HMO Licensing Changes: What Do They Mean for Property Owners?

It has recently been reported that the West Suffolk councils of St Edmundsbury and Forest Heath have written to more than seventy local landlords to advise them that their HMO – houses in multiple occupation – properties will be subject to mandatory licensing, after changes made by central government on how this type of property is defined.

A house in multiple occupation is, broadly speaking, a larger rented property in which multiple individuals or households share some amenities, such as a kitchen or bathrooms. The most obvious example is shared student accommodation, but HMOs also encompass other types of shared properties, and have seen growth in recent years as some renters see cost savings in renting a room in an HMO as opposed to renting a property outright.

For better or worse, the government has seen HMOs as representing a greater risk than other types of private renting, amidst stories of “rogue landlords”, poor living conditions and failures to adhere to electrical and fire safety standards. For some time, the government has required mandatory licensing of only “large” HMOs, which up until now have been defined as buildings of three or more storeys, in which five or more occupiers comprise two or more households. Local authorities have also had the ability to apply, at their discretion, additional selective licensing criteria to properties of a certain type or within a certain postcode area.

The forthcoming change – which applies from 1 October 2018 – removes the “three or more stories” provision from the definition of an HMO, meaning that any property housing five or more occupants living as more than one distinct household with shared amenities, regardless of size, will be considered a house in multiple occupation. The change in definition means that some properties that previously didn’t require licensing will now have to be licensed.

The new licensing regime will be phased in over a six-month period during which local authorities will publicise the changes, process applications and issue licences. HMO landlords without a licence within this phase-in period will not be prosecuted for failing to hold a licence, and will not be exposed to rent repayment orders. However, landlords of qualifying properties will be expected to obtain a licence from their local authority before the end of the six-month grace period, after which action may be taken against those failing to comply.

Failure to apply for a licence to run a qualifying HMO rental property can be harsh – fines of up to £30,000 can be imposed, while repeat offenders can be subject to a banning order prohibiting them from letting property in the future. While local authorities have already started contacting landlords in cases where they know the property will fall under the new HMO rules, it’s also a good idea for landlords to review their own properties to know where they stand, and contact local authorities in cases where properties are likely to qualify for mandatory HMO licensing under the new regulation.