A Landlord's guide to Houses in Multiple Occupation Legislation

A Landlord’s guide to Houses in Multiple Occupation Legislation

This article provides a detailed guide to explaining the legislation relating to Houses in Multiple Occupation (HMO) and the licensing requirements outlined by central government (The Department for Communities and Local Government). It provides more detailed information on HMO legislation than the introductory article A Landlords guide to Houses in Multiple Occupation (HMO).

1. Laws relating to HMO

The Housing Act 2004 introduced licensing for houses in multiple occupation (HMOs). The Act provides a detailed definition of HMOs and sets out standards of management for this type of property. Most of the Act came into force on 6 April 2006, except for sections relating to converted blocks of flats. HMO licensing has abolished all pre-Housing Act 2004 registration schemes run by councils.

2. Houses in Multiple Occupation licensing

Under the new laws, there are two types of HMO licensing:

mandatory licensing; and
additional licensing.

2.1 Mandatory licensing

Licensing is mandatory for all HMOs which have three or more stories and are occupied by five or more people forming, two or more households.

2.2 Additional licensing

Additional licensing occurs when a council requires HMOs that do not require mandatory licensing to be licensed. The council can do this if it considers that a significant proportion of these HMOs are being managed sufficiently ineffectively so as to give rise to one or more particular problems, either for the occupants of the HMOs or for members of the public.

The Act also introduced a range of other measures applying to both licensable and non-licensable HMOs. It is recommended that you contact your local council and ask for advice on their HMO policies and designated areas for HMO licensing.

3. What is a House in Multiple Occupation?

For a building or part of a building (such as a flat) to be classified as an HMO under the Act it must meet all of the following tests:

3.1 The building test

An HMO is a building or part of a building (e.g. a flat):

Comprising more than one household sharing an amenity such as a bathroom, toilet or cooking facilities; or
Which does not entirely comprise self contained flats; or
Which comprises entirely of converted self contained flats, where the standard of conversion does not meet the minimum required by the 1991 Building Regulations. More than one third of the flats are occupied under short tenancies.

3.2 The residence test

A building is classified as a HMO if it is occupied by more than one household as their only or main residence. This includes occupation:

by asylum seekers, migrants or seasonal workers; or
as a refuge by persons escaping domestic violence; or
by students in higher or further education.

If a council is satisfied that a building is not being used entirely as the occupiers’ only or main residence, but that a significant number of the occupiers live there on a permanent basis, it can serve an HMO Declaration. This has the effect of bringing the building within the HMO definition. Such a declaration may, for example, be made in respect of a Bed and Breakfast establishment which provides both tourist accommodation and housing for some of its residents on a more permanent footing.

3.3 The more-than-one-household test

A household is defined by the department for communities and local Government as a group of people, who are not all members of the same family living in the same building. A ‘household’ is either a single person, or members of the same family who are living together, and includes people who are married or living together as married. Included in this definition of households are specific relatives who live together (parents, grandparents, children (and step-children), grandchildren, brothers, sisters, uncles, aunts, nephews, nieces or cousins).

3.4 The consideration test

For a property to be classified as a HMO the occupant must be paying to occupy the property. This payment can come in the form of rents and fees, and includes ‘live-in’ employment (with the exclusion of some domestic employment).

3.5 Buildings which are exempt

A number of buildings which can be defined as HMOs may be exempt from the HMO definition. These include:

Properties occupied by the resident landlord and a maximum of two other persons who are not part of his or her household; and
Properties inhabited by up to two persons.

4. Licensing

This section of the article details information on licensing a Houses in Multiple Occupation.

4.1 Who should apply for a license?

Applications will be accepted from the landlord(s) or managing agent of the property (provided the landlord has been notified about the application). The person managing or controlling the HMO will have committed an offence if they fail to apply for a license.

4.2 Applying for a license

Your local council will provide you with a license application pack. You are required, as part of the act to notify ‘various relevant’ persons who have an interest in the HMO. You will be required to provide the details of each person to the council. ‘Relevant persons’ include:

the landlord (unless you are the applicant);
any other owner of the HMO if the landlord does not own the freehold, for example the freeholder and any head lessors, who are known to you;
any person who is a long leaseholder. This excludes tenants with assured shorthold, assured tenancy agreements. In addition, there is no need to notify tenants who have a protected tenancy whose tenancy is periodic or has less than three years to run, or a statutory tenant;
the mortgage company;
the proposed license holder, if you are not that person;
the proposed managing agent, if you are not that person; and
any person who has agreed to be bound by any conditions in any granted license.

