Houses of Multiple Occupation: Types of HMO Licensing

Under the HMO licensing regulations there are 3 types of HMO licensing these are:

  • Mandatory Licensing; and
  • Additional Licensing
  • Selective Licensing

Mandatory Licensing

Where the property has three  or more stories and is occupied by five  or more persons and  more than one household sharing facilities, the property must have a Mandatory HMO licence.

Additional Licensing

Additional Licensing is where the Local Authority imposes an HMO regime on properties within a certain area even though those  properties may not meet the requirements for Mandatory Licensing.  Additional Licensing may be imposed on properties whereby there are several household sharing facilities and those properties are not being managed adequately and are giving rise to issues such as antisocial behaviour or poor housing standards which have a noticeable effect on those living within the property or in the neighbourhood in general.

Selective Licensing

Selective Licensing may apply to properties which may not normally fall within the definition of an HMO and may include residential properties which are only occupied by one household.  Although not strictly speaking, a HMO licence we have included Selective Licensing within this article because the  property that has to be licensed under the Selective Licensing regime the property will have to be managed to the same standards as an HMO.

Selective Licensing of privately rented residential property may be imposed by the Local Authority as a tool to limit or control the amount of privately rented property in an area , for example if they consider that a particular area has too many bedsits and short-term lets which makes the area less suitable or attractive for families, or the prevalence of rental properties may having a detrimental effect on the value of the properties within the area.

Selective Licensing is becoming more and more common within the cities and boroughs of England and Wales and it is important that if you are considering purchasing a buy to let property that you check with the Local Authority whether or not the Selective Licensing regime applies to the area in which the property is situated.

Applying for a Licence

If the property meets the criteria For Mandatory Licensing (see above) or is in an area which has been designated for Additional Licensing (see above) the owner of the property must apply to the Local Authority for an HMO licence before they can let the property out to tenants.

An application is normally made by the owner or landlord of the building but can be made by a person managing or controlling the HMO (provided the landlord or owner of the building has been notified of the application)

An HMO licence will last for a maximum of five years although the council may in certain limited circumstances grant a licence for a shorter period. The HMO licence is not transferable which means that if the building is sold the new owner will have to reapply for an HMO licence for the building.

When applying for an HMO licence you must notify the local authority of all the “Relevant Persons” being all those who have a legal interest in the HMO.  Full details of all the Relevant Persons must be given to the council within the application. Examples of Relevant Persons are:

  • The landlord (if different from the applicant)
  • The owner of the HMO if the landlord if the building is Leasehold an example may be a head lessor or a superior head lessor (owner of the freehold)
  • Any person occupying the building who has a long leasehold (it should be noted that you do not need to notify a tenant who is occupying  under an AST)
  • Any mortgagee
  • Any proposed licence holder (unless you are the applicant)
  • The managing agent who will be managing the property
  • Any other person who has agreed to be bound by the conditions in the HMO licence

Considerations when granting a HMO Licence

When deciding whether or not to grant the HMO licence the council will look at several factors not only in respect of the building but also in respect of the landlord or  those who will be managing the property/building.  Factors may include:

  • The suitability of the building/property for the number of proposed or existing occupiers
  • The suitability of the facilities to be shared by the tenants ( these being toilets, bathrooms and cooking facilities).
  • Whether the landlord and/or the managing agent is able to pass the “fit and proper” test.  This relates to whether the landlord or managing agent has any relevant convictions or has acted in such a way as to indicate that they were unsuitable to manage an HMO.
  • The suitability of the proposed arrangements for the management of the building’s/property.

In circumstances where the Local Authority does not consider the applicant to be a fit and proper person to hold an HMO licence they may agree that another party such as a managing agent may hold the HMO licence for that particular building/property.

Failure to apply for an HMO licence

  • Failure to apply for an HMO licence for a building/property which requires an HMO licence is a criminal offence.   Sanctions that may be imposed include:
  • A fine of up to £20,000 on conviction
  • The imposition of an Interim Management Order (“IM0”) which has the effect of transferring the management (and therefore the revenue) of the property to the local authority for a set period of time (as stated in the IMO) after which a final management order “(FMO”) may be made.
  • If the landlord has not applied for an HMO licence  and a HMO licence is required they will not be able to use the Accelerated Possession Procedure under Section 21 of the Housing Act 1988.
  • A Rent Repayment Order may be made by the Residential Property Tribunal whereby the local authority can recover all the housing benefit it has paid in respect of the HMO during any period when it ought to have been licenced but was not licensed, up to a maximum of 12 months.   The tenants within the building may make a separate application to the Residential Property Tribunal for a Rent Repayment Order in respect of the rents that they have paid (minus any housing benefit).

Exemption from HMO Regulations:

Certain buildings are automatically exempt from being designated as an HMO even if they pass the HMO Tests these are:

  • Buildings Controlled All Managed by the Resident Social Landlords and Housing Associations
  • Buildings Controlled or Managed by the Police, Fire Brigade or Health Service Body
  • Buildings Regulated by Other Enactments
  • Set University/College Accommodation by Students
  • Buildings Occupied by Religious Communities
  • Any Building Occupied by 2 Persons Who Form 2 Households

Applying for an Exemption

It is possible to apply to the local authority to have a HMO exempted from licensing on a temporary basis.

But making an application for temporary exemption from licensing the landlord/manager will need to satisfy the local authority that they are taking steps to ensure that either the building will cease to be an HMO or that it is a building which will no longer be subject to licensing.  Temporary exemption can only be granted for a minimum of 3 months but can be extended in exceptional circumstances.

A temporary exemption may be granted in the case where the HMO licence holder dies whilst the licence is still in force.  The temporary exemption in this case is usually for a period of 3 months during which period the licence holders personal representatives may apply for a grant of an HMO licence in their own right.

Management Orders

If a Local Authority is unable to grant a licence or if it revokes a licence (for example on the basis that the HMO is not being managed satisfactorily or is not suitable to have a number of occupiers and there is no reasonable prospect of granting a licence in the near future) the Council must make an Interim Management Order.

An Interim Management Order transfers the management of HMO to the Local Authority and the occupiers of the HMO will be required to pay their rent to the Local Authority.  The local authority takes over responsibility for the management of tenancies and the maintenance of the HMO.  An interim management order cannot be made for a period of more than 12 months.

If at the end of the 12 months the Local Authority is still unable to grant an HMO licence, they will impose a Final Management Order. The Final Management Order will last for a maximum of 5 years during which time the management of the HMO will continue to be the responsibility of the Local Authority and rents will continue to be paid to the Local Authority.  At the end of the Final Management Order period the Local Authority must either grant an HMO licence or make a new Final Management Order (unless the building has ceased to be a licensable HMO).

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