HMO licensing – avoiding a costