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When Is An HMO Licence Required for A Rental Property?

The Housing Act of 2004 included the requirement for landlords to get HMO licences. They originated as a means of protecting individuals who lived in shared residences, which were frequently overcrowded and had inadequate fire safety precautions in place before their introduction.

Since the year 2006, landlords of residences with more than one occupant have been required to obtain licences. Certain licences are required by law.

The local Councils have the authority to dispense supplementary licensing programmes for rental properties that do not fit under the mandatory category of those required to be licensed.

An explanation of what an HMO is.

Houses that have many occupants are referred to as HMOs.

According to the Housing Act of 2004, for a building or a portion of a building to be considered an HMO, the building or portion must fall into one of the following categories:

  • the term “standard test” or “self-contained flat test” refers to a building or flat in which more than one household shares basic amenities, such as bathrooms, toilets, or kitchen facilities.
  • a building that has been converted but does not completely consist of self-contained flats is considered to have failed the “converted building test.”
  • a home that is shared by multiple families and is classified as an HMO by the local government
  • an apartment building that has been converted, but the quality of the conversion does not fulfil the appropriate construction regulations, and fewer than two-thirds of the units in the building are occupied by their owners: This type of HMO is referred to as a section 257 HMO.

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

The short answer to that question is yes. An HMO is defined by the government as ‘a property that is rented out by at least three persons who are not from the same family, but share basic amenities such as bathrooms, toilets, or kitchens

When all the following are true, we are talking about a huge HMO:

  • It is rented to groups of five or more persons, each of whom constitutes their own home.
  • Facilities like bathrooms, kitchens, and toilets may be shared by part or all of the residents.
  • At least one rent payment has been received (or their employer pays it for them)

A valid licence is required of all large HMOs. It is best to check with your local authorities to determine whether or not a licence is required for your HMO, especially if it is a smaller one.

Houses that do not fulfil the requirements of an HMO can apply for a licence.

Councils have the authority to choose whether or not to institute a selective licensing system for properties that are exempt from statutory licensing requirements. Properties in certain geographic areas, such as student residences located close to educational institutions, as well as blocks that have been transformed into self-contained flats, can fall under this category.

If a selective licensing scheme is implemented by a municipality, every single property located within the designated region is required to have a licence, regardless of whether or not the properties include HMOs. This is typically done to increase standards in the private rental sector, particularly in areas where there is a problem with housing that is of low quality and private rentals that are badly managed.

It is important to keep in mind that authorities cannot just decide on a whim to implement selective licensing systems. The process of consultation must take place, and it must be open to the public.

Landlords may incur additional expenses due to the cost of selective licences. Landlords in certain regions have complained that selective licensing schemes are being utilised to treat them as “cash cows,” which is one of the criticisms levelled against such schemes by those who are opposed to them.

How Much Does It Cost to Get an HMO License?

Because councils are free to select how much to charge for necessary HMO licences, the price will differ from one municipality to the next because of the location of the property. The purpose of the HMO licence fees is solely to pay the expense of operating the licensing programme; therefore, the prices should not be excessively high.

If your application for an HMO licence is denied, the application cost will be reimbursed to you.

How long does it take to get an HMO licence?

HMO licences are typically valid for a period of five years; however, in some cases, licences may be issued for a shorter period of time. Keep in mind that each and every property need its own HMO licence, which must be renewed in advance of the license’s expiration date.

Do not obtain a home rental operator’s licence and then ignore it completely afterward. That licence will need to be renewed in five years (or less!), which could take some time depending on the circumstances. Make a note in your calendar to reapply for a new HMO licence before the one you now have expires. If you use landlord software, helpful reminders for things like this are all included in the package, so there is no need for you to be concerned about missing them.

How to Find Out If I need an HMO Licence

It is up to the landlord to determine whether or not an HMO licence is required for the property. Carelessness is not an acceptable defence, and the argument that someone did not apply for an HMO licence because they were unaware that doing so was required will not hold up in court.

The primary criteria for obtaining an HMO licence have already been discussed in detail. If you are not one hundred percent certain as to whether or not your property requires an HMO licence, it is a good idea to speak with the housing department of the local council. This should be self-explanatory.

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

It should come as no surprise that there are consequences for operating an HMO without a licence if it meets the criteria for requiring a licence.

If a landlord fails to apply for a licence, they might face fines of up to £20,000 in addition to any associated charges.

In addition to this, landlords can be punished separately for failing to comply with the restrictions of their licences. The Magistrate’s Court is the only court that hears cases.

If you have applied for a licence or exemption but no decision has been made yet, the council cannot penalise you for breaking the law.

After a landlord has been kicked out of a building, current and former tenants who were residing there during the time that it was operating illegally are eligible to submit an application for a Rent Repayment Order.

They are eligible to receive a refund of the rent that they have already paid, up to a maximum of 12 months.

Councils can seek reimbursement for housing benefit payments for a period of up to a year. Even if the rent was paid directly to the tenants, this sum of money still comes out of your own pocket.

