Houses in Multiple Occupation (HMO) licensing

Houses in Multiple Occupation (HMO) licensing was introduced by the Housing Act 2004. The legislation was introduced to empower local authorities’ in governing the privately-rented sector of the property market. The requirement for HMOs to be licensed ensures local authorities are able to assess and regulate HMOs within their area in order to safeguard tenant welfare. The Act makes failing to licence a HMO a criminal offence, which can often lead to criminal and regulatory enforcement against landlords and managers of HMOs.

Stephensons are experienced in assisting clients in relation to HMOs or other properties affected by licensing requirements, in a multitude of cases; with both our commercial property and regulatory departments regularly receiving instructions from landlords and property managers affected by such matters.

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What is HMO?

The formal definition of a HMO stems from section 254 of the Housing Act 2004.

A property will be regarded as an HMO if any of the following apply:

  • The property is an entire house or flat, that is let to three or more tenants, who form two or more households and who share a kitchen, bathroom or toilet
  • The property is a house that has been converted entirely into bedsits, or, other non-self-contained accommodation, and that is let to three or more tenants, who form two or more households and who share a kitchen, bathroom or toilet
  • The property is a converted house, that contains one or more flats that are not wholly self-contained, i.e. the flat doesn’t contain within it a kitchen, bathroom and toilet, and that is occupied by three or more tenants who form two or more households
  • The property is a building that is converted entirely into self-contained flats if the conversion did not meet the standards of the 1991 Building Regulations

‘Households’ for the purposes of the Housing Act 2004, can be defined as any of the following:

  • A single tenant
  • Couples married to each other or living together as husband or wife (or in an equivalent relationship in the case of persons of the same sex)
  • Relatives living together (including step-children and foster children). Half relatives will be treated as full relatives
  • Domestic staff are also included in the household if they are living rent-free in accommodation provided by the person for whom they are working

To be an HMO, the property must be used as the tenants’ only or main residence and it should be used solely or mainly to house tenants. Properties let to students and migrant workers will be treated as their only or main residence and the same will apply to properties that are used as domestic refugees.

It is important to note that certain properties are exempt from the HMO definition. These include:

  • Those occupied by the landlord and a maximum of two other people who are not part of his or her household; and
  • Those occupied by no more than two people.
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What is a HMO/Property Licence?

Licenses give landlords and managers legal authority to rent out properties that are covered by licensing legislation provided in the Housing Act 2004. 

The Act introduces three types of property licensing:

  • Mandatory HMO licensing
  • Additional HMO licensing
  • Selective licensing

Mandatory HMO licensing

Some HMOs will invoke mandatory licensing requirements. Mandatory licensing will apply to a property if:

  • It is a HMO
  • It comprises three storeys or more
  • It is occupied by five or more people

When counting the number of storeys in the building, you need to include:

  • Basements and attics if they are occupied or have been converted for occupation or if they are in use in connection with the occupation by residents
  • Any storeys that are occupied by you or your family if you are a resident landlord
  • All the storeys in the residential occupation, even if they are self-contained

If the above criteria is fulfilled, the Housing Act 2004 stipulates that the HMO must be licensed, irrespective of its location.

Additional HMO licensing

Local authorities can also choose to introduce additional licensing schemes applicable to other types of HMOs which are not subject to mandatory licensing. Such schemes are commonplace in areas where the management of HMOs is giving cause for concern.

The Housing Act 2004 provides that the local authority must have concerns as to the ineffective management of HMOs in a particular area before additional licensing can be introduced. The act also requires the local authority to consult local landlords before implementing such a scheme. The scheme will also have to be publicised by a local authority before its introduction. If these steps are complied with, the act requires all affected HMOs to be licensed.

Selective licensing

In certain cases, the local housing authority may introduce a selective licensing scheme in areas which are known to be areas of low housing demand or those with significant anti-social behaviour problems. The effect of such a scheme will be that all rented property within the area designated for selective licensing has to be licensed, regardless of whether or not the property is an HMO.

As with additional HMO licensing, the Housing Act 2004 requires the local authority to carry out a consultation process and provide publicity before a selective licensing scheme can be introduced.

Applying for a HMO licence

The process for applying for a HMO licence, or a licence required for a property covered by selective licensing, will vary according to the local authority receiving the application. In most cases, it will be the housing or environmental health department of the local authority that will be responsible for assessing and processing applications.

When applying for a licence, it is useful to bear in mind the following information:

  • A separate licence is needed for each property
  • A licence will normally last for up to five years
  • The landlord can hold the licence or nominate someone else such as a manager of agent (with their agreement) to be the licence holder. Whoever holds the licence, must be the person who is most appropriate person to hold the licence (likely to be the person who receives the rent for the property)
  • The licence holder and any manager of the property will have to be considered ‘fit and proper’ and the property will need to meet minimum standards for the licence to be granted
  • A licence may not relate to more than one property and is not transferable to a different property, or to a different person.

Licensing enforcement

Failure to apply for a licence required by the Housing Act 2004 is a criminal offence and - following a change in the law in 2015 - landlords can now be punished with an unlimited fine for each offence. Local authorities will frequently look to prosecute landlords who fail to obtain a licence. In addition, charges can also be brought when landlords with a licence fall foul of the HMO Management Regulations 2006. Moreover, the local authority, and in certain circumstances, the tenant, can apply for a repayment order, under which they can reclaim rent paid during the period, up to a maximum of 12 months, in cases where the landlord did not have a licence

If a landlord is suspected of having committed an offence under the Housing Act 2004, their property may be subjected by an inspection conducted by the local authority. In addition, they may be required by the local authority to provide information and evidence pertaining to the property. This will arise before any decision has been made as to whether the landlord or manager should be prosecuted. The information will usually be required by way of a legal notice, which, if ignored, can constitute a separate criminal offence.

Landlords and managers are also frequently invited to attend interviews under caution as part of the investigatory process. Such interviews will permit the local authority to ask the landlord questions as to why the property has not been licensed. The purpose of an interview under caution is to question a person on their suspected involvement in an offence. As such, interviews are recorded, and answers provided can be referred to in any subsequent proceedings. Independent legal advice should always be sought before attending such interviews.

In cases where criminal proceedings are brought, it may be possible that the landlord or manager in question has a defence. The Housing Act 2004 provides a statutory defence of ‘reasonable excuse’, which, although normally difficult to establish, will mean the landlord or manager is not guilty of an offence - even if they have failed to obtain a licence. Legal advice will need to be taken by those charged to determine if such a defence exists.

Although failing to obtain a licence without reasonable excuse is a criminal offence, it is important to note that not all cases result in a court appearance and a criminal conviction. Stephensons are regularly instructed by landlords and managers throughout all stages of the enforcement process, and have an accomplished record of resolving cases without the need for the criminal proceedings before a Magistrates’ Court.

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