HMOs can be an attractive option for landlords, as they typically generate higher rental yields, at 7.0% on average vs. 5.8% for landlords without HMOs.* However, there are cons that come with the pros, such as higher running costs. HMOs cost an average of £21k a year more to manage than non-HMOs.*
There are also a lot of regulations that HMO landlords must follow in order to be compliant, we’ve put together a round-up of the key things HMO landlords, or those thinking of becoming one, need to think about. To successfully rent out a compliant HMO, one of the first things you need to understand as a landlord is how the government and your local authority defines a HMO, whether a licence is required or not and if you require planning permission.
What is an HMO?
The UK government defines an HMO as a property that is let to three or more tenants who form two or more separate households and share facilities such as kitchen, bathroom and toilet. The government classifies an HMO as any home where individuals from different households are living together in the same building and sharing facilities. An HMO is classed as:
- at least 3 tenants live, forming more than one household
- and there is a shared toilet, bathroom or kitchen facilities for all tenants
If your property has two tenants that are unrelated, it’s not an HMO. Any building, or part of a building, which is occupied by just two people cannot be an HMO, even though those individuals are unrelated. For premises to be an HMO, there must be at least three unrelated people living there.
Licences
Mandatory licensing of HMOs came into force in 2006 and originally applied to properties of 3 storeys or more, with 5 or more people making up 2 or more separate households living in them. Since being introduced, licensing has largely been successful in helping to drive up standards in the sector. As it stands an HMO must have a licence if it is occupied by 5 or more people. A council can also include other types of HMOs for licensing. The best way to check this is finding out from your local council.
Risk assessment
The council must also carry out a Housing Health and Safety Rating System (HHSRS) risk assessment on your HMO within 5 years of receiving a licence application. If the inspector finds any unacceptable risks during the assessment, you must carry out work to eliminate them.
How do I make sure I am a compliant landlord?
Any property that’s privately rented out needs to adhere to all the government’s rules and regulations. It is key that you ensure the property is safe and habitable, by providing a number of things including: a gas safety certificate, an up-to-date EPC and being familiar with smoke and carbon monoxide alarm regulations. You should also ensure the property is free of damp and mould, and make sure there isn’t uneven flooring or areas that may make accidents and slips and trips more likely.
You need to ensure that tenants have a ‘Right to Rent’ in England and that you supply them with all the necessary information required, such as the government’s ‘How to Rent Guide’. With an HMO, you are subject to more rules and regulations and some could even be specific to your local authority. Key areas to think about are health and safety, minimum room size and tenant checks.
Tenant checks
It’s not always straight forward keeping track of the number of people living in a home, especially if you have multiple properties. As a landlord, you’re required to carry out the Right to Rent checks on all tenants before they move in, so it is essential you regularly check on who is living in your HMO. For example, a tenant could move out and move someone else in and not notify you – this can put you in breach of the rules.
Reporting changes
You must tell the council if:
- you plan to make changes to an HMO
- your tenants make changes
- your tenants’ circumstances change (for example they have a child)
Minimum room size
Since 1 October 2018, a room smaller than the specified size must not be used as sleeping accommodation in Houses in Multiple occupation (HMOs). The minimum sleeping room floor area sizes are:
- 6.51 m2 for one person over 10 years of age
- 10.22 m2 for two persons over 10 years
- 4.64 m2 for one child under the age of 10 years
Any room of less than 4.64 m2 may not be used as sleeping accommodation. Landlords must notify the local housing authority of any room in the HMO with a floor area of less than 4.64 m2.
In addition, local housing authorities are required to impose conditions specifying the maximum number of persons over 10 years of age and/or persons under 10 years of age who may occupy specified rooms provided in HMOs for sleeping accommodation. Local housing authorities have discretion to require higher standards within HMO licence conditions, but must not set lower standards than those set out above. There is Government guidance on the provisions.
Health and safety
As a landlord you will need a gas safety certificate for the property, as well as an inspection of the electrics every five years, and to carry out a fire risk assessment. Things to consider:
- are fire blankets and extinguishers required?
- are fire doors fitted for escape routes?
- are communal clear so tenants can escape safely in the event of a fire?
- are furnishings compliant with Furniture and Furnishings (Fire) (Safety) Regulations 1988?
What happens if a landlord doesn’t have a compliant HMO?
Councils can issue large fines for each breach of the rules. In August 2023 over £200,000 of fines were issued to unlicensed HMOs, by Haringey Council. When it comes to breaching minimum room sizes, a licence holder commits an offence if, without reasonable excuse, they breach the licence by:
- knowingly permitting the HMO to be occupied by more persons or households than is authorised by the licence
- failing to comply with a condition of the licence such as a prohibition against occupation as sleeping accommodation
If convicted for such an offence the licence holder is liable to an unlimited fine. The local housing authority may impose a financial penalty of up to £30,000 as an alternative to prosecution.
Using a letting agent
The law surrounding HMOs can be complicated and there are many elements to think about, resulting in a higher percentage of HMO landlords leaning on the services of letting agents. According to 2024 research from Pegasus Insight, HMO landlords are more likely to utilise letting agents on a full management basis (35%), while a higher proportion of non-HMO landlords self–manage (48%).*
Whether you are an HMO landlord who uses a letting agent, or if you self-manage, it’s key that you put the safety of your tenants first. Stay up to date with our dedicated landlord help centre, for the latest on landlord tips, responsibilities and insight.
*Landlord Trends Report Q1 2024 - Pegasus Insight