 and one third or more of the flats are rented on a lease of less than 21 years

The second type is less well known but it has the same consequences as the first.

In case you are wondering - the other two types of HMO are the totally separate definition of an HMO for Council Tax purposes and HMOs for planning purposes.  I am not going to be talking about these in this article.

 

The effect of being an HMO - Management Regulations

Often people assume that having an HMO does not matter if it is a small HMO which does not need licensing.  But this is a dangerous assumption and quite wrong.

Because ALL HMOs are subject to the HMO Management Regulations.  These are basically health and safety related and deal with things such as the supply of services, dealing with rubbish and generally keeping the common parts of the HMO in a clean and safe condition.

 

The effect of being an HMO – Licensing

The other main consequence of having an HMO is that you may need to obtain an HMO licence.  At the moment, this is where:

  • The property is subject to mandatory licensing - i.e. there are five or more unrelated tenants living in a property with three of more storeys 
  • The Local Authority has introduced additional or selective licensing into all or a part of their area

As with the definition of an HMO itself, working out whether an HMO is subject to licensing can be tricky - for example the rules regarding storeys are complex.

The fact that so many Local Authorities have introduced their own schemes also means that you need to contact your Local Authority and see whether any schemes have been introduced in your area - you cannot just assume that because you are renting out a bungalow it will not require a license.

 

Penalties and charges

All landlords, but in particular, HMO landlords, need to be aware of the HMO management and licensing regulations and rules and comply with them - as Local Authorities are likely to be stepping up their enforcement action.

Under the Housing & Planning Act 2016 they obtained new powers:

  • To serve fixed penalty notices imposing fines of up to £30,000 for each offence.
  • Additional reasons to apply for Rent Repayment orders (plus your tenants can do this too)

Also coming - maybe in October, or maybe next year but coming sometime - are Banning Orders.  These will be even more serious as they will effectively close down your business, as well as allowing the Council to charge more penalties.  

However even just fixed penalty notices and the rent repayment orders can prove very expensive indeed for landlords.  Particularly rent repayment orders where you may need to refund a whole years’ worth of rent – either to the Local Authority if the rent is paid by benefit or to the tenants. 

 

The future

The main point about the new Local Authority enforcement powers is that they can keep the money. Which means that the more enforcement work they do, the greater their income will be from penalties and fines.

This almost certainly means that councils will be stepping up their enforcement action.  In the past many landlords have ‘got away’ with non-compliance simply because their Local Authority has not had the resources to enforce the law properly.  

But this will be changing.

Another thing that will be changing is the scope of licensing.  Government has already carried out a consultation exercise and it is very likely that HMO licensing will be extended to smaller properties with two or even one storey (in fact one storey licensing is quite likely as it will then apply to ‘beds in sheds’).

My advice?  All agents and landlords should do training so you can

  • Recognise an HMO and
  • Know what needs to be done if you have one

If you find that you are in fact managing an HMO, it is imperative that you ensure that you are complying with the myriad rules as otherwise this could prove very expensive indeed.

Tip - a good place to start is this free series which I wrote with HMO expert solicitor David Smith. 

In the meantime you can find me at www.landlordlaw.co.uk, my Landlord Law Blog at www.landlordlawblog.co.uk and on twitter @TessaShepperson


Tessa Shepperson

Tessa is a lawyer specialising in landlord & tenant law and runs the popular Landlord Law online service for landlords.


Posted by Tessa Shepperson on 14 August 2017

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