What is an HMO Licence?

• A licence granting official permission for a landlord to rent out an HMO
• Nationwide, required for all properties with 5 or more tenants forming more than one household
• At the local authority level, a licence may be required for smaller HMO properties
• Ensures the property meets safety standards such as minimum room size, fire safety & more
• Typically valid for 5 years

As a landlord, you have various responsibilities, and depending on the property you are letting, these can vary greatly. Owners of an HMO may find that they are subject to stricter rules and regulations than landlords who own regular properties. In many cases, the owner of an HMO requires an HMO licence. This licence demonstrates that the property meets the required standards and the landlord is deemed “fit and proper”.

Regulations around HMO licences vary by local authority, meaning that if you own property in multiple locations, you may find that in some areas, you need a licence and in others you don’t.

What is an HMO property?

An HMO, or house of multiple occupation, is a property with shared facilities such as a kitchen, bathroom or communal living area. It is lived in by at least three people who are not from a single household. You may often see it referred to as a house share or shared house.

When do I need an HMO licence?

Licensing regulations for HMOs vary by local authority, meaning that in some cases, you may need an HMO licence in some places but not in others. You must have an HMO licence if your property is classified as large. Current government rules on HMOs define a large property, and therefore one in need of an HMO licence as one where all the following apply:

• It is rented to 5 or more people who form more than one household
• Some or all of the tenants share toilet, bathroom or kitchen facilities
• At least one tenant pays rent or has their employer pay it for them

With licensing regulations varying per council, it is quite possible for smaller properties or those with fewer occupants to also require a licence. Landlords are advised to check with their local authority before making a property available for rent, as penalties can be severe.

Why does a landlord need an HMO licence?

Many HMOs are in poor condition, so licensing was introduced to help improve the quality and condition of private rented housing. With licensing in place, local authorities can assess the health and safety credentials of a property and its suitability as a home, something they previously had no power over.

What types of HMO licensing are there?

Local authorities may issue mandatory, additional or selective licensing regarding HMO properties.

Mandatory licensing

Mandatory licensing requires all HMO properties with five or more people from two different households to hold a licence. Since the introduction of the Housing Act 2004, this applies nationwide.

Additional licensing

Additional licensing applies when a rental property is occupied by three or more people from two or more households. It sometimes applies to buildings that match specific criteria, such as exceeding a certain number of stories or consisting of self-contained flats. Often applied by councils where necessary but frequently implemented nationwide.

Selective licensing

A selective licence is used for all properties regardless of the number of occupants or households. Implemented at a council level, this licence is often used in specific areas where housing is of a lower quality.

How do I apply for an HMO licence?

If your HMO property requires a licence, you should first speak to your local council. Processes for applying can vary between local authorities, so understanding the requirements will help you avoid penalties and remain eligible to rent your property as an HMO.

By visiting the government website and entering your postcode, you will find the specific guidelines for applying for an HMO licence with your local authority.

Within your HMO licence application, or to support it, you will need:

• A plan of the property, including measurements and fire detection systems
• Your EPC (Energy Performance Certificate)
• Your EICR (Electrical Installation Condition Report)
• A gas certificate (if gas is used in the property)
• A DBS for the licence holder & property manager
• The current tenancy agreement

Getting your HMO licence

Upon completion of your application, your local authority will conduct a range of checks and inspections to ensure that the property and its landlord are suitable. This involves:

• A fit and proper test for the landlord
• A housing health check (to check for gas safety, fire safety and that the property aligns with building regulations and standards)
• Issuing an improvement notice (if applicable)

If these tests are passed, and an improvement notice is not required, a licence may be granted. If an improvement notice is issued, the landlord or property manager will be given a specific timeframe to bring the property up to standard before the licence is granted.

Key responsibilities of an HMO licence holder

Along with having to prove yourself as a fit and proper person and that the home is safe for occupancy, you must also:

• Send the council an updated gas certificate each year
• Install and maintain smoke alarms
• Provide all relevant safety certifications for electrical appliances when requested

Other conditions may also be added to your license. These can vary per council, so it is advisable to check before applying.

How much does an HMO cost, and how long does it last?

An HMO licence lasts for up to five years, but this can vary per council. Upon expiry, it needs renewal, and landlords should remember that each property requires its own licence, so you may need to renew them at separate times.

The council determines the cost of an HMO licence. For a 5-bedroom HMO, costs can range from £500 to more than £1,500. These fees are often split into two parts: the application fee and the administration fee. For additional or selective licenses, prices tend to be much lower, with £300-£900 more common.

Landlords should remain aware that there is no maximum limit on HMO licence fees and that when you apply, the first part of the fee is often non-refundable.

What is an unlicensed HMO?

An unlicensed HMO is a property that should have an HMO licence but doesn’t. Landlords operating an HMO without the correct licence risk fines, rent repayment orders and even prosecution. Fines can be severe, with up to £30,000 per property potentially ordered, and rent repayment orders can go back as far as 12 months. In some cases, landlords may even be banned from letting property in the future.

Selling an HMO with Bettermove

If you own an HMO and are frustrated with the paperwork, legal requirements, and perhaps troublesome tenants. We can help. At Bettermove we can sell your property portfolio, whether it’s all of it or just part of it. Our team facilitates a quick sale, without any fees, so you can streamline your portfolio to your liking. Contact us today to explore your options.