Understanding mandatory HMO licensing

Understanding property licensing is not an easy task – we know that and we’ve been using the legislation since in came into force in 2006!

We appreciate most people don’t have time to study the legislation and so we have prepared this free guide help you understand the requirements. We explain how the mandatory HMO licensing scheme applies to private rented properties in England, using a simple three-step approach.

Step 1: Is your property an HMO?

The first thing you need to decide is whether your property is a House in Multiple Occupation (HMO). You could read the legislation itself (Sections 254 – 260 Housing Act 2004) although you may prefer the much simpler advice on the Gov.uk website.

As a simple rule of thumb, an HMO is any property (house of flat) occupied by three or more people comprising two or more households who share facilities (kitchen, bathroom and/or toilet) and occupy the property as their only or main residence, even if they are all friends and occupy the property on a single tenancy.

The occupants are all considered to be part of the same household (Section 258 Housing Act 2004) if they are all members of the same family. That includes people living together as husband and wife or in a same sex relationship, plus others related to them as parent, grandparent, child, grandchild, brother, sister, uncle, aunt, nephew, niece or cousin. A half-blood relationship is treated the same as full blood and a stepchild is treated the same as a child.

The Regulations also explain how live in employees, carers, migrant or seasonal workers should be counted for this purpose. There’s a lot of information to study if this scenario applies to you.
  


Step 2: Does the mandatory HMO licensing scheme apply to your property?

Ok, so you have established that your property is an HMO but are unsure whether it needs a licence. It is important to know there are three types of licensing that operate in England:

• Mandatory HMO licensing
• Additional licensing (more information)
• Selective licensing (more information)

Whereas mandatory HMO licensing applies throughout England, additional and selective licensing schemes only apply in certain areas. In you live in London, you can click on the ‘Select Borough’ link at the top right of this page to check what schemes apply in your borough – we provide this free service. Elsewhere in the country, you will need to contact your local council.

Mandatory HMO licensing does not apply to all HMOs. It is restricted to certain larger properties under Part II of the Housing Act 2004 – an estimated 220,000+ properties. 

You will need a mandatory HMO licence if your property meets the standard test, self-contained flat test or converted building test HMO definition (section 254 of the Housing Act 2004) and is occupied by five or more people.

But what are these tests and what does this mean in practice? It means you need a licence for any house or flat that is occupied by five or more people who are not all related and live in the property as their main home. For example, it includes:

• Shared houses and flats occupied by students and young professionals;
• Properties converted into bedsits with some shared facilities; and
• Properties converted into a mixture of self-contained and non self-contained accommodation.  

Prior to 1 October 2018, the mandatory HMO licensing scheme only applied to properties that were three or more storeys in height, but that restriction has now been lifted.

When assessing if your property needs to be licensed, there is an important exemption you need to be aware of. The government have excluded purpose built self-contained flats within a block comprising three or more self-contained flats from the mandatory HMO licensing scheme.

While this exemption will be good news for some landlords, it does make the licensing scheme more complicated. These purpose built flats could also still be licensable if your council has introduced an additional or selective licensing scheme.

Statutory Exemptions

The Housing Act 2004 and associated regulations list certain exemptions from HMO licensing including:

• Any property occupied by just two people who form two households. So, two friends that share a house or flat does not constitute an HMO;
• Buildings managed by a local housing authority, registered social landlord, police, fire & rescue authority or health service body;
• Buildings already regulated under certain other statutory provisions (Schedule 1 to SI 2006 Number 373)
• Certain student halls of residence;
• Buildings occupied principally for the purposes of a religious community whose principle occupation is prayer, contemplation, education or the relief of suffering; and
• Buildings owner occupied with no more than two lodgers. 

Step 3: Apply for a mandatory HMO licence

If you find your property needs licensing, you will need a submit a licence application to your local council using their prescribed application process. Councils usually ask for a floorplan of the property and various supporting documentation. You will also need to pay an application fee and the licence will be issued for up to five years. 

There is no grace period and your application should be submitted on or around the date the tenants move in.

If you realise you are already operating a licensable but unlicensed property, you need to apply as soon as possible to minimise the compliance risk. Alternatively, you can apply for a temporary exemption from licensing if you want to reduce the occupancy level below the licensing threshold, revert to a single family let or secure vacant possession so you can sell the property.

Ignore the law and you could pay a heavy price. You risk being prosecuted by the council and if found guilty you could get a criminal record, be fined an unlimited amount and ordered to pay court costs and a victim surcharge.

Alternatively, the council can issue you with a civil penalty of up to £30,000 and you could be subject to a Rent Repayment Order and may have to repay up to 12 months rental income.

Until the application is submitted, you cannot use a Notice of Seeking Possession under Section 21 Housing Act 1988 to evict your tenants. As such, it is far better to comply at the earliest opportunity.

Need further advice and support?

If you find the whole licensing process a bit daunting and are based in the London area, we can help you. We offer a fixed price licence application handling service and you can find more information here. We have limited capacity and specialise in more complex cases. Several other companies offering a licence application handling service can be found in our Landlord Suppliers Directory here.

If you want to learn more about what happens once you submit your application, we have published another guide explaining the next part of the process here.

If you still have questions and need expert advice, we can offer a 30-minute telephone consultation, explained here. Following an initial consultation, we may be able to offer more in-depth consultancy support, including the preparation of temporary exemptions, licensing representations and appeals.   

Hopefully this has given you a useful overview of the mandatory HMO licensing scheme. Remember, this is not legal advice and you may wish to refer to our disclaimer below.

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