Commercial Alerts

Houses in Multiple Occupation (HMOs)

The introduction of new legislation has dramatic implications for landlords, property managers and occupants of HMOs.

The Housing Act 2004 made significant changes to the housing functions of local authorities and the handling of HMOs. These include the requirement for all privately rented HMOs to be licensed.

The relevant part of the Act took effect on 6 April this year but there is a three-month grace period before penalties for not having the necessary licence will be imposed.

It is a criminal offence not to apply for a licence or knowingly to allow the HMO to be occupied by more tenants than it is licensed to hold. In each case a fine of up to £20,000 may be imposed.

What is an HMO?

The statutory definition is set out at great length in the Act and is very complex. Those which are subject to compulsory licensing are those which are three or more storeys high, with five or more people in more than one household and sharing amenities (cooking, toilets, and bathrooms).

What constitutes a household?

The definition under the Act means that those who are married to one another or living together as married, or anyone who is related to one another, will be a household. Thus, for example, six people living in one house with two people married to each other would constitute five households (the couple is one household and the four others constitute four separate households).

Conditions of the Licence

Before the local authority can issue a licence they will need to be satisfied that the proposed licence holder is a fit and proper person, that the management arrangements for the property are satisfactory, and that the property is suitable for the proposed number of occupants.

Whether or not a person is “fit and proper” will involve consideration of any criminal record relating to violence, sexual offences, drugs or fraud as well as any prior contraventions of landlord and tenant law.

The question of management standards is defined by each local authority. For example, if the landlord lives a long distance away from the property the local authority may determine that this is not conducive to them carrying out the necessary management tasks and may insist that they employ a more local manager to deal with day-to-day management or maintenance issues.

As to the suitability of the property this is also a matter for judgement. For example, if a property has only one bathroom but has six tenants the local authority may consider that inappropriate and either deny the licence or put certain conditions upon it. These discretionary conditions would require extra amenities to be installed within an agreed timescale. Alternatively, they might choose to grant a licence for a lesser number of occupants.

Certain conditions are mandatory and must be included in any licence. These would cover such issues as the safety of occupants and the provision of safety certificates with regard to gas, electrical installations and smoke alarms. Mandatory conditions may also relate to the maximum number of occupants in respect of each property, and require that every occupant is supplied with a written statement of terms on which they occupy the premises.

Terms and Cost of Licence

Application for a licence must be made to the relevant local authority. When the necessary conditions are satisfied the authority must grant the licence, which will generally be for five years but may be for a shorter period.

The licence will be revoked on the death of the landlord, or the expiry of the licence or because of breach of the licence. Where a licence is refused the local authority must give reasons for their refusal and allow a 14 day period during which the applicant may appeal to the Residential Property Tribunal.

A fee is payable on each application.

Offences and Penalties

Sanctions are both civil and criminal. Operation of an HMO without at least applying for a licence is a criminal offence and subject to a fine of up to £20,000. Allowing an HMO to be occupied by more tenants than it is licensed for will attract a similar penalty.

Civil sanctions include rent repayment orders where the local authority can reclaim from the landlord any housing benefit monies paid out on behalf of any tenants.

Tenants can also apply to reclaim rent paid to landlords during an unlicensed period and unlicensed landlords can be prevented from obtaining possession at the end of a shorthold tenancy.

Further Information

This is a complex set of regulations and we would counsel that landlords take legal advice if in any doubt as to their rights and obligations under the legislation.

Application for a licence has to be made before 1st July 2006 to avoid risking a £20,000 fine (per premises)

Please call Graham King or Robert Hill on 01494 525941 if you need further help or advice.