A House in Multiple Occupancy (HMO) is a very popular type of property investment where a landlord buys a building with the intention of renting it out to multiple tenants on an individual basis, rather than to one household (usually a couple or family).
Unlike with traditional buy-to-let properties, HMOs are rented out on a bedroom-by-bedroom basis to tenants individually. This benefits the landlord as it allows them a greater rental profit overall, as margins are made on each tenant, and tenants benefit from more affordable housing.
Due to its affordability, HMOs are particularly popular among students and young professional tenants.
An introduction to HMO Licencing
HMO Licences are required for any landlord who wishes to rent out their property as an HMO to 5 or more tenants. The licencing laws also apply to HMO landlords with 3 or more tenants in bigger cities in the UK.
The licencing laws were introduced to protect tenants from unscrupulous landlords from buying property, converting all available rooms into “bedrooms” and then renting it out to as many tenants as possible.
Given that the laws are there to protect tenants, HMO licencing regulations cover:
- The minimum size of bedroom in the building
- The general level of health and safety in the property
- What amenities are available to tenants in the home’s communal areas
- What the landlord’s intentions are in renting out their property as an HMO
You apply for an HMO licence through your local council. The application can take up to 9 months to be completed so it is worth getting it started well in advance.
What are the minimum bedroom sizes for an HMO?
The minimum required bedroom sizes for an HMO to pass the licencing regulations depends in part on who the room is being rented out to.
The minimum sizes run as follows:
- Bedrooms rented out to a single tenant over the age of 10 years old must have at least 6.51m2 of floor space
- Rooms rented out to two tenants (double rooms) require a minimum floor space of 10.22m2
- Single rooms rented out to a tenant under the age of 10 needs to have a minimum floor space of 4.64m2
In this context, “usable floor space” is defined as an area of flooring where the floor-to-ceiling distance is 1.5 metres or more. If the bedroom in question has a slanted ceiling, as can often be the case with top floor bedrooms, then it might be worth measuring out the room yourself before you apply for your licence.
What are the health and safety requirements for an HMO?
Health and safety requirements for HMOs are more stringent than for traditional buy-to-lets because of the assumed additional risks that are incurred when tenants who are unrelated live together.
The majority of health and safety requirements for HMOs concern fire safety. A building needs to have a clearly designated fire exit that can be easily accessed from every room in the building.
The room in which the designated exit sits needs to be fitted with fire doors to ensure that it can be reached even during a fire.
All the communal areas of the property need to be fitted with interlinked smoke alarms, and kitchens require heat detectors and fire extinguishers.
A written fire safety plan needs to be present in a communal area of the home, and this needs to be understood and agreed upon by all tenants. Reasonable adjustments need to be made for any tenants with disabilities that might impact their ability to evacuate the building during a fire.
Electrical safety checks need to be officially carried out every 5 years, with gas safety checks carried out annually. Documented evidence of this needs to be made available upon request of your local council.
What general amenities must an HMO landlord provide for their tenants?
Landlords are required to provide the means for their tenants to live in “clean and decent conditions”. Although this phrasing is rather vague, it generally equates to the following:
- There must be at least one shower and toilet for every 3 tenants in an HMO.
- Buildings require a hob, oven, adequately sized fridge and washing machine in their communal areas.
- An outdoor waste disposal system, that is regularly collected, needs to be provided.
- Houses must be adequately heated.
Landlords should note that a dedicated living room is not required by HMO licencing laws.
The provision of heating is a topic that has come under a lot of scrutiny recently, with the BBC reporting a case where a landlord kept their thermostat in a lock-box. It’s a good idea to speak to your tenants about what reasonable heating bills are for each month of the year, and then agreeing for the tenant to pay the excess if these are greatly exceeded.
As communal areas of HMOs are not technically being rented out to tenants, Landlords and lettings agencies are also required to make repairs to these areas and their contents promptly upon request.
What tests must a landlord themselves pass to obtain an HMO licence?
To obtain an HMO licence, a landlord needs to pass a “fit and proper persons test”.
This essentially boils down to a criminal history check, so if you have no criminal record to speak of then passing it should be little more than a formality.
If you do have a criminal record, then you may still pass the fit and proper person’s test, as each case is judged individually. The tests are designed to prevent landlords from either exploiting their position of power over tenants, or from using their HMO to facilitate criminal behaviour.
Therefore crimes that are financially exploitative in nature, or involvements with organised crime, will make the passing of a fit and proper persons test less likely.