HMO Regulations You Need To Know
What is a HMO or House in Multiple Occupation?
A HMO or House in Multiple Occupation is a property type often utilised by Buy-to-Let investors. The basic definition of an HMO/House Share is a property where each room is rented on an individual basis.
HMO’s are popular because they have plenty of scope to deliver higher rental income – a bigger property can have rooms which can be converted into bedrooms, creating the potential for more tenants and thus, more money.
What constitutes a HMO?
Officially, if you let your property to several tenants that are not within the same family, your property could be considered as a ‘House in Multiple Occupation’ (HMO).
Your home is a HMO if:
At least three tenants live there, forming more than one household.
The property has bathroom or kitchen facilities that are shared.
Your home is a large HMO if:
At least five tenants live there, forming more than one household.
The UK Government considers a household as either a single person or members of the same family who live together. It includes people who are related, married, living together or in same-sex relationships.
Do you need a HMO license?
It’s mandatory for any HMO property that is occupied by five or more people to have a license. Depending on your council, other types of HMO will be included in licensing.
If you own a large HMO, you must meet mandatory standards of living:
- Proper safety measures are in place including working smoke alarms
- Annual gas safety checks are carried out
- Electrics are checked every five years
- The property is not overcrowded
- There are bathroom and cooking facilities for the residents
- Communal areas are clean and in good repair
- There are enough rubbish facilities
HMO’s are not required to be licensed if they are managed or owned by a housing association, co-operative, council, health service or a fire/police authority. Licenses usually last for five years but some councils grant them for shorter periods.
Upon renewal, the council will check:
- The property meets an acceptable standard of living
- The landlord is a ‘fit and proper’ person
You can be fined and ordered to repay up to 12 months’ rent if you own a HMO that isn’t licensed but should be. Any housing benefit or universal credit you have used to help you pay your rent will be reclaimed by the council.
Because most people have an assured shorthold tenancy in a HMO, if you’re a landlord that wants to evict a tenant within a shorthold tenancy but you’re not licensed, the section 21 notice would stop you from evicting.
How many tenants per bathroom?
Queries that typically crop up when talking about HMO’s are: how many tenants are allowed in one house and how many tenants per bathroom?
Government guidelines state that the bathroom to tenant ratio should be no less than one bathroom/bath or shower/lavatory for every five people. However, this is only guidance and local councils are free to interpret the guidelines based on the individual case.
In most cases, if you’re letting a HMO to five people or more, it’s best to consider having two bathrooms to keep your tenants happy.
Remember that HMO landlords are usually responsible for any repairs to communal areas of the property. This includes:
- Structure of the house
- Water and gas pipes
- Electrical wiring
- Basins, sinks, baths and toilets
- Fixed heaters and Water heaters
Who pays council tax in a HMO?
In a HMO, it is the landlord that pays Council Tax so typically rents will be adjusted to accommodate the amount the landlord would pay.
That said, if the Council Tax increases, it doesn’t mean that the landlord can immediately increase the rent, as this usually can’t be increased more than once a year. Some landlords will typically include a term in the tenancy agreement if they think the Council Tax may need to rise and it’ll be reflected in rent increases.
Some local authorities differ in how they classify HMO’s, so it’s important to find out whether your property is considered a single dwelling or separate units.
In some areas, buildings that were previously considered single dwellings for council tax purposes may be ‘broken down’ into multiple units. This can confuse matters for landlords so it’s important to ensure you know where you stand.
Can a flat be a HMO?
While a purpose-built block of apartments/flats is not a HMO, an individual unit could be if it has more than 3 tenants. In this situation, the property would not be a part of mandatory licensing but could be subject to additional licensing according to the local authority.
If the block is a house that has been converted entirely into apartments, it’ll be considered a HMO if more than a third of the flats are let out on short leases. These blocks of apartments are not subject to HMO licensing unless the local authority says otherwise.
What’s the minimum bedroom size for licensed HMO’s?
The rules for the minimum bedroom size changed towards the end of 2018 and now must follow these standards:
6.51 square metres for a person aged 10 or over
10.22 square metres for 2 people aged 10 or over
4.64 square metres for a child under 10 years old
Bare in mind that some councils may set higher-standards for bedroom sizes. If a room is used as a bedroom but doesn’t comply, the council can potentially allow up to 18 months to comply with the rules.
As with all property investments, the key to success is diversification. That said, the potential that HMO’s can offer is exceptional, especially when we consider a consistent stream of tenants that could be renting a unit in the property.
As usual, always speak to an advisor before making any property investment going forward.