Once an application has been submitted, the council will consider a range of factors when considering the application. These include:

the suitability of the HMO for the number of occupiers.
the suitability of the facilities within the HMO, such as toilets, bathrooms and cooking facilities.
the suitability of the landlord and/or the managing agent to manage the HMO (This is called the “fit and proper” test and is mainly concerned with whether the landlord or manager has any relevant convictions or has acted in a way that would indicate his or her unsuitability to manage this type of residential accommodation.)
the general suitability of managing arrangements.

4.3 Cost of the license

Your local council has the discretion to set its own, non-refundable fee for the license. However, the fee should reflect the cost to the council of providing the license.

The council may chose to inspect the property before granting a license but, this is not a mandatory requirement. Councils have the power to inspect the property for Health and Safety hazards at any point during the licensed period.

4.4 Consultation period

During the application process the council will outline the requirements of the license they propose to grant. This consultation will take a minimum of 14 days and will include the ‘relevant persons’ named on the application. If the council decide to alter the license they propose to grant, they must allow a further 7 days for comments.

4.5 Appealing the council decision

It is possible to appeal to a Residential Property Tribunal (see link at the end of the article) about the terms and conditions of the license. However, you are not permitted to appeal against a mandatory condition imposed or to complain about the manner of its enforcement.

You will have a limited period in which to appeal and it is probable you will be required to pay a fee for this appeal. It is recommended you take advice from Landlord organisations or the citizens advice bureau, should you decide to appeal against a decision.

4.6 Duration of license

A license can be granted for anything up to 5 years. The council which is responsible for your HMO license has the discretion to grant licenses for shorter periods. The license must be renewed on expiry if the property is to remain functioning as a HMO.

4.7 Conditions of a license

Any license granted is likely to come with conditions, designed to ensure the property is maintained appropriately. The conditions are mandatory and include:

produce an annual gas safety certificate.
keep electrical appliances and furniture supplied by the landlord in a safe condition and to supply declarations of their safety to the local council on demand.
install smoke alarms and keep them in proper working order and to supply to the local council, on demand, a declaration of their positioning and condition; and
give the occupiers a statement of the terms on which they occupy the HMO.

The council may insist on a number of additional conditions specific to the HMO and its facilities.

4.8 Exemptions from licensing

Exemptions from licensing are only granted to properties that do not require licensing under the act, and those in the process of ceasing to operate as a HMO. Exemptions last for 3 months and can, in exceptional circumstances be renewed on application to the council for a further 3 months. The council will need to satisfy itself that a property satisfies the conditions for exemption. Examples of evidence that will be sought include, but are not limited to:

Planning permission for conversion to a single household dwelling.
Contract of sale between the owner and a third party.

Placing the HMO on the market or making a proposal to sell the property will not be seen as sufficient evidence. If the council refuses to grant you an exemption it must write to you explaining its decision. You are entitled to appeal against this decision at the Residential Property Tribunal.

4.9. Penalties for non compliance with a license

If you manage a HMO which should be licensed but is not, you are committing a criminal offence. If you are prosecuted by the council for not complying you could be liable for a fine of up to £20,000 plus costs. This fine is applicable to HMO managers who allow their HMO to become overcrowded.

If the manager of a HMO does not comply with the conditions of the HMO license, without a reasonable reason for doing so, they are committing a criminal offence and are liable to a fine of up to £5,000. If the manager persistently breaches the terms of the license, they face the possibility of their license being revoked.

4.10 Revoking a HMO license

The council has the right to revoke a HMO license if it deems the management to be unsatisfactory or the HMO no longer suitable to house the number of occupiers within the property.

When revoking a license, the council must inform the landlord and ‘relevant persons’ of their intentions and allow 14 days for a response. The council must consider all responses to this notice. If the license is revoked the landlord will have the right to appeal to a Residential Property Tribunal.

If the license has been revoked due to a breach of conditions of the license, an interim management order will be put in place, unless a new management order can be granted for the property.

5. Interim Management Order

An interim management (IMO) order is made when a council deems it can not grant a license for a HMO or if it revokes a HMO license. When granting an interim management order, the council must send a copy of the order to the landlord and the ‘relevant people’, in addition to reasons for their decision.

