A guide to HMO property

A guide to HMO property

HMOs can be great investment choices for landlords and provide tenants with a cost-effective and sociable rental option.

But what are HMOs and what are the rules landlords need to know about?

We’ve got all the answers in this guide to HMO property, as well as all the pros and cons surrounding HMOs for tenants…

 

What does HMO stand for?

HMO stands for House in Multiple Occupation.

This refers to co-living rental properties that are occupied by several tenants who aren’t from one household.

 

What is an HMO?

For a property to be classed as an HMO, it must be:

 

  • Shared by at least three people from at least two households
  • Occupied by tenants who share bathroom, kitchen, and toilet facilities

 

Examples of HMOs include:

 

  • Shared or co-living houses
  • Hostels
  • Bedsits in a communal building
  • Halls of residence
  • Employee accommodation

 

Beware of accidental HMOs

Some landlords may be operating an HMO and not realise that they are.

An example of an accidental HMO would be a landlord who is renting a property to two friends.

This wouldn’t be classed as an HMO, but if those friends were to request a third person to move in, the property would then be classed as an HMO as it would contain three tenants from more than one household.

This arrangement could have a major impact on the landlord, their licensing requirements, mortgage, and insurance policies.

 

The HMO rules and regulations landlords need to know about

Landlords of HMOs are required to adhere to the same legislation and health and safety regulations as landlords of standard buy-to-let properties, including:

 

  • Gas safety
  • Electrical safety
  • Fire and smoke safety
  • Legionella assessments
  • Deposit protection
  • Minimum Energy Efficiency Standards (MEES)
  • Right to Rent legislation

 

However, HMOs do come with a number of other compliance demands, including:

 

1. HMO licensing and planning permission in England

Any HMO in England that is occupied by five or more tenants from more than one household must have a mandatory licence from the local authority.

Smaller HMOs with fewer than five tenants won’t require a mandatory licence, but many local authorities operate a selective licensing scheme, meaning all HMOs in their area must be licensed.

HMO licences can cost as much as £1,000 and as little as £60, depending on the local authority, with the average cost of a licence in the UK around £600.

Some HMOs may also require planning permission.

Small HMOs housing three to six people fall into the C4 planning class and will only require planning permission if the local authority has an Article 4 directive in place which limits the number of HMOs in their area.

However, HMOs with seven or more tenants fall into the Sui Generis class and do require planning permission, regardless of location.

 

2. Minimum room sizes

Since October 1, 2018, HMOs have been required to have minimum room sizes for sleeping accommodation.

That means room must be:

 

  • A minimum of 6.51 square metres if the person occupying is over 10 years old
  • A minimum of 10.22 square metres if two people older than 10 are occupying
  • A minimum of 4.64 square metres if one person aged under 10 is occupying

 

Any HMO room with a floor space of less than 4.64 square metres, meanwhile, cannot legally be used as sleeping accommodation.

 

3. Additional fire safety measures

HMO landlords must carry out a standard rental property fire risk assessment, identifying and rectifying any potential fire hazards, including:

 

  • Sources of ignition such as cooking equipment, and faulty electrical and gas appliances
  • Sources of fuel such as wooden furniture, textiles, waste, or flammable liquids

 

On top of that standard fire risk assessment, HMOs must also have:

 

  • Self-closing fire doors marked with a clear notice – ‘Fire Door Keep Shut’
  • Fire doors that comply with 30-minute fire resistance criteria
  • An unobstructed and safe fire escape window
  • Clear, unobstructed escape routes
  • Signs and notices clearly showing exit points in the event of a fire
  • Mains powered smoke alarms installed on landings and in hallways, as well as in additional rooms for larger HMOs over more than two storeys
  • Heat detectors in kitchens
  • Emergency lighting for larger HMOs or those with a long or complicated escape route
  • Fire blankets and extinguishers if required by licensing terms

 

4. Overcrowding and facilities

HMOs must not be overcrowded, and landlords have a responsibility to provide the right number of facilities for the number of people occupying the property.

That includes:

 

  • Enough cooking facilities for the number of tenants
  • Enough bathroom facilities for the number of tenants
  • Enough rubbish bins

 

Meanwhile, the rules around HMO occupation state that:

 

  • No more than two people must sleep in any room, regardless of their age
  • Rooms can only be shared with individuals’ consent
  • No tenants over the age of 12 should share unless co-habiting as a couple

 

5. Maintenance requirements

HMO landlords must make sure their properties are well maintained, including:

Ensuring communal areas are clean and in good repair

Ensuring the structure and exterior of the HMO is maintained

Maintaining water systems, gas pipes and electrics and sanitary ware

 

6. Council tax

In some cases, HMO landlords are responsible for paying council tax on their properties, unlike standard buy-to-lets where the tenants are generally responsible.

Council tax for HMOs that are let out on a room-by-room basis, with each tenant having a separate tenancy agreement, is usually paid by the landlord.

However, if the HMO is let to a group of tenants, from different households, under one tenancy agreement, the tenants are usually responsible for council tax.

 

The pros and cons of HMOs for tenants

Renting a room in an HMO is very different to renting a property on your own, so there are things for tenants to consider…

 

Pros of HMOs

Cons of HMOs

Rent is usually cheaper than a sole tenancy

You’ll be sharing communal space with several other tenants

Bills in HMOs are often included

Disagreements can crop up with so many different people under one roof

HMOs can be great for making new friends if you share with the right people

The property can suffer more wear and tear than a standard single tenancy home

 

How much rent do you get from an HMO?

HMOs are generally regarded as more profitable for landlords than standard buy-to-let properties.

Because HMOs are usually rented out on a room-by-room basis, the rental income they generate can add up to substantially more than a single tenancy rental property.

HMOs are also superb ways for landlords to balance cashflow, as if one tenant moves out, the others will still be paying rent.

Rental yields in HMOs can be up to three or even four times higher than single tenancy buy-to-lets, but this investment boost is tempered by the fact co-living properties are more complex and subject to far more legislation.

 

Further reading…