Photo by Parable Property

Rising regulations and licensing updates, HMO landlords and investors need to be aware of all of their legal obligations. Dealing with HMO licences in the UK in particular can be extremely challenging and confusing… 

One of the major reasons behind this is due to the standards and requirements being enforced differently across the UK, and there are even numerous grey areas within the guidance! And HMO licensing standards have changed a lot over the past five years, and they’ll likely continue to do so moving forward.

Additionally, while there are national minimum standards set by the central government, local authorities can insist on their own individual standards, and this is getting more and more common and increasingly stringent. 

It’s important to keep in mind that something that’s licensed today may not be licensable when it comes up for renewal if you’re assessed against new criteria, or even if you don’t currently need a licence for your property, you might in the future. And this should impact your investment decisions accordingly!

But no matter how confusing or difficult, you must understand HMO licences and the guidance for your investment location in great detail. So, here we’ll cover everything you need to know about HMO licences in the UK!

What are HMO licences?

To operate a HMO in the UK, you may need to have a licence depending on the number of occupants and the local authority the property is located in. Licensing for HMOs was brought in to improve the quality of housing, but not all HMOs require a licence. 

Investors need a separate HMO licence for each licensable property they run. There are three different types of licensing measures that are important to be aware of to ensure you remain compliant.

Mandatory Licencing: As part of the Housing Act 2004, mandatory licensing requires all HMOs with five or more people from at least two different households to obtain a licence. This is applicable nationwide no matter what local authority your property is located in.

Additional Licencing: An additional licence requires all HMOs with three or more people from two or more households to obtain a licence. This kind of scheme can be introduced by your local council or borough. It might only apply to certain areas in the region or strictly to buildings over a certain number of storeys. However, it’s often implemented regionally.

Selective Licencing: A selective licensing scheme then requires all privately rented properties in a specific area – no matter the number of occupants. This is introduced by a local council and is typically targeted on street or ward levels, especially in areas known to have the lowest quality housing.

Do you need a licence for your property?

You need to figure out if a property you’re interested in purchasing or have purchased will need a HMO licence. This will depend on whether you’re investing in a small or big HMO and where it’s located in the UK.

As a starting point, you’ll need to know how many tenants will be in your property. On a national level, if your property has between three and four tenants, your HMO will be considered a ‘small HMO’. This means you might not need a licence unless there are additional or selective licensing. 

HMOs with five or more tenants will be considered ‘large HMOs’ and need a HMO licence from your local council. If you are unsure what local council your property is located in, check on the government website. You can use this link for England or Wales and this one for Scotland. Then, check if there are any additional and selective licensing schemes in place.

What standards do you need to adhere to?

Even if your property doesn’t require a HMO licence, you will still need to adhere to a number of standards when owning any HMO! There are national standards set centrally by the government, but local authorities can also insist on their own stricter standards as mentioned above. 

So, HMO licence requirements will differ across the country with councils having varying sets for rules and guidance. When purchasing an investment property or spec-ing out a refurbishment, you need to know exactly what the licence requirements are in your area and how these rules are interpreted by your local council as there can be many grey areas. 

Make sure you know what your housing authority requires and what you’re going to actually have to do. The standards you have to adhere to for a HMO licence include fire, amenity and space standards.

Fire Standards: This is one of the most crucial aspects of ensuring your HMO is compliant and safe for tenants to live in. Some of the key aspects include fire detection systems, emergency lighting, fire fighting, route of escape, fire doors, an emergency plan and fire risk assessment.

Amenity Standards: Amenity standards rules are designed to protect tenants from harm and ensure they have a pleasant living experience. This covers room lighting, ventilation, sanitation, facilities, furnishings and equipment.

Space Standards: This criteria includes minimum size requirements for rooms and space and layout of the property. Ensure rooms within your HMO, particularly kitchens and bedrooms, meet the minimum sizes required by either the central government or local council. There must also be enough space for each tenant, and the layout of the property needs to be safe and easy for everyone to navigate.

Keep in mind that amenity standards and bedroom sizes will heavily impact what it’ll cost to refurbish a property and convert it into a HMO. Additionally, the council could add other conditions to your licence. This could include improving the standard of your facilities.

If you have any questions about licensing standards and specific requirements in your area, reach out to your local housing authority. 

How do you apply for a HMO license in the UK?

A HMO licence is granted to a licence holder – not the property, as a lot of people believe. A licence holder’s details will need to be kept up to date, and you can’t simply pass the licence on to someone else.