The effect of an IMO is to transfer the management from the landlord or managing agent to the council. The council will become responsible for the collection of rents, the management of tenancies and the maintenance and upkeep of the property.

The council will provide information on the rights and liabilities of the landlord when the IMO is granted. An IMO can be appealed by the landlord or ‘relevant people’ via the Residential Property Tribunal Appeal Service.

An IMO can last for up to 12 months but, can be revoked sooner if the council is satisfied a license can be granted. If after the IMO expires, the council is unable to grant a license it must grant a final management order.

6. A Final Management Order

A Final Management Order (FMO) is designed to secure the long term management of a HMO and usually lasts for up to 5 years. An FMO may be revoked earlier at the discretion of the council. Whilst in force, the landlord or the landlord’s management agent will be excluded from the management of the HMO. The council will provide the landlord with information on the rights and liabilities of the landlord.

Throughout the duration of an FMO, rents will be payable directly to the council or the council’s appointed agents. The council or their agent will be responsible for the management of tenancies and the upkeep and maintenance of the HMO.

The council’s decision to grant an FMO can be appealed against via the Residential Property Tribunal Appeal Service, as can decisions to revoke, or refusal to revoke FMOs.

If the property remains a HMO, on the expiry of an FMO the council must make a new FMO or grant a license.

7. Management regulations of HMOs

Management regulations apply to all HMOs. Such regulations impose certain duties on managers and occupiers of such buildings. These duties can be split by who is responsible for ensuring they are applied; the manager, the occupier.

7.1 Manager’s responsibilities

The manager’s responsibilities are:

Provide contact details to all occupiers.
Fire safety: ensure all fire escapes are well maintained and free from obstructions. Ensure all fire fighting equipment are well maintained useable.
Take reasonable action to ensure the occupiers are not injured due to the HMOs design and structural condition.
Ensure an adequate water supply which is not unreasonably interrupted.
To ensure adequate drainage.
Ensures the supply of gas and electricity are not unreasonably interrupted. Supplies annual gas safety certificates to the occupants and the council responsible for the HMO.
Carry out checks on electrical installations every 5 years.
Keeps in good repair the communal areas of the HMO, including decorations and all fixtures and fittings.
Ensure the gardens and additional structures of the HMO are well maintained.
Ensure living areas are maintained in good repair, including fixtures and fittings.
Ensure suitable facilities for the disposal of rubbish.

It is recommended the manager keeps a log book recording each time they complete an activity related to their responsibilities, including checks, repairs and maintenance. In addition, ensuring any tenants within the HMO sign a declaration of understanding that they have been made aware of:

The working of the fire alarm.
The need to keep means of escape free from obstructions.
How to manage waste, including the times the refuse is collected by the council.
What would be deemed anti-social behaviour.

7.2 Occupier’s responsibilities

The occupier’s responsibilities are listed below. In these responsibilities, the term ‘manager’ refers to the person responsible for managing the HMO.

Do not hinder or prevent the manager in meeting their responsibilities.
Does not deliberately damage anything the manager is responsible for maintaining in good repair.
Ensure rubbish is disposed of inline with the instructions provided by the manager.
Comply with any reasonable instructions regarding fire safety.

8. Frequently Asked Questions

8.1 Does having a HMO license mean the building will always be a HMO?

No. There is no requirement for a building licensed as a HMO to remain a HMO. It could be converted to a single dwelling without the need for licensing. Conversion to a single dwelling may be subject to planning permission – it is recommended you consult your local council to determine whether planning permission is required.

8.2 Can I evict my tenants to avoid licensing?

No. If you harass or forcibly cause a tenant to move out you are breaking the law. Tenancies must be ended in a prescribed manner. If the council is notified you are evicting tenants to avoid HMO licensing, they have the power to make an interim management order.

8.3 My property has been granted a license but, there are more people living there than permitted by the license. What should I do?

If the property has recently received a license you will be permitted to take steps to reduce the number of people occupying the property. This can not be undertaken by evicting the tenants. Instead, excess tenants should be allowed to leave on expiry of their tenancy and should not be replaced.

8.4 Are HMO licenses Transferable?

licenses do not transfer on the sale of a property or when the individual granted the license ceases to manage the HMO.

8.5 Where can I find more details on the Residential Property Tribunal?

More details about the Residential Property Tribunal Appeal Service can be found at www.rpts.gov.uk or by calling 0845 600 3178.

9. Useful links

Listed below are a number of useful links: