New licensing requirement for owners of houses in multiple occupation

18 September 2018

If your let property has five or more occupants you need to check the new regulations.

Background

According to the Ministry of Housing, there are now 4.5 million households in England and Wales who pay rent to private landlords. Of these 508,000 are houses in multiple occupation (HMOs). However, only 60,000 of these are licensed. In a bid to tackle overcrowding, poor property management and the housing of illegal immigrants the licensing requirement will be extended to cover 177,000 dwellings.

Licensing

Licensing is currently carried out by local authorities. The suitability of a building is assessed by Environmental Health Officers under the Housing Health and Safety Rating System, and the adequacy of the management is assessed under the Management of Houses in Multiple Occupation Regulations 2006.

The landlord has to pass a fit and proper test in order to obtain a licence and they will not be able to obtain one if they have been convicted of:

  •  Fraud or dishonesty;
  • Discrimination;
  • A breach of the Housing Act 2004;
  • Contravention of the Code of Practice relating to the management of HMOs; or
  • If they are an undischarged bankrupt or an illegal immigrant.

What is an HMO?

This can be complex, but the standard test defines an HMO as bedsitting accommodation, shared houses or hostels that contain one or more units that are not a self-contained flat or flats. A flat that is not self-contained is one that shares one or two basic amenities with other tenants; these could be toilet, bathroom or kitchen.

There are some exemptions: buildings owned by local authorities or registered social landlords, student halls of residence, religious communities, and those mainly occupied by owner-occupiers.
Purpose-built HMOs are mostly exempt; the regulations apply mainly to converted buildings.

If you are in doubt as to whether your building requires a licence you can check a number of typical examples at page 22 onwards of this Government consultation paper.

Significant change from 1 October 2018

HMOs are currently exempt from licensing if they have fewer than 3 storeys, and have fewer than 5 occupants. Even if they have 5 occupants or more they are exempt if these occupants comprise only one household or extended family unit.

The change relates to the number of storeys. This exemption will no longer apply, so HMOs, unless exempt for other reasons, will need to be licensed irrespective of the number of storeys. The measure will bring approximately 117,000 currently exempt HMOs under the scope of the Act. These will typically but not exclusively be large houses originally constructed as family residences but since converted to bedsits.

Act now

It currently costs £750 to obtain a licence from Sheffield City Council, in addition of course to the costs of making your property compliant. If you have a building in multiple occupation that will no longer be exempt from 1 October you need to act quickly. Penalties for operating an HMO without a licence include fines of up to £20,000, rent repayment orders and management orders.

If you have any doubts about the categorisation of any of your let properties you should contact your letting agent for advice, or you can contact me at  a.hulse@uhy-uk.com or contact your local UHY adviser. Alternatively fill out our contact form here.