Siddharth Mahajan’s guide for landlords to invest in HMO

When you invest in a property with the intention of renting it out, you have a decision to make over the type of tenants you want to occupy it.

Some landlords prefer single professionals as it reduces the wear and tear that will occur, while others like the security of having a working couple or a family renting the property, as with two or more incomes it offers more reassurance regarding the rent.

If a landlord decides to convert multiple rooms into separate living areas to create a group of house-sharing occupants, this is known as a House in Multiple Occupation (HMO). It can be anyone from students to professionals who are seeking more affordable accommodation – the rule being that when a house is shared by multiple people it usually falls into this category. Owning an HMO also means there are a number of regulations that come with being a landlord of this type of property.

Is my property an HMO?

If there are three or more unrelated tenants living in at least two separate households within your property, sharing the toilet, bathroom or kitchen facilities, this is classed as an HMO.

When it comes to HMOs, a household is defined as a single person, a couple in a relationship, a married couple, or an entire family living together in one property. For example, three unrelated people living in different rooms would be classed as three households.

According to the Housing Act 2004, the following all qualify as HMOs:

  • Properties converted into self-contained flats that do not meet 1991 Building Regulations
  • When at least a third of said flats are available to rent on short-term tenancies
  • Three or more unrelated households are contained in the property
  • Either bathroom, cooking or toilet facilities are shared by unrelated tenants
  • Each tenant is in possession of their own tenancy agreement
  • Students currently live in the property
  • The property is being used as either a hostel or bedsit

Do I need to get an HMO licence?

Since the rule changes made in October 1 2018, all HMOs must have a licence. You must apply for a licence if 3 or more unrelated people occupy at least two different households. The maximum length for any licence is 5 years and if you wish to apply for a new one it must be renewed before the existing licence expires. Fines of up to £30,000 can be handed out if you do not renew in time, or possible prosecution and criminal record if you do not have a licence at all.

There are two types of licence available:

  • Mandatory: This is for properties that have three or more storeys, or contain five or more unrelated tenants that consist of two or more households
  • Additional: This is for smaller HMOs that have at least three different people living in two separate households, regardless of the number of storeys in the building.

To apply for an HMO licence you will need to contact your local council to start the process.

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