HMO Regulations: What You Need to Know

HMO Regulations: What You Need to Know

HMOs provide landlords with excellent potential returns, but these specialist properties also come with tighter rules and regulations.

In this guide, CJ Hole’s HMO experts reveal all the regulations you need to know about if you’re thinking of investing in these lucrative, but complex properties. 

 

What does HMO mean in property? 

HMO stands for House in Multiple Occupation – often a ‘house share’ property that is rented by individuals from different households.

 

What is an HMO property?

An HMO property is one that is rented by three or more people from at least two different households who share common facilities like bathrooms and a kitchen.

Most HMOs are ‘house shares’, usually between professionals or students, although HMOs can also be:

  • Hostels
  • Clusters of flats
  • A group of bedsits

HMOs are usually labelled either ‘small’ or ‘large and this can affect the regulations that apply to them.

 

What are the regulations for HMOs?

HMOs are subject to more stringent regulations that standard buy-to-let properties, including:

 

1. HMO licensing

HMOs often require a licence from the local authority in order to be legally let, say our HMO experts.

Whether or not an HMO needs a licence often depends on its size and the rules set by individual local authorities.

HMO licensing falls under three categories:

 

Mandatory licensing

Any HMO with five or more individual tenants from two or more households will always require a licence.

 

Additional licensing

Local authorities can impose licensing rules on any size HMO if they wish, known as additional licensing.

In areas where additional licensing rules are in place, HMOs with fewer than five tenants would also require a licence.

 

Selective licensing

Under selective licensing, confirm our experts, a local authority can impose licence requirements on certain areas – for example a street or council ward.

Selective licensing usually covers all privately rented properties, meaning landlords of standard buy-to-lets in areas where selective licensing is in place will also require a licence as well as all HMOs in that area.

 

What does the local authority look at when granting an HMO licence?

When considering an HMO licence application from a landlord, the local authority will need to see that:

  • All required fire safety measures are in place
  • The property has a valid gas safety certificate
  • An Electrical Installation Condition Report (EICR) has been carried out and the property’s electrics have been declared safe
  • The property isn’t overcrowded
  • Facilities for cooking and washing are adequate
  • Communal areas are in a good state of repair
  • There are enough waste disposal facilities

 

Do I need an HMO licence?

If your property falls under the mandatory licensing criteria of having five or more tenants from at least two households, our experts confirm you’ll definitely need an HMO licence.

If your local authority has additional or selective licensing in place, you may also require a licence if your HMO is smaller and home to fewer than five people.

 

How much does an HMO licence cost?

The cost of an HMO licence can vary depending on:

  • The local authority area
  • The number of HMOs you own
  • The size of the HMO

Licences can cost anywhere between £300 and £2,000, so always check your local authority’s pricing structure.

 

How long do HMO licences last?

Most HMO licences are valid for five years before they need to be renewed.

However, some licences can be issued on shorter terms if the local authority wishes.

 

2. Health and safety

HMOs are subject to the same health and safety regulations as other privately rented properties, meaning you must:

  • Have an annual gas safety assessment every year
  • Have an Electrical Installation Condition Report (EICR) carried out every five years
  • Follow fire safety and smoke / CO2 alarm rules
  • Ensure your HMO meets the Minimum Energy Efficiency Standards (MEES)

An HMO must also have enough cooking, bathroom, and waste disposal facilities for the number of tenants living there and not be classed as ‘overcrowded’, add our experts.

The local authority will also carry out a Housing Health and Safety Rating System (HHSRS) assessment within five years of receiving an HMO licence application.

 

3. Minimum room sizes

HMOs are subject to minimum bedroom sizes, according to our experts, which state:

  • A bedroom must be a minimum of 6.51 square metres if occupied by someone aged over 10
  • A bedroom must be a minimum of 10.22 square metres if occupied by two people aged over 10
  • A bedroom must be a minimum of 4.64 square metres if occupied by someone aged under 10

 

Any room smaller than 4.64 square metres can’t legally be used as a bedroom in any HMO, while further HMO room regulations state:

  • No more than two people can sleep in any room, regardless of age
  • Bedrooms should only be shared if both individuals agree
  • No HMO tenant aged over 12 should share a bedroom unless co-habiting as a couple

 

4. HMO planning permission

If you’re converting a property into an HMO, our HMO experts confirm you may require planning permission.

Standard residential properties fall under the C3 planning class, while an HMO housing three to six people is classed as a C4 property.

To switch from a C3 to C4 planning class, for example if you’re converting a three-bedroom family home into a five-bedroom HMO, you won’t require mandatory planning approval.

However, if the property is in a local authority with an article 4 direction in place, planning restrictions may be in place, meaning you will require planning approval for any size HMO.

Any HMO housing seven or more people falls under the sui generis planning class and will always require planning permission.

 

5. HMO fire regulations

You should always carry out a thorough fire risk assessment before renting out an HMO, say our experts.

Fire regulations for HMOs also state that they must:

  • Have self-closing fire doors installed for each bedroom, living room and each entry point to the kitchen
  • All fire doors must comply with 30-minute fire resistance
  • Have an unobstructed fire escape window
  • Have clear and unobstructed fire escape routes
  • Display signs and notices showing exit points in the event of a fire
  • Have mains powered smoke alarms installed on landings and in hallways
  • Have heat detectors in the kitchen
  • Have emergency lighting if a large HMO with a long or complicated escape route
  • Fire extinguishers and fire blankets if required by the terms of an HMO licence

 

6. HMO management regulations

Before granting an HMO licence, the local authority will assess that you are a ‘fit and proper person’.

This means you cannot have previously broken any criminal laws, housing laws or landlord/tenant laws.

According to our experts, the local authority will also assess your plans for managing your HMO.

 

7. Other HMO regulations

HMOs are also subject to other private rented sector regulations, including:

 

Tenancy deposits

Every tenant who provides a deposit in an HMO must have it protected in a government-backed tenancy deposit scheme within 30 days of a landlord receiving it.

 

Council tax

You may be responsible for paying council tax on your HMO if each tenant in your property has a separate tenancy agreement.

 

HMO mortgages

HMOs require specific HMO mortgages and can’t be funded with a standard residential or buy-to-let mortgage.

HMO mortgages usually come with tighter lending criteria and higher interest rates.

 

HMO landlord insurance

As HMOs can come with more risk, taking out adequate landlord insurance is vital.

An HMO mortgage lender will insist on a buildings insurance policy, but you should also consider:

 

Contents insurance

Most HMOs are let fully furnished, so contents insurance can help to protect against damage to items you supply.

 

Rent guarantee insurance

This can help cover you against tenant rent arrears for a period of time, usually up to a maximum of six months.

 

Public liability insurance

This can protect you against liability if a tenant or guest is injured at your HMO.

 

Are HMOs good investments?

HMOs can offer excellent financial returns, but they also come with more complex regulations such as licensing, as well as more up-front expense.

Here are the main pros and cons of HMO properties:

 

HMO pros

HMO cons

Higher potential yields

Tighter legislation including licensing

Strong demand from professionals

Higher tenant turnover

Less exposure to rent arrears

Higher start-up costs

Fewer costly void periods

Increased maintenance, and wear and tear

 

Further reading…