You have the ability to file an appeal against the judgement through the Residential Property Tribunal Service if you believe that you have been unfairly punished or penalised for not possessing an HMO licence or for not satisfying the requirements for HMOs.

HMO License Waivers and Exceptions

Only landlords who can provide evidence that their property is no longer being used as an HMO or is going to stop being used as an HMO will be granted an exemption from the HMO licensing requirements.

The local government will want to see evidence that you are taking action to convert the property into a single-family home, such as a planning application for the necessary renovations before they will approve the project.

You can show the council that you are no longer involved in the HMO business by selling the property and entering into a contract for sale with a potential purchaser.

HMO exemptions usually remain in effect for a period of three months.

If you are currently in the process of selling the house, you should have sufficient time to finish the conveyancing process thanks to this.

You have the option to submit a request to have the exemption prolonged for a further three months; however, the council is not required to grant your request.

If an HMO landlord passes away, the property is eligible for a temporary exemption that lasts for three months. This is done to give the relatives of the deceased or their personal representatives time to settle their affairs.

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

If the council does not provide an exemption notice, they are required to provide you with a written explanation of their decision. After that, you have the opportunity to file an appeal against the ruling by bringing your case before a Residential Property Tribunal.

How to Put in an Application for a License

The UK government’s website offers downloadable application forms for HMO licences. Go to the website of your council in order to locate the appropriate link.

Be sure to have a debit or credit card handy before you start the application process, as you will be expected to pay online.

Be sure you have hard copies of any necessary papers on hand to submit with the application. These are the following:

  • Certificates of Compliance for Gas Safety for the Building
  • Certificate of Electrical Safety for the Building or Property
  • A map of the property in question

In addition to that, you can be asked to supply PAT certificates, records concerning the fire alarm and maintenance, as well as an example of a leasing agreement.

You are required to give notice to the freeholder (if the property is leasehold), the mortgagee (i.e., the lender), and your managing agent if you need to apply for a home management organisation licence. There is no need to inform your tenants in any way.

After passing a series of requirements and screenings, an HMO licence can finally be obtained.

During the course of the five-year contract, the council may visit the property at any time to conduct inspections. These checks are carried out to make certain that there are no lapses in health and safety.

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

When deciding whether or not to provide a licence for an HMO, the following considerations are taken into account.

The landlord is required to be a “fit and proper” person, which means that they must not have a criminal record and must not have broken any landlord rules in the past. It is highly possible that a licence will be denied to you if, for example, you are included on the national database of unscrupulous landlords.

The home must satisfy the requirements for operation as an HMO. There must be an adequate number of kitchen facilities, bathrooms, and toilets to accommodate the whole number of occupants.

The building needs to have regular maintenance and sufficient fire safety precautions in place. You can get additional information on the fire safety regulations that apply to HMOs by clicking here.

There is no rule that says an HMO must always operate in this manner. Even if you submit an application for a home-management organisation (HMO) licence, it does not exclude you from ever deciding to transition to a different kind of business model at any point in the future.

You cannot be compelled by the council to continue operating the home as an HMO. They have the ability to bring charges against you if they determine that you unlawfully evicted HMO residents in order to turn the property into a single-family home.

If you already have a licence to use a property as a household or multiple-family dwelling, you do not need to notify the local council if you wish to rent the property to a single family. It is possible that you will need to submit an application for planning approval before making any structural changes in order to convert the property back into a single-family home. Make sure this is the case before beginning the process of transforming your HMO into bedsits and flats on their own.

If you have decided to stop running your property as an HMO, you should discuss this decision with the housing department of the local municipality. There is a possibility that you could receive a return of some of the money you paid for your HMO licence. However, if there is even the slightest possibility that you might decide to use the property as an HMO again, you shouldn’t terminate the licence. If you don’t, you’ll have to reapply for your driver’s licence and go through the entire process all over again.

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

As was just indicated, local councils do conduct inspections of HMO landlords to ensure that these individuals are effectively managing their properties. If you violate the conditions of the licence, you could face a punishment of up to £5,000 in addition to any other applicable fees.

The licence can potentially be revoked by the council. If they proceed in this manner, they are required to provide you with written notice of their actions and allow you 14 calendar days to respond.

If the property has not yet been licensed, they may issue a management order for the property in the interim. They are also able to do this if they believe that the landlord is not the right person to be in charge of the situation.

Can Tenants Check if I Have an HMO Licence?

Tenants can delve into a landlord’s HMO licensing status. They need to contact the local housing department as they keep a list of HMOs that have been granted licences.

This only applies in the event that the property in question is subject to selective and/or mandatory licensing procedures.

If a tenant discovers that you do not have a licence for a property that is subject to selective and/or mandatory licensing, they have the right to claim up to a year’s worth of rent back from the landlord in the event that the landlord is prosecuted for operating an unlicensed HMO, as was discussed previously.

Summary

HMOs are notoriously difficult to run well, which is one of the reasons why inexperienced landlords tend to avoid them as a business model. If you are considering transitioning to the HMO model, be sure you understand your duties regarding licensing as well as other aspects. In the event that you make a mistake and fail to carry out your statutory duties, the repercussions of that blunder could be quite costly.

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