Do you need a HMO licence? Guide to HMO properties and house shares

Letting an HMO property allows landlords to have more tenants and generate more rental income. However, HMO landlords have more rules and responsibilities to follow, such as licensing, overcrowding, and minimum size requirements.

Read on to find out about how HMOs work and what you need to do to let one safely and successfully.

HMO meaning – what is a HMO?

HMO stands for house in multiple occupation. The HMO definition is a property which has three or more people from more than one household living there who share kitchen, bathroom, or toilet facilities. It’s more commonly known by tenants as a house share.

The government defines a household as a single person, or members of the same family living in the same property. For example, three unrelated people in three rooms would make up three households, while a property with two couples would make up two households.

HMOs can take many forms. They’re often a shared property where the tenants aren’t related to each other, or a house split into several rooms.

For a property to be considered an HMO, rent must be paid, and it must be the occupants’ main residence.

There’s a separate category of property known as a large HMO. A property is a large HMO if it has at least five tenants forming more than one household, and the tenants share toilet, bathroom, or kitchen facilities.

HMO regulations – what else do landlords need to do?

In 2018, the government introduced minimum bedroom sizes for HMO properties that need a licence.

Read our in-depth guide to what minimum room sizes are in HMOs, overcrowding in HMOs, and how you can comply with the rules.

Do I need an HMO licence?

All large HMOs must be licenced. So, if your property is let to five or more unrelated tenants, and has shared tenant facilities, you must apply for an HMO licence. You’ll also need a separate licence for each HMO you rent out.

Even if you don’t have a large HMO, some councils require HMO properties to have a licence. Each licence will specify the maximum number of people that can occupy the property and how long it’s valid for.

You should also remember that some councils require all landlords to be registered, regardless of whether or not their properties are HMOs. If you’re in doubt, check with your local council first.

How can HMO landlords apply for a licence?

You should apply for an HMO licence through your local council. Individual councils will set the terms of the licence. You can apply yourself, or you can ask your letting agent to do it for you.

The landlord must inform a number of different parties when applying for a licence, and you must also pass on the details of these people to the council. They are:

• the freeholder of the property, if there is one, or any other owners of the property
• tenants who have more than three years left on their existing tenancy
• the lender, if you have a buy-to-let mortgage

You can find out how to apply for your HMO licence here.

HMO licence cost

The cost of an HMO licence is set by individual councils. It’s normally charged as a fee for applying, and will be non-refundable regardless of whether or not the licence is granted.

For example, the cost of an HMO licence in Brighton is £1,061 for five occupants, rising to £1,514 for properties with up to 14 occupants.

Meanwhile, costs for HMO licences in Newcastle and Birmingham start at £1,000 and £1,125 respectively. There are often discounts available for accredited landlords and renewals.

Many councils charge more if you’ve been prompted to apply for a licence, so it’s important to make the application yourself as soon as possible.

HMO licences normally last for a period of five years. At least once during that period, the council will inspect the property to make sure that it doesn’t have any health and safety hazards.

HMO rules – what are the penalties for not having a licence?

If you’re the landlord of an HMO that should be licensed but isn’t, you’re committing a criminal offence and there are HMO licence fines you should be aware of.

You could be prosecuted and get an unlimited fine. You could also be ordered to repay up to 12 months’ rent or, if the tenants are in receipt of housing benefit, you could be ordered to repay 12 months’ housing benefit to the council.

If you break the terms of your licence, you could be fined up to £5,000. If you break the terms by renting to more than the number of tenants allowed on the licence, you could be fined up to £20,000.

What’s more, it’s important to understand that if your HMO isn’t properly licensed, you may not be able to evict tenants.

HMO Council Tax

Whether or not you or your tenants pay Council Tax for your HMO depends on the tenancy agreements issued. If each occupant living in the property has their own tenancy agreement, you as the owner will be responsible for paying the Council Tax.

However, if your HMO property has only one tenancy agreement covering all of the occupants (with each of their names on it), the tenants will be responsible for paying Council Tax.

HMO landlord insurance

While there isn’t specific insurance designed for HMO landlords, it can still be a good idea for you to get landlord cover. This can cover you for things such as accidental damage to your property or even property owners’ liability insurance – all issues which can affect HMO landlords.

Let us know about your experience with renting HMO properties in the comments.

More guides for landlords

• Illegal subletting – what do landlords need to know?
• How can landlords get a buy-to-let remortgage?
• Energy efficiency guide for landlords – what is an EPC rating?
• Why do I need landlord insurance?