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Landlords - Could you be Caught by the Extension of HMO Licensing?

on Thursday, 18 February 2016.

In recent years, the government has appeared to be keen to overhaul the private rental sector.

There are two strands to this viewpoint. The first is that first time buyers are being priced out of the market by overseas investors and buy-to-let properties. The second is that vulnerable tenants are at risk of living in unsafe accommodation, or being unfairly treated by so-called 'rogue landlords'.

The proposed updates to the legislation dealing with Houses in Multiple Occupation (HMO) are aimed at tackling the second issue by giving local housing authorities additional tools to deal with overcrowding, unsafe properties and poor management. This will help authorities to protect the estimated 4.4 million households in England living in private rented accommodation.

What is an HMO?

The primary criteria for a property to be an HMO are that:

  • the property is occupied by at least three people from more than one household
  • two or more of the households share a toilet, washing facilities or cooking facilities

Properties which are 'classic' HMOs include bedsits and house shares.

The Current HMO Licensing Legislation

HMOs are subject to mandatory licensing where the property is:

  • three or more storeys
  • occupied by five or more persons who do not form a single household

When deciding whether or not to issue an HMO licence, the local housing authority will consider matters such as whether the property is of an acceptable standard, how many occupants and households the property is suitable for, and whether the proposed management arrangements and licence holder are satisfactory.

What are the proposed changes to the HMO licensing regime?

The government plans to introduce changes to the HMO legislation in 2016 to increase the number of properties which will be subject to mandatory licensing. Consultation ended on 18 December 2015 and we await publication of the government's response.

The proposals include adding a number of categories of HMO to the mandatory licensing regime:

  • HMOs with two storeys, and possibly also single storey properties
  • buildings which have been converted into flats and which are not compliant with building regulations
  • flats in multiple occupation above and below business premises

The consultation has also enquired into whether there would be support for a minimum national bedroom size for HMOs and how to simplify and streamline the licence application process.

Penalties for Breaches of HMO Regulations

Under the legislation, landlords can be guilty of criminal offences for failing to obtain a licence, allowing more people into occupation than permitted under their licence, and failing to comply with conditions under a licence. The penalties for breach can include:

  • fines of up to £20,000
  • imposition of a management order, where the council takes over management and receipt of the rent from the property
  • a rent repayment order, which could result in the repayment of up to 12 months' housing benefit or tenants' rent payments

For advice on how the new HMO licensing regulations may affect you, or if you are looking to buy or develop an HMO, please contact Gemma Pouncy in our Commercial Property Law Team on 0117 314 5300.