Where any residential property in England or Wales is occupied by more than one household you need to consider whether it is a house in multiple occupation (HMO) that needs to be licensed under the Housing Act 2004. This Act seeks to improve the safety and management of residential buildings let by private landlords through its licensing scheme.
In particular, you should be aware of new rules from HMOs in England introduced in October 2018 (the Rules) which have brought more buildings within the licensing requirements.
When does an HMO need to be licensed?
Prior to the Rules being introduced, only HMOs set out over three floors required a mandatory HMO licence, unless the local authority had introduced additional or selective licensing schemes. However, the new Rules sought to amend the definition of an HMO and reference to the number of storeys was removed. Therefore, any HMO occupied by 5 or more people forming two or more households now requires a licence, regardless of the number of storeys in the property.
Additional Licensing Schemes
Additional licensing schemes, previously introduced by local authorities, that require the licensing of any property occupied by three or more people forming two or more households within specified designated areas, remain in force. However, many of the properties formerly covered by an additional licensing scheme will now be caught by the new Rules and will now require a full licence (i.e. any property occupied by five or more people forming two or more households). Many local authorities do not require an additional licence holder to “upgrade” their licence to a full one until their current licence expires; however, it is worth checking this with your local authority to ensure you do not accidentally end up in breach.
Selective licensing schemes, which can be set up by local authorities in designated areas, also remain in force. Sometimes entire boroughs can be included in a scheme, sometimes just a small area or estate. These schemes have been introduced by various local authorities and are designed to “catch” any privately rented properties not requiring a mandatory or additional licence. In areas subject to selective licensing schemes, all owners of privately rented property must hold a licence in order to rent their property to a tenant.
Section 257 HMOs
An s257 HMO is a property which has been converted to flats but where the conversion works carried out do not comply with Building Regulations. If you are thinking of purchasing a converted property but the seller is unable to provide a Building Regulation completion certificate for the conversion works, then (depending on your local authority’s specific requirements) you may require an additional licence before being able to rent the property to tenants. If you are in any doubt whether a licence is required, it is best to speak directly to your local authority.
A large HMO is occupied by 7 or more people forming two or more households. These properties will require a mandatory licence, however, there may also be planning implications too. A large HMO falls under the sui generis use class and therefore if you own a single residence (use class C3) or HMO (use class C4) and intend to let it to 7 or more tenants, you will need to obtain planning permission for change of use.
Article 4 Directions
These are directions that a local authority may introduce in order to require landlords wishing to use their property as an HMO to obtain planning permission for change of use from C3 (residential dwelling) to C4 (HMO). Normally this change would be allowed without planning consent under permitted development rights. However, an Article 4 direction seeks to restrict these permitted development rights, resulting in planning permission being required for properties in the designated Article 4 area. This arrangement assists the local authority in monitoring the quality and quantity of HMOs in a particular area and is often found in towns and cities with a large student population.
Certain HMOs will not need to be licensed if they are managed/owned by a housing association or co-operative, a local authority, health service or the police or fire authority.
Although these rules are complex and can be time-consuming to comply with, letting a licensable HMO without a licence is an offence and can result in a fine of up to £20,000. Additionally, the owner of a property which is found to be in breach of planning can be issued with an enforcement notice and an unlimited fine by the local authority. For these reasons, we would always recommend researching local licensing schemes if you are thinking about purchasing a property to use as an HMO or intend to let your property to multiple tenants.