What is an HMO Property? Our Ultimate Guide
Landlords need to be very aware of the regulations and laws relating to HMOs (Houses of multiple occupancy, or house in multiple occupation). The licensing rules around HMOs are complex and stringent, and the penalties for non-compliance can be significant.
What is an HMO Property?
An HMO property is defined as a property where there are at least three people of two or more households sharing a kitchen, bathroom or toilet facilities. A ‘household’ could be a single person, a co-habiting couple or people from the same family living together. It is likely that any landlord with even a medium portfolio of properties will have an HMO in their portfolio.
What are the different types of HMO properties?
What kind of properties are HMOs?
A ‘Large HMO’ is one with more than five tenants, and a ‘small HMO’ is a property with three to four people. Small HMOs sometimes have additional licensing regulations attached to them by local authorities.
The most common type of HMO are houses that have been converted into non self-contained units – the archetypal ‘bedsit’. A large Victorian or period building might have a considerable number of people living in individual rooms but sharing communal facilities. Then there are purpose built blocks of flats that have non self-contained properties within them. Student halls of residence are not usually considered HMOs, and neither are properties managed by local authorities or housing associations as social housing. Mixed use HMOs are properties that combine residential accommodation with retail or commercial units, such as flats above shops.
Who rents HMOs?
HMOs are most typically let to tenants like students, young professionals, temporary and migrant workers. Rental yields can be high with these types of tenants, because there will always be demand in these sectors.
What are the key features of HMO properties?
Each household living in an HMO signs an individual tenancy agreement. This is usually an assured shorthold 12-month tenancy. It will usually only apply to the tenant’s individual room, meaning that the landlord can gain access to the communal areas of the property.
Each person or household’s room will have their own lock, and the bathroom, kitchen and toilet(s) are shared facilities. The property may also have other communal areas like a lounge or garden. The landlord has a duty to provide adequate facilities for preparing food, cleaning and washing clothes, and to ensure that the property is not overcrowded.
What are the Fire Safety Measures for HMOs?
The Fire Safety Regulations came into force in England in 2023. Landlords of HMOs have a duty to inform their tenants of the fire safety procedures that exist within the property (and update them of any changes), and to display fire safety instructions prominently around the property.
Landlords must ensure that all the smoke alarms within the property work, install a suitable fire alarm and fire rated doors. There should be a fire blanket in the kitchen, smoking should be banned inside the property and tenants must be able to open the externally opening doors without a key. Fire extinguishers must be installed.
What are the legal requirements for HMO properties?
Licensing
Mandatory licensing applies to all large HMOs – all landlords with these type of properties must apply for licensing to their local authority, which will inspect the property to ensure it meets safety and quality standards. Small HMOs may be subject to selective licensing. Selective licensing is a system of licensing operated in some local authorities, where the council has greater powers to improve the standard of accommodation offered by private landlords.
Because selective licensing can apply to certain boroughs, wards or even individual streets, landlords of small HMOs may not know whether their property is in an affected area. So all landlords should find out from their local council if they need a license.
Health and Safety Standards
As part of a landlord’s general obligations, annual gas checks and electric safety checks every five years should be carried out. Copies should be sent to the local authority if the HMO is licensed. Landlords should make any repairs that are needed in shared areas. Smoke alarms must be installed on every floor, and carbon monoxide alarms installed for all coal fires and wood burning stoves.
Minimum Room Sizes
Bedrooms in HMOs have to be of a specific minimum size: at least 6.51 m2 for people aged 10 years and above; 4.64 m2 for children under the age of 10, and 10.22 m2 for two people aged 10 or over sharing a bedroom.
Management Regulations
Whether a small or a large HMO, all HMOs are governed by a set of management regulations for landlords. This includes a strict range of guidelines, covering aspects of property management like the upkeep of fixtures and fittings, rubbish disposal, water supply, fire safety and general safety obligations.
What are the benefits of investing in HMO properties for landlords?
HMOs have long been popular with landlords.
Letting a 2, 3 or 4 bedroomed house as an HMO can generate higher rental income for landlords than if the property is let to a single household. Despite the licensing regulations and the increased amount of paperwork and red tape that landlords need to do for an HMO, it is still a lucrative type of tenancy.
Demand is also increasing for HMO properties. The rising cost of living means that more people are sharing properties than ever before, particularly in cities like London. Surging house prices, and the lack of affordable single household tenancies, are encouraging more landlords to convert properties into HMOs. There are tax benefits to doing so, as most costs associated with conversion and maintenance are tax deductible.
What are the challenges with HMO properties for landlords?
While the return on investment can be significant, landlords will have to weigh that up against the amount of administration, management and maintenance an HMO requires. Applying for licences can be time consuming, costly and complex. With more tenants per property, landlords are exposed to greater risk. More things can go wrong, requiring landlords to intervene or get involved with repairs or disputes. Turnover of tenants will be higher, simply because for many people living in this type of accommodation is a short term measure.
How can you get an HMO licence?
The first step is to check if your property requires a licence. If it is a large HMO it will need a mandatory licence. If it is a small HMO (with four or less people) it may be covered by a selective licence. To find out you will need to check with your local council’s housing department.
How much is an HMO licence?
The cost of an HMO licence will vary between local authorities, and the way it is charged. All councils will have a basic application charge. Some might have a scale of fees to cover 1 year, 3 year or 5 year licences. Others may charge landlords per unit of accommodation, or extra for larger properties (eg. more than five bedrooms). It really will depend on your individual area, but landlords should expect to pay at least £1,000 for a licence for one property. Licences need to be renewed annually.
Let us help with your property search
If you have a property to let, we can help with a range of property management services, advice and information about the lettings process. We also offer a free valuation service.