Licensing of HMOs (House in Multiple Occupation)
The House in Multiple Occupation (“HMO”) licensing and planning regimes often spring a nasty surprise on unsuspecting landlords, placing them at risk of hefty fines for breaking the rules.
With the law soon to change, and to place demands on even more landlords, this blog post sets out the current and future HMO regulatory landscape.
So what exactly is an HMO?
The definition of an HMO is set out in S254 of the Housing Act 2004. In summary, a House in Multiple Occupation is a building or part of a building which satisfies the following criteria:
- It consists of one or more units of living accommodation;
- The living accommodation is occupied by three or more persons who are not all related to each other;
- The living accommodation is occupied by those persons as their only or main residence;
- The living accommodation is not used for any other purpose;
- Rent is paid for at least one of those persons to live there; and
- Two or more people who are not related share one or more basic amenities, or the living accommodation is lacking in one or more basic amenities.
Essentially, any residential property rented to three or more people who are not all related, and which has a shared kitchen or bathroom will be an HMO. In converted buildings, the definition is stricter as the kitchen or bathroom requirement need not be met.
As such, there are many HMOs across London and the rest of the country. Yet many landlords are unaware of their status as HMO managers, and this lack of awareness can have significant consequences – in both licensing and planning regimes.
An HMO license can be required according to the mandatory national regime or additional local council regimes.
Mandatory licensing (National)
Central Government has set out a mandatory scheme of licensing for HMOs of a specific size.
Currently, an HMO license is required under the national scheme for all HMOs which are occupied by five or more people and comprise three or more storeys.
From 1 October 2018, a license will be required for every HMO occupied by five or more people regardless of how many storeys it covers.
Additional licensing (Local)
Further, each local authority has the power to introduce local HMO licensing within its area, either for all HMOs or for those within specified classes.
For both mandatory and additional licensing regimes, landlords will need a separate license for each HMO they run.
To find out whether you need a national or local HMO license contact Adem Esen at Hodge Jones & Allen or check with your local authority.
The consequences of failing to obtain a required license can be dire for the landlord.
The Council can impose a financial penalty of up to £30,000. Alternatively, they may seek to bring a criminal prosecution, and, on conviction, the Court can impose an unlimited fine.
Further, the landlord may have his unlicensed properties seized and be ordered to hand over a further financial sum of up to 12 months’ rent in addition to the fine.
The regulatory burden for landlords does not stop there, as many HMOs also require separate planning permission.
The planning regime categorises properties according to their use, and an HMO (as defined above) which is occupied by seven or more people is categorised as a “large HMO” falling within planning Use Class C4.
Accordingly, planning permission will be required for any change of use from any other use to use as Class C4 – subject to limited exceptions to this general rule under the “Permitted Development Rights” regime and the relevant limitation period for planning breaches.
Failing to obtain the necessary planning permission can lead to an enforcement notice being served, requiring you to close your HMO, with further non-compliance leading to the criminal courts and potentially substantial fines.
As such, the licensing and planning regimes for HMOs is complex and opaque. It is dependent on where your HMO is located, the number of occupants, and the physical nature of the building.
It is crucial for landlords to limit their legal and financial risk by putting in place the necessary licenses and permissions. The number of landlords required to hold a license will expand from 1 October 2018.