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Holy HMOly

Properties that qualify as Houses in Multiple Occupation (HMOs) have long presented a potential headache for unwary landlords, but from the start of this month the headache got bigger.

Originally, the requirement for an HMO licence only applied to properties that comprised at least three storeys but under new rules, introduced on 1 October 2018, size is no longer relevant. The change was brought in to tackle sub-standard and overcrowded homes and poor management practices. It is expected that it will bring an additional 160,000 properties within the HMO remit.

When do I need an HMO licence?

Landlords need to get an HMO licence from their local housing authority if:

• they rent out a property to five or more people who form two or more households; and
• the property meets one of the following tests:

The “standard test”: the property:

(a) consists of one or more units of living accommodation (excluding self-contained flats);
(b) is occupied by two or more households, is the tenants’ only or main residence (this includes students only occupying during term time) and this is the only use of the property;
(c) one or more tenants pay rent; and
(d) two or more tenants share a toilet, bathroom or kitchen, or the accommodation is lacking in one of these.

The “self-contained flat test”: the property is a self-contained flat with a bathroom, toilet and kitchen available for the tenants’ exclusive use, and (b)-(d) above apply (but it must not be a purpose-built flat in a block of three or more self-contained flats).

The “converted building test”: the property is a converted building and (a)-(c) above apply.

A landlord will commit an offence if he doesn’t have a licence and could face an unlimited fine and a rent repayment order or a penalty of up to £30,000 as an alternative to prosecution.

Even if a property doesn’t meet the HMO licence criteria, there is still a risk that it will need an HMO licence as local housing authorities have powers to extend the mandatory licensing regime to other properties (typically where social and economic improvement is a priority in their area).

What sort of conditions will be included in the licence?

The licence must include various conditions ranging from landlords submitting annual gas safety certificates to the local housing authority to installing smoke and carbon monoxides alarms.

The new rules also introduce extra mandatory conditions: minimum bedroom sizes, restrictions on the number of people of certain ages in each bedroom and waste storage and disposal requirements. These conditions are intended to reduce overcrowding and problems with waste.

A landlord who fails to comply with the licence conditions could face a fine of up to £5,000. If he knowingly permits occupation in excess of the number of tenants or households authorised by the licence, the resulting fine is unlimited. In either case a penalty of up to £30,000 could be imposed as an alternative to prosecution.