1.0 Introduction To Co-Living

Simon Zutshi Asks Has The Energy Crisis Killed HMOs?

Let us get right to the fundamentals of what is a Houses Of Multiple Occupation (HMO)?

Here is the official publication about what is an HMO, and what you have to do if you want to run one.

https://www.gov.uk/house-in-multiple-occupation-licence

You cannot set up an Houses Of Multiple Occupation without official permission, you need a license and also you need planning permission for such a use of a building.

2.0 Definition Of Houses Of Multiple Occupation

A houses of multiple occupation (HMO) is a property rented out by at least 3 people who are not from 1 ‘household’ (for example a family) but share facilities like the bathroom and kitchen. It’s sometimes called a ‘house share’, or alternatively ´Co-living´.

If you want to rent out your property as a house of multiple occupation in England or Wales you must contact your council to check if you need a licence. Some councils have set up Article 4 Areas, which restrict the number of HMO´s, and we will review later in this article.

You must have a licence if you’re renting out a large HMO in England or Wales. Your property is defined as a large HMO if all of the following apply:

• it is rented to 5 or more people who form more than 1 household
• some or all tenants share toilet, bathroom or kitchen facilities
• at least 1 tenant pays rent (or their employer pays it for them)

Even if your property is smaller and rented to fewer people, you may still need a licence depending on the area. you must check with your council before you implement a plan of action related to an HMO.

Let’s start with the basics. HMO stands for houses in or of multiple occupation. Put simply, a rented house shared by multiple people or ‘households’ which can consist of a single person, families or cohabiting couples. In order to work out if your property is HMO you will need to know about the different types of HMO housing.

There are several types of HMO properties:

• A house or flat shared by three or more people from at least two households with shared communal areas.
• A home lived in by the landlord as the owner-occupier that has more than two tenants and in which some areas are shared.
• Since The Housing Act 2004, some student accommodation comes under HMO. Privately owned property shared by students, who are each treated as a separate household and have exclusive use of the accommodation is an HMO.
• A building or part of a building made solely of converted self-contained units which do not meet the conversion requirements of the Building Regulations 1991, and in which more than a third of the units are occupied by short tenancies. This is also referred to as Section 257 Houses Of Multiple Occupation .

To be considered an Houses Of Multiple Occupation a property must…

• Be shared by more than two people.
• Be the main residence of the tenants.
• Have rent paid by the tenants.

The key thing to remember is that properties tend to be defined as Houses Of Multiple Occupation if the people living there are not related and share toilet, bathroom or kitchen facilities. Separate tenancy agreements are also a good clue.

2.1 Restrictions On HMO´s

A licence is valid for a maximum of 5 years.

You must renew your licence before it runs out.

You need a separate licence for each HMO you run.

2.2 Conditions On HMO´s

You must make sure that the following apply:

• the house is suitable for the number of occupants you plan should occupy it (this depends on its size and facilities)
• the manager of the house – you or an agent – is considered to be ‘fit and proper’, for example they have no criminal record or breach of landlord laws or code of practice.

You must also:

• send the council an updated gas safety certificate every year
• install and maintain smoke alarms
• provide safety certificates for all electrical appliances when requested

The council may add other conditions to your licence, for example improving the standard of your facilities. They will let you know when you apply. Usually this will be informed by the council´s Houses Of Multiple Occupation licensing officer or another suitably empowered council official.

If you disagree with any conditions the council sets, you can appeal to the First-Tier Tribunal.

You should apply for the licence yourself, but if you use a managing agent they can apply for you.

You’ll be charged a fee which is set by the council.

2.3 Fines And Penalties For Unlawful Use Of HMO´s

You could get an unlimited fine for renting out an unlicensed HMO.

This is a very important point and should act as a deterrent to anyone who takes the subject of co-living lightly. You have obligations as an HMO landlord, as well as the opportunity to make profit.

3.0 A Helpful Guide for HMO Landlords

3.1 Should You Do a Tenant Reference Check?

Clearly, because the tenant is your source of income, it is essential that you take up references on all tenants, otherwise you may have problems collecting the rent.

If you are not collecting rent from a tenant, sooner or later you will have to evict them and get in someone who will pay the rent. See the later paragraphs about eviction.

HMO properties continue to be an appealing choice for landlords as they offer lots of advantages

For one, they are often more profitable than other types of rentals.

However, these benefits come with added demands put in place to protect renters. How can you understand and deal with these requirements as an Houses Of Multiple Occupation landlord?

This helpful guide covers most of what you need to know.

3.2 What are the Legal Responsibilities Involved in Being A Landlord Of HMO Properties?

As the landlord of a multiple occupancy home, you are subject to additional legal responsibilities. It is important to understand these legal obligations as failure to do so can result in some hefty fines of up to £5000, and even unlimited if non-compliance continues (see above).

Here’s a list of the legal requirements for you as an HMO landlord:

1. You must display a notice in a prominent position within the property detailing your name, address, and contact number as the Houses Of Multiple Occupation licensee.
2. You are obliged to keep the property well maintained and also keep professional health and safety inspections in line with safety rating systems are performed. Remember to keep good records of all inspections and work done.
3. You must ensure the property is not overcrowded.
4. You must adhere to all current fire safety standards by providing working smoke alarms and heat detectors in kitchens as well as keeping fire escapes clear. A fire risk assessment needs to be carried out in accordance with The Regulatory Reform (Fire Safety) Order 2005. If the assessment is not performed to the required standard and copies are not kept, the landlord is liable to face criminal charges in the case of harm or death to tenants from fire.
5. You must maintain a clean water supply and proper drainage, which includes protecting pipes from frost.
6. You must arrange and Issue inspections of electrical equipment at least once every five years and keep a record of the reports. You must upgrade to current (5th Edition of the IEE Regs).
7. You must supply a gas/electrical safety record within a week if requested by the council. If you rent bedsits you also need to comply with the Heat Network Regulations.
8. You must maintain clean and safe communal areas
9. You must ensure that the exterior and interior of the property is maintained in good order.
10. You must provide the minimum number and location of shared bathrooms and kitchens. Advice on the local requirements can be found at your local council’s Environmental Health Department.
11. You must arrange and ensure regular refuse disposal.
12. you must have an up-to-date legionella risk assessment.
13. You must ensure you have the correct landlord insurance. An Houses Of Multiple Occupation property requires a specific insurance policy. You also need to ensure that tenants do not sublet as most insurers won’t cover this.

It’s not just landlords who have to follow the rules. Tenants are also under the obligation to:

• Allow the landlord reasonable access and information so they can complete your duties.
• Act in a responsible manner so as not to damage items it is the landlord’s duty to provide.
• Follow refuse and fire-safety guidelines required by the landlord.

3.3 What is a HMO Licence?

Another thing to consider as an HMO landlord, is whether your HMO property needs a license. Some multiple occupancy HMO’s legally require a license to make sure the property is being managed correctly.

You will need a license if:

• Your property is higher than three stories and has five or more occupants from two or more households. This is called mandatory licencing.
• The council believes a significant number of HMOs are not being managed properly. This is additional licencing and the conditions depend on the local council.

If you’re still not sure if your HMO property needs a licence, you can check with your local authorities. Some councils require all private landlords to apply for a license so it’s worth a check to avoid any unwanted fines.

It is a fair statement that the sector is becoming more and more highly regulated, and there does not appear to be any way back from that situation

3.4 How to Apply for a HMO Licence

A HMO license application form can be requested from your local council and the application can be made by a landlord or property manager. There is normally a fee, the amount of which is set by individual local authorities and it is non-refundable regardless of the success of the application. Once issued, the license will last up to five years.

You will need to inform several ‘relevant persons’ about your application and provide their details to the council.

Here are some of the things councils look at when making a decision whether to grant an HMO license:

• If the HMO property accommodates for the number of people living there and the shared facilities are suitable.
• If the landlord or managing agent are ‘fit and proper to take on the role. This can include looking at criminal convictions and previous unlawful discrimination as a landlord.
• Since 1st October 2018, councils also check that bedrooms meet the minimum size requirements.

3.5 HMO License Refusals

If the council refuses to grant you an HMO license, it may be possible to use a different license holder such as the property manager. You will usually be granted a month if you decide to try and persuade the council to change their decision. The council are obliged to give you the reasons behind their decision.

The council also has the power to revoke a license if they believe the conditions are being violated. You will have two weeks to respond and a month to appeal to a Residential Property Tribunal if required to do so.

Breaking the terms of the license also risks fines of up to £5000. If the conditions of your license have been broken and your tenant gets Housing Benefits, the council can apply for a Rent Repayment Order and reclaim rent paid for the time the HMO was unlicensed.

As a landlord, you are also able to revoke your license if you wish to change license holders or cease to run the property as an HMO.

It is a criminal offense to disobey licensing laws and without a required license you are at risk of repaying up to twelve months’ rent and fines of up to £20,000!

Without proper licensing, a Section 21 Notice will not be valid and you may be unable to evict tenants who default

Hopefully, with the help of this guide, you now have all the information you need to be a responsible, capable HMO landlord and you won’t get caught out by any hidden legal requirements. That being said, managing an HMO property isn’t always easy. With so many tenants under one roof, vital tasks like managing inventories can prove onerous.

4.0 Alternative Use Options

If you no longer wish to operate your property as an HMO, then talk to Alpus and we may be able to suggest a different usage and may be interested to acquire your property from you for investment or development. Call Alan on 07539 141257 or 03332241257 or schedule a call at calendly.com/alanje, or drop an email to alan@alpusgroup.com.