A Guide to HMO Rules for Landlords
With the rules for House in Multiple Occupation be somewhat similar to that of a traditional single let, new or accidental landlords may be forgiven for glazing over the essential differences in HMO rules and regulations. However, these differences are anything but subtle, with the repercussions of failing to comply being severe.
What Is a HMO?
The term HMO or House in Multiple Occupation is not exclusive to the private rental sector. A property is considered a house in multiple occupation if under this single household there are a minimum of three tenants that also share common household facilities such as a bathroom, toilet and a kitchen. Under this vague ruling there are many types of property that can be deemed to be a HMO including shared houses and lodgings, hostels, private halls, a block of flats and in some cases even bedsits. With this being said there are further thresholds for a house in multiple occupation, as of at least five tenants reside in the property as at least two households, whilst sharing the expected household facilities, this would meet the criteria for a ‘large HMO’.
Of course, this does still leave some room for interpretation for what can be defined as a household. A property may contain many tenants, but it’s essential to know how many household are in the rental. If the occupants of the rental property live together, such as a family, then this would be considered a household.
It is important to note that with the implementation of The Housing Act 2004 some properties that are let to students as accommodation may fall under the HMO bracket, with any privately owned property that comprises multiple households of student occupants hitting this mark. So what is a house in multiple occupation? Well, as established a good general rule of thumb is if the property has multiple tenants that live separately whilst also sharing household facilities, this will be a HMO.
What is a HMO License?
Not all landlords that host tenants in a HMO will be required to obtain a license. However, if the rental property in question is over three floors tall and contains more than four occupants across multiple households then the landlords will be legally obligated to get a HMO license. To side with caution, it is best for landlords to check with their local authority if they are required to apply for a HMO license before renting out the property, as if the local council upholds this ruling then the landlord can expect to be fined.
If required, once the application for a HMO licence is made to the council by the landlord a fee is typically paid to the authority. At this point the council will evaluate if the rental property adequately accommodates for the number of tenants it comprises, affording them rooms that meet the minimum size requirements introduced in 2018, and if the landlord is suitable to manage the property. If the application is approved then the property owner will not have to make another request for a HMO licence for another five years.
If however, the application for a license is rejected by the council the landlord will be provided with four weeks in which to appeal the response, arguing against any reasoning the council offer behind their decision. With this being said if the property fails to meet the required standards the local council could issue an interim Management Order or IMO. This order will allow the local authority to take on the responsibility of managing the property instead of the landlord for up to one year. As the council will be in possession of the rental property they are therefore permitted to enact the same powers and responsibilities a tenant would expect from their usual landlords. This will result in the council potentially conducting maintenance work on the property, and even collect rent from the existing and new tenants, using these funds at their own discretion. If at the end of the established period for the IMO the issuing authority is still not sufficiently please with the rental property they may issue a Final Management Order or FMO, allowing them to further possess the property for up to five years.
If a HMO license has been issued and the landlord is suspected of breaching the conditions established by the local authority, they are able to revoke the license, alongside a potential fine of up to £5000. Deciding to establish a rental property without a HMO license can bring with it significant consequences, landing the negligent landlord an order to repay any rent taken from the tenants and fines of an unlimited amount.
Fit and Proper Persons Test
If a property owner wishes to obtain a HMO license for their property they must first pass a Fit and Proper persons Test. This mandatory assessment was introduced with the Housing Act 2004 and is intended to remove any neglectful or incompetent landlords from the rental community before thy have an impact on multiple tenants’ lives. When putting a landlord or property owner through the Fit and Proper persons Test, the appropriate local authority will assess any information detailing the landlord’s involvement in criminal activity such as fraud, drugs or violent offences. Similarly, if the landlord is found to have committed any violations of housing law or has a proven historical record of being a poor landlord then they will also fail the test. Landlords are also able to fail this screening process if they have been found to implement discriminatory business practices or that their properties are regularly associated with antisocial behaviour. It is worth pointing out that simply having a past criminal conviction will not be enough for a landlord to automatically fail the screening process; rather the local authority will evaluate the cause of the conviction, the length of time that has passed since the event, what the risk is of the offence being repeated, and the impact the offence has on the individual’s ability to be a landlord.
