Telling the truth about SME life today

When Is An HMO Licence Required for A Rental Property?

HMO licences became a requirement during the legislation of the Housing Act of 2004. This regulation serves to protect people living in shared residences. Often, these shared housing lacked fire safety. Living conditions were also poor due to overcrowding and other factors.

From 2006, landlords have to obtain applicable licences, particularly to comply with conditions required if they are renting out homes/units to more than one person.

Local Councils can also exercise their legal authority to require a special licence for any of these rented properties that may not fall under any of the categories that require mandatory licensing.

An explanation of what an HMO is.

HMOs refer to houses that have more than one occupant.

The Housing Act of 2004 identifies specific conditions that classify a building (or any portion of it thereof) as an HMO.

  • If occupants of a household share basic facilities, including bathrooms, kitchen or toilet facilities.
  • If a building fails the “converted building test”. This means that while the building was converted, it hasn’t fully met the requirements to be categorised as having self-contained flats.
  • If multiple occupants share the residence along with its amenities and is categorised by the local government as an HMO.
  • If it is a converted apartment building that fails to comply with all required construction guidelines. Further, section 257 HMO applies if less than two-thirds of the unit owners occupy the building units.

Do I need an HMO License if I have 3 tenants?

The direct answer to this question is a yes. The government identifies HMOs as properties rented by three persons or more who do not belong to the same family unit. In an HMO property, the unrelated occupants share bathrooms, kitchens, toilets, and other basic amenities.

Additionally, we identify large HMOs as:

  • Properties that rent out to 5 people and above, although each would constitute their own home
  • Properties where facilities such as the kitchen are co-used by some or all of the occupants who live there
  • Properties that receive at least one payment from a renter or from their employer

Large HMOs must hold a valid and current licence. Whether you have a small or large HMO, consult your local government authority to ascertain whether or not your HMO must register for a licence. Homes that are not able to fulfil HMO requirements can put forth a licence application.

However, your local Council has the authority to decide if your property is exempt (or not ) from statutory licensing regulations. Since local councils may institute selective licensing processes, certain properties may be exempted, such as student housing that is situated near an educational institution. Residential blocks that have been converted into self-contained units may also qualify for an exemption.

If a municipality acknowledges selective licensing, then single properties located inside designated regions are required to be licenced, even if these properties do not classify as HMOs. This is a practice that aims to elevate standards in private rentals and address low or poor-quality housing that is not managed well. The process of selective licensing and granting exemptions is never quick. It takes time for authorities to deliberate on these matters.

Landlords must expect additional expenses to cover the cost of selective licences. In certain geographic areas, property owners have expressed concerns over selective licensing schemes, complaining that they feel like they are being milked for money. This is a common complaint raised by those in opposition against selective licensing systems.

How Much Does It Cost to Get an HMO License?

HMO licence fees differ between municipalities since councils are independent of each other. They can choose the amount to charge people for HMO licences. The fees cover the operating expenses incurred in running the licensing program. Ideally, the cost to carry out the operation should not be too expensive.

Should your HMO licence application be denied, you will get a reimbursement of all application costs you have previously paid for.

How long does it take to get an HMO licence?

HMOs must always hold a valid, current licence. Your HMO licence will be valid for 5 years. In special cases, the Council may choose to give you a shorter validity period. Remember to check when your licence will expire and renew way before the expiration date.

Once you receive your home rental operator’s licence, always keep tabs on renewal dates. It takes time to renew a licence so you don’t want to push it up to the last minute. Set a reminder in your calendar so you apply for a new HMO license before your current one expires. If you are using a software or app for landlords, set alarms within the app. This reminder feature is included in all landlord software packages so utilise this feature for your own good.

How to Find Out If I need an HMO Licence

Landlords must read up on rental property regulations to check if and when they are required to apply for an HMO licence. Ignorance or oversight will not hold up as a legal excuse in court.

We have discussed the identifying factors of a rental property that requires an HMO licence. However, If you still need help in determining whether your property falls under HMO regulations, it is best to refer to the local council’s housing department. This way, you can make sure if you need to apply for an HMO licence for your rental property.

What are the consequences for not having a valid HMO licence?

There would be consequences for HMOs that operate without a valid licence where such is required.

Landlords who do not comply with the licence requirement could be fined up to £20,000. In other cases, additional fines and penalties would apply.

On top of that, any landlord who does not abide by the restrictions that come with their licence is in violation and will face a corresponding punishment as decided by the Magistrate’s Court.

However, if a landlord has put in their application but no licence has been granted yet, no penalties would apply for breaking the law. The same goes for landlords who have applied for exemptions.

In the event that a landlord is kicked out of the rental property, current and previous tenants may qualify for rent repayment. This is granted to those who are residing within the time period that the property was illegally operating. Tenants who qualify for e a claim must fill out a Rent Repayment Order application.

Eligible tenants may receive back up to 12 months of rent paid to landlords illegally operating an HMO.

The Council, on the other hand, can get reimbursed for housing benefits paid out for up to one year. Regardless of whether tenants directly paid for any rent, this amount will be paid back by the landlord.

Landlords may appeal to the Residential Property Tribunal Service in case they feel they’ve been unfairly penalised for not being able to fulfil HMO licensing requirements or for not having an HMO licence

HMO License Waivers and Exceptions

Exemptions are granted when a landlord provides proof that the property no longer classifies as an HMO. Likewise, if an HMO-licensed property is about to stop its operations, it may also get an exemption.

In this case, the landlord must be in the process of converting the property back into a single-family unit dwelling. A planning application must be underway to seek approval for the renovation project.

The landlord should no longer have any dealings in the HMO business. There must be evidence that the property is being sold. If not, there must be ongoing talks with a potential buyer.

HMO exemptions are valid only for 3 months on average.

With his 3-month exemption, there’s enough time for landlords to close the sale and complete all conveyancing processes with their potential buyers.

Should time prove insufficient, the property owner may request for an extension on the exemption for up to 3 months longer. Bear in mind, however, that Councils are not obligated to grant additional exemptions.

Should the HMO property owner pass away, the property can be given a temporary exemption which is valid for 3 months. This exemption is given so that any successor or relatives and their representatives may have an opportunity to get their affairs in order.

What Consequences Will Follow if the Council Does Not Approve an Exemption?

There are cases when council rejects an application for exemption. If the Council does not grant you an exemption, expect to receive a document that outlines the reasons why your property does not qualify for an exemption. You can also lodge an appeal and to the Residential Property Tribunal.

How to Put in an Application for a Licence

You can readily access and download electronic HMO licence application forms directly from the UK government website. You may also go to your local council’s website for the specific links.

Application fees are payable online so be ready with your credit card or debit card at the onset of the application process.

You also have to prepare the following required building or property documents for submission:

  • Gas Safety Compliance Certificates
  • Electrical Safety Certificate
  • Property map

For additional documentary requirements, you may be asked to present PAT certifications, fire alarm and maintenance records and a copy of your leasing contract with renters.

When you apply for a Home Management Organisation licence, you must give notice to your managing agent, the mortgagee or lender, and the freeholder (for leasehold properties). This is a legal requirement. However, you are not legally obligated to give notice to your tenants.

Once you meet the requirements and pass the screening and review, you will receive your HMO licence for the property.

Keep in mind that your local council may likely inspect the property or building at any time within the 5-year contract period. It is routinary for authorities to inspect the health and safety conditions of HMO properties and buildings to ensure that landlords are in compliance.

What Does a Council Look at When Deciding Whether to Approve an HMO Application?

The Council deliberates on several factors when making a decision to either grant or reject HMO licence applications

Landlords must not have a previous criminal record and they must not have committed any law violations prior. They must be fit and proper with a clean record. Should you be blacklisted on any database, for instance, for being an unethical or law-breaking landlord, your application may be rejected.

Your property must also meet all requirements in order to run an HMO. You must have the required number of facilities, such as toilets, bathrooms and kitchen facilities. This is a requirement to ensure that you can sufficiently house your occupants.

Your building must meet all fire safety regulations applicable to all HMOs. This includes having regular fire safety and maintenance checks. For more information, you may click here.

HMOs are not required to continually operate as an HMO. Landlords may stop operating their homes as an HMO-licensed property and shift to a different type of business at any time.

It follows that local councils cannot force HMO properties to continue running as such. However, you could have charges brought against you if you unlawfully evict your current residents when transitioning your current HMO property to a single-family rental home.

If you currently hold a valid HMO licence for multiple-family dwelling, you may rent out the property to a single family. The council does not need to be notified in this case. However, if you decide to make structural changes, you must lodge a planning approval application before the council. You must not proceed with converting your home into a single family dwelling without having that planning approved.

Consult your local council and the housing department for proper guidance on ceasing operations as an HMO. You may be able to get a partial refund on your HMO licence fees. It is in your best interest, however, to only give up your HMO licence if you are fully certain that you will absolutely no longer operate as an HMO. Otherwise, you’d have to go through the pain of applying for an HMO licence all over again.

What Happens if I Breach the Terms of my HMO Licence?

As previously mentioned, you must expect local council authorities to drop in and inspect your property. Comply at all times and manage your property well. Otherwise, you may be slapped with heavy fines up to £5,000 plus other penalties.

Councils may revoke an HMO licence at any time. If your licence is cancelled, you will receive a written notice. Upon receiving the notice of their decision, you have 14 business days to respond.

While your property is under application review, the council may release a temporary management order for your property. This happens when authorities deem that the landlord is not fit to manage the property at the time.

Can Tenants Check if I Have an HMO Licence?

Tenants may check their property’s status to verify if it is HMO-licenced. Simply contact the housing department to search if your property is listed among HMOs that are licensed. Tenants are able to check licensing status only for properties that are undergoing mandatory or selective licensing processes.

If a tenant finds out that their landlord’s property is not licensed, they may lodge a claim to get their rent payments back. They are eligible for this claim because your property is required to have a licence and you would be illegally operating it without one.

Summary

HMO properties are difficult to operate. Hence, many landlords avoid running this type of business. If you are thinking of converting your property to an HMO type, make sure that you are aware of all licensing requirements and other processes you must follow. Failure to comply with all conditions may cost you a lot of money and stress.

Trending

Topic

Related Stories

More From

Most Read

Trending

If you enjoyed this article,
why not join our newsletter?

We promise only quality content, tailored to suit what our readers like to see!