If you’re a private landlord looking to maximise your rental income, letting out properties to multiple tenants might seem appealing. But to rent out your house to tenants from different households, you’ll likely need to apply for a HMO licence.

Find out what exactly constitutes an HMO, how to apply for a HMO licence, how much it costs, and how to avoid obtaining an HMO licence altogether.

What is HMO?

HMO stands for "houses in multiple occupations," a rental property shared by multiple households. Single persons, families or cohabiting couples are all examples of households.

Legally, a property is considered an HMO when it's occupied by at least 3 tenants from more than 1 household sharing some of the facilities.

For instance, a property IS an HMO in these cases:

• 3 friends rent a flat together and share a bathroom and kitchen (3 separate households)
• a couple and their friend rent a flat with a shared kitchen (2 separate households)

A property is NOT an HMO in these cases:

• 2 friends rent a flat together
• 3 friends share a house with private kitchens, bathrooms and toilets (no shared facilities)
• a couple is renting a flat together with a family relative (3 people from 1 household)

Who is exempt from an HMO licence?

The following types of buildings don't need an HMO licence:

• buildings managed by local housing authorities, registered social landlords, police or fire and rescue authorities, or health service bodies
• buildings already regulated by other laws
• buildings mainly used for prayer, education, or helping people in need.

HMO licensing

There’re 2 types of licensing for HMOs in the UK: mandatory HMO licensing and additional HMO licensing.

Mandatory HMO licensing: at least 5 tenants

In England or Wales, you only need a mandatory HMO licence when renting out a large HMO.

A property is a large HMO if:

• it's shared by 5 or more people from more than 1 household
• at least some of the tenants share facilities such as a bathroom, toilet or kitchen
• at least one of the tenants pays rent

Additional HMO licensing for small HMOs

Smaller HMOs don’t need the mandatory HMO licence but might require additional HMO licensing. Check with your local housing authority as they decide if the additional HMO licensing is required for an entire district or specific areas. This licensing ensures that properties are well-managed and meet safety and amenity standards.

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Even if you don’t require an HMO licence, check with your local council if other licensing schemes apply. For example, selective licensing might be in place in areas of low housing demand.

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Legal requirements for mandatory HMO licence

You need a separate HMO licence for each large HMO you manage. To qualify for a licence, you must meet the spatial and safety requirements and have no criminal record or breaches of landlord law.

The bedrooms should meet the minimum size requirements:

• 1 tenant over 10 years old: 6.51 sqm or larger
• 2 tenants over 10 years old: 10.22 sqm or larger
• 1 tenant under 10 years old: 4.64 sqm or larger

While these are the minimum bedroom size requirements across the UK, they can increase per local authority.

In terms of safety requirements, you must: send an updated gas safety certificate to the council every year install and maintain smoke alarms provide safety certificates for all electrical appliances upon request

The council may impose additional conditions on your licence, such as upgrading your facilities to meet a higher standard. If you have objections to the conditions set, you can appeal to the First-Tier Tribunal.

How to apply for an HMO licence

To apply for a HMO licence in the UK, you must contact your local council and fill out an application form online or in person.

Before you begin your application, gather documents that confirm the following information:

• facilities available on the property, including the number, locations and sizes of bedrooms, bathrooms and kitchens
• information about the structure of the property
• safety equipment and certificates in place
• names and addresses of any persons or organisations with interest in the property, such as freeholders, leaseholders, managing agents, or mortgage providers.
• your payment card details
• date of birth of the appointed licence holder
• a criminal background check.

Once you've submitted your application and paid a fee, the council may request additional information or inspect the property. If your application is successful, you'll receive an HMO licence, which will typically be valid for up to 5 years.

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The specific requirements for obtaining an HMO licence can vary depending on the local council. Check with your local council before applying.

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How much are the HMO licence fees in the UK?

HMO licence fees are set by the local council and vary from around £300 to over £2,000 in total. This fee usually consists of a non-refundable processing fee (paid when applying) and an enforcement fee (paid before a licence is issued). Depending on your local council, you might be eligible for certain discounts on HMO licences.

Most councils will charge a single fee per property. However, some local authorities charge based on the number of bedrooms.

A renewal fee, which is typically lower than the initial application fee, must be paid every 5 years or when the licence expires.

Can an HMO licence be refused?

If you fail to meet the conditions of the HMO licensing conditions, your application for a licence may be refused and the fee won't be refunded. The council will always explain their decision to you, and you can try to convince them to change their decision within a month. Alternatively, you can use a different licence holder, such as a property manager, to apply for your licence.

However, if the council doesn't find you a fit and proper person, they may issue an Interim Management Order (IMO), which allows them to take over the management of the HMO property.

What is the fine for renting out an unlicensed HMO?

There is a common misconception that the maximum penalty for renting out an HMO without a licence in the UK is £20,000. But in reality, there is no limit on the fine. Some councils, such as Barnet, have imposed hefty fines totalling £49,900.

Moreover, your tenants have the right to request a Rent Repayment Order for up to 12 months' rent, which would require you to reimburse a portion of the rent you received while the property was unlicensed. Failing to obtain a licence means that a Section 21 notice may not be valid, making it difficult to evict tenants.

How to avoid an HMO licence

Acquiring and renewing an HMO licence requires some effort and costs money. If you don’t want to do this, there’re ways to legally avoid an HMO licence.

Consider renting out to just 1 or 2 tenants or a family to avoid the hassle of HMO licensing altogether. In this case, you only need to ensure that your property suits the number of occupants and meets safety requirements.

If you decide to rent out to multiple tenants, you can avoid getting an HMO licence if each household has self-contained facilities.

If renting out to 4 or fewer tenants, you don't need a mandatory HMO licence. However, it's important to remember that depending on the local regulations, you may still need an additional HMO licence.

This article is for informational purposes only. Please consult the appropriate authorities or a lawyer for legal advice.

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