Tenant Complaints in a HMO
Unfortunately, as with many things that involve revenue, shortcuts are occasionally taken and HMO’s can be an appealing target for landlords more concerned with cashing in on having multiple occupants than providing a habitable space for their tenants to live. Whilst this can of course be a nightmare for the tenants currently residing in the property, it is encouraged that an open discussion is had between both parties about the responsibilities that were outlined and agreed by both parties in the tenancy agreement. If after this discussion and perhaps further correspondence the HMO property owner is still showing reluctance to address the issues raised by the tenants, then a complaint can be made to the local councils Environments Health department.
The local authority will then commence an inspection of the property assessing the integrity and habitability of the property through the Housing Health and Safety Rating System, or HHSRS. The examination will reveal if the property is fit to be currently occupied, with the assessors evaluating any infestations, hazardous installations, mould, and significant structural weakening and decay.
If the local authority concludes that the property is unfit the landlord can expect to face fines reaching up to £20,000, alongside the aforementioned Interim Management Orders and Final Management Orders, relinquishing possession of the rental property from the landlord for up to five years.
Aside from the HMO property failing to satisfy all of the necessary health and safety requirements for a rental property, tenants are also able to report a landlord to the local authority if the property is poorly manages, has well over the suitable number of occupants living inside, or if the property is being rented out without a current HMO license.
Electrical Safety Inspection Reports for HMO’s
It goes without saying that landlords of course have a responsibility and legal obligation to ensure that their rental property is safe for occupants during a tenancy period. To this end, the Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020, established that landlords in England have the Electrical installations inspected by a qualified electrician every five years. The assessment involves the inspection of the fuse boxes, plug sockets and other electrical fittings and outlets across the rental property. If the electrician find no hazards or faults in the rental then the landlord will be provided with and Electrical Installation Condition Report or an EICR, detailing the authenticity of the inspection and its findings. A copy of this report must be provided to the current tenants within 28 days of the test taking place.
HMO Fire Safety Regulations
Due to the increased number of occupants within a HMO property the risk of a fire and the potential for the damage it can sustain is far higher. This places the fire safety regulations for a HMO property at a far more stringent level that a smaller let. Whilst the specific fire safety regulations can see some slight variety between local authorities the tradition requirements demand the following. HMO’s tend to need the installation of smoke and carbon monoxide alarms, with the larger properties requiring a fire alarm system with a central panel. Fire blankets and extinguishers will also be expected in each household, with fire doors being installed throughout the building.
HMO Gas Safety Regulations
With the introduction of the Gas Safety Regulations in 1998, it became the legal obligation of all landlords to ensure that their rental properties contained gas appliances that were safe to operate, alongside flues and pies that were in a good state of repair. A certified Gas Safe Engineer must inspect the rental property each year, issuing the landlord with a Gas Safety certificate one the inspection is complete. Landlords are required to provide the current tenants with this documentation within a 28 day timeframe once the gas inspection has taken place. The property owner will also need to offer the gas safety certificate alongside their application if their local authority demands they have a HMO license for their property, with the updated results also being provided each year.
Do Hmo’s Have a Higher ROI?
Perhaps one of the greatest incentives for a landlord to consider adopting a house in multiple occupancy as their rental is the significantly higher returns they can provide when compared against a traditional let. Traditionally, the rental yield landlords can enjoy on a HMO property have been found to be as much as three times higher thanks to the increased occupancy of the property. The landlord of the HMO can also greatly benefit from the massively increased financial security that a HMO provides. With the property containing multiple households, if one were to relocate the landlord is far less exposed to the hardship of void periods as they are still receiving regular payments from the remaining occupants. Similarly if a tenant was to begin falling behind on their rent and accumulating rental arrears, this too would have less of an impact on the landlord.
As the physical size of a HMO property is naturally larger than the typical let, although the expenditure associated with upkeep and remedial work may be higher so too is the amount of business expenses the landlord is able to claim back on their annual self-assessment tax return.
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