Local councils will require you to distinguish between the licence holder and property manager, but this can be the same person. The council must be satisfied with a number of things, such as:

• The licence holder and property manager being a fit and proper person
• The proposed licence holder is the most appropriate person to hold this
• Proper management standards are being applied to the property
• The HMO is reasonably suitable for the number of tenants allowed under the licence

You’ll need to gather necessary documents to submit alongside your application. This might be a gas safety certificate for the property and copies of your tenancy agreements. You might also need to provide safety certificates for all electrical appliances in the property when requested.

A licence is valid for a maximum of five years in England, Wales and Northern Ireland. In Scotland, a licence is typically valid for three years. And remember that you need a separate licence for each HMO property you own!

How much do HMO licences cost?

In order to apply for a HMO licence, you will be charged a fee. This is set by your local council, so it can vary quite substantially for HMO investors across the UK, but licence fees typically range from around £500 to £1,500. 

More and more councils are adopting selective or additional licensing schemes. So, this is another cost investors must factor in even if you are not currently required to have a licence for your property!

What’s next?

HMOs are increasingly subject to licensing from local councils, which will need to be renewed periodically and standards maintained. If you forget or miss the deadline, fines can be substantial.

Even after you’ve been granted a HMO licence for your property, you still have to uphold a range of conditions for the full duration of the licence. If you feel any conditions are unjustified, you can appeal them. There also might be things you need to do on an ongoing basis, like providing the council an updated gas safety certificate every year.

The local housing authority may even inspect the property before granting your licence. They are required to do this at some point within five years of the licence being granted. Your local housing authority will outline all the standards you must adhere to, but you can also get a rough guide from the mandatory licensing guidelines online.

But if you don’t comply with the law and any specific standards or conditions set by your local council or the central government, you could be penalised, and it doesn’t matter whether it was intentional or not!

If you don’t have a HMO licence for a property that should be licensed or you don’t comply with HMO regulations, penalties can include substantial fines, rent repayment orders or the revocation of the HMO licence. In extreme cases, landlords may even face criminal prosecution!

Advice for Getting HMO Licensing Right

As a HMO investor, you need to make sure your HMO remains compliant not just for today but also moving forward even if HMO licensing requirements change. You need to understand the rules on a local and national level and all of your legal obligations. While this can all sound complicated and stressful, there are things that can help you get this part of owning a HMO right!

1. Create a compliance checklist.

Create a checklist of the most important standards you’ll have to comply with in your local area, and the documents and paperwork you’ll need to provide as part of the HMO licence application. You can make this part of a wider checklist for HMO legislation and legal obligations.

2. Plan out renovations based on amenity standards.

Take the time to understand the ins and outs of the amenity and space standards in your local area before planning any renovations. 

For example, you need to be careful when adding ensuites into your properties to ensure that they don’t compromise on bedroom floor space so much that you don’t comply with HMO licence amenity standards. Additionally, even if you won’t fail these standards, think about whether you’re leaving enough space for the bedroom. Tenants don’t want to live in tiny rooms!

3. Check if you need planning permission.

The licensing and planning departments in your local council often do not communicate, so don’t assume that having a HMO licence means you have or don’t need planning permission. Make sure you check if you need planning permission, especially if your property is in an area with an Article 4 direction or for any work you want to do to the property.

4. Work with a property specialist VA. 

A property specialist virtual assistant can help with a number of activities and can make a real difference in managing your HMO.  An appropriately experienced VA can liaise with local authorities, gather documents and submit applications or renewals for your HMO licence. This can help you remain up-to-date with local council requirements and avoid any fines or other penalties.

4. Provide tenants a copy of HMO licence

There are a few key certificates and documents that we must send to new tenants before they move in, and this includes a copy of your HMO licence. It’s also good practice to send all of the certificates for your HMO property at this point. This makes you look really professional. Doing this can also sometimes kill an argument before it even comes up!

6. Keep your knowledge up to date.

There will likely be increasing regulation when it comes to HMO licences, so you need to keep up with any local and national changes to ensure you remain compliant. Find out if there are HMO license training courses in your area. Some local councils insist that every license holder has completed an approved training course, so you may even be required to do this!

Don’t be afraid to reach out to your local housing authority if you are unsure about any licensing requirements or standards you need to comply with. They’re usually very happy to advise landlords on this!

For more helpful resources and guides about HMO legislation and your legal obligations, sign up for The HMO Roadmap today! And if you’d like to ask experienced HMO landlords any questions, join us over in our free Facebook Group The HMO Community.

About the Author:

Andy Graham is the founder and the lead trainer at The HMO Roadmap! He writes as a regular columnist in different magazines about a variety of HMO topics and is the host of The HMO Podcast! Follow Andy on Instagram!