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Posted 19 Mar 2024

Houses In Multiple Occupation: Do I Need A HMO Licence For 3 Tenants?

apartment / hmo / landlord

Lots of landlords ask about the HMO rules, with frequently asked questions including: “Do I need a HMO licence for three tenants?”

Lots of landlords ask me about houses in multiple occupation (HMO), with questions such as: “Do I need a HMO licence for three tenants?” and so on.

The number of HMOs has increased in recent years. According to the House of Commons, there are around 500,000 in England and Wales, providing accommodation for approximately 4.5m households.

So, what is a HMO? It’s a type of shared housing where several unrelated people live together and share the property’s common areas, such as the kitchen and bathrooms.

As specified by the Housing Act 2004, key criteria includes:

    • Multiple tenants: There are at least three tenants living in the house
    • Several households: The tenants don’t form a single family
    • Shared amenities: Tenants don’t have their own private kitchens or bathrooms

HMOs are a common type of housing among those looking for more affordable options, such as students or young professionals.

Read on to find out more about HMO licences and the criteria determining whether you need to apply for one as a landlord.

What is a HMO licence?

HMO licences are permits issued by a local council that allows you to rent out a property to several tenants meeting the above criteria.

It ensures the property meets safety and quality standards for the number of tenants living in this accommodation.

The licensing process involves inspections to ensure the HMO meets fire safety regulations, has adequate living space and provides essential amenities in good condition.

When people talk about the HMO licence, they usually refer to one type in particular. This is called a mandatory HMO licence.

Issuing a mandatory HMO licence is the official way of recognising that the property you’re renting out is fit for purpose. Government conditions specify that the landlord or their agent has no criminal record and hasn’t breached property law – e.g. by failing to do a right to rent check on tenants.

And they must meet certain other requirements too. These include sending the council an updated gas safety certificate every year, install and maintain smoke alarms and provide electrical appliance safety certificates when asked.

Since October 2018, to receive the licence, bedrooms must have the following minimum sizes, according to government guidance:

  • 6.51 square metres for one person over 10 years of age
  • 10.22 square metres for two persons over 10 years
  • 4.64 square metres for one child under the age of 10 years

These are the rules for HMOs in England at the time of writing, but for HMOs in Scotland as well as HMOs in Northern Ireland, the rules may differ.

The mandatory HMO licence lasts for five years before you need to renew it again. I’ll explain the factors determining whether you need to pay for a mandatory HMO licence shortly.

Other licensing requirements

As a landlord, even if you don’t require a mandatory HMO licence, you may still need to apply and pay for something similar.

Some councils have introduced their own additional HMO licences. These additional licences apply to relatively smaller HMOs within the council’s boundaries.

Furthermore, some councils have introduced selective licensing – this isn’t a licence solely for HMOs though. If a council has introduced selective licensing, all landlords renting out a property within their boundaries must apply for one, even if they have only one tenant.

As confirmed by London Property Licensing here and here:

  • You do not need an additional licence if your property requires a mandatory HMO licence
  • You do not need a selective licence if the property requires a mandatory HMO or additional licence

So, as a landlord, when do you need to get one of the HMO licences? I’ll run through the most common questions people ask me right here.

Do I need a HMO licence for 2 tenants?

No – that’s a simple one. Based on the criteria above, your property doesn’t count as a HMO unless there are at least three unrelated tenants living there.

If you’re letting out a property where the council operates selective licensing, you’ll need to apply for this, but that’s not the same thing as a HMO licence.

Do I need a HMO licence for 3 tenants?

Landlords don’t need the mandatory HMO licence, but your council may require an additional licence – see below.

Here’s where there tends to be some confusion. As mentioned, if there are at least three tenants living in the property, sharing the amenities and from more than one household, the accommodation counts as a HMO.

But that doesn’t mean that the landlord requires mandatory HMO licensing. In fact, it’s not a requirement to get the mandatory HMO licence with only three unrelated tenants in the property.

However, some councils still require an additional HMO licence for three tenants. Here are some of the London boroughs where this is the case:

Please note, this list is not exhaustive and only covers London. To learn whether your local authority has additional HMO requirements, browse their website or contact them directly – you can find your council here.

Do I need a HMO licence for 4 tenants?

As above – you don’t need the mandatory HMO licence, but check if your council requires an additional licence.

Similar to the previous example, you don’t need the mandatory HMO licence when there are four tenants of at least two households, living in the property and sharing the common areas.

In terms of mandatory licensing, this number of tenants is still below the threshold required – but again, HMO rules can vary by council in terms of additional or selective licensing.

Do I need a HMO licence for 5 tenants?

Yes – for five or more tenants, from more than one household, you need to apply for the mandatory HMO licence. Here is the full HMO guidance from the UK government.

If you are planning to have five tenants or more in the property, meeting the aforementioned HMO criteria, this is the threshold to pay for the mandatory licence. Such properties are called large HMOs.

The fines for operating a HMO without a licence can be very high. Last year, one London council issued a £480,000 fine for an unlicensed HMO that put tenants’ health at risk, according to Inside Housing.

The mandatory HMO licence is an important requirement to ensure that properties with at least five tenants are living in appropriate accommodation.

You can apply for the HMO licence online. The cost varies by council – Tower Hamlets charges £691.50, while the fee in Hounslow is £1380, for example.

The council should conduct a Housing Health and Safety Rating System risk assessment within five years of receiving the HMO licence application, says the government. If the inspector finds any risks, you need to address them.

There are several exemptions for the HMO mandatory licence. According to Barnet council, these include, but are not limited to, buildings that are:

  • Managed by private registered social housing providers
  • Halls of residence for students, controlled by a listed educational establishment
  • Occupied by religious communities
  • Regulated under other legislation such as care homes and accommodation for asylum seekers

Some councils also let you apply for temporary exemptions – Merton, for example, if you think the property will cease to require a licence within three months.

Final thoughts: When do I need a HMO licence?

So, here’s a quick summary. If you’re a landlord letting out your property to five or more tenants, consisting of more than one household, using shared amenities – you must apply for a mandatory HMO licence.

But all landlords should check for their local council’s specific licensing requirements. With fewer tenants, you may need to apply for the so-called additional HMO licence or even a council’s selective licence.

In terms of how to avoid HMO licence requirements, you can let out a property to just two tenants. Your property will not count as a HMO, but bear in mind that your council may still operate a selective licence scheme.

For more guides, check out our blog. Recently we’ve explained what a sitting tenant is and also, what an EWS1 form is.

There’s plenty to think about as a landlord, isn’t there? And if you’re a non-resident landlord using the NRLS scheme, there are even more requirements to keep up with!

As an experienced estate agent in London, I understand government or local authority requirements for property matters and help landlords stay compliant.

If you have any questions or would like to ask about a property in our portfolio, Fine Living is here for you. Please do not hesitate to get in touch.

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