If a property is to be let to multiple occupiers who are not a family unit, the local authorities may class it as an HMO. This type of rental property can be an excellent investment opportunity but they are subject to additional regulation, licensing and inspections for the safety of the occupants.
A rented property is considered a House in Multiple Occupation if it is occupied by three or more people who share facilities such as the kitchen or bathroom, who form two or more 'households'. It’s sometimes called a ‘house share’. We also recommend that you seek guidance from your local authority about what they consider to be an HMO.
A household is either a single person or members of the same family who live together. A family includes people who are:
As with any property investment, landlords need to consider the advantages and disadvantages, but there are some clear benefits that HMO investment can bring if done right:
Whilst the benefits are numerous, more tenants in one property means more tenancy agreements, check-ins and check-outs - and the nature of a house-share may mean that tenants may be likely to move-on more frequently. This all means that HMOs can require more hands-on management than other rental properties, although a good letting agent will help you deal with this.
HMO’s are also subject to additional regulation and may require a licence.
If you want to rent out your property as an HMO in England or Wales you should contact your council to check if you need a licence. You must have a licence if all of the following apply to your property:
In this instance, your property would be classed as a “large HMO” and would require mandatory licensing. However, councils can bring in additional licensing requiring all HMOs to be licensed, so even if your property is not considered a “large HMO”, you may still need a licence depending on the area. Contact your local authority to confirm whether you need a HMO licence.
Once granted the licence must be clearly displayed within the communal areas along with the name, address and telephone number of the licensee or property manager of the premises. A copy of the current gas safety certificate must also be on display.
It is a criminal offence to operate a HMO which requires a license without one. If a landlord is convicted, the fines for non-compliance are unlimited. Local authorities also have the power to vary the terms of a granted HMO licence or to revoke an HMO licence.
Landlords may receive a rent repayment order and have to pay back to a tenant any rent they have received, or pay back any housing benefit received to the council, up to a maximum 12 months.
As well as all your normal legal responsibilities as a landlord you must ensure:
The minimum standards applicable nationwide are:
Any part of a room where the ceiling height is less than 1.5m is not considered as usable floor space. Your local authority may also apply larger room size standards, but cannot set a standard lower than these nationwide standards.
Many HMO rooms come with en-suite facilities. However, the minimum requirements of Health and Safety Legislation is at least one bathroom for every four tenants, and a minimum of one for every 3 tenants is widely considered best practice. Remember that a happy and satisfied tenant is likely to want to stay longer, so it’s best to avoid queues for the bathroom and any associated arguments!
HMO mortgages differ from standard buy-to-let mortgages in that they allow the letting of multiple rooms to multiple people, which normal buy-to-let mortgages don’t allow.
There are several different kinds of HMO mortgage available and the one you need will depend on which stage the HMO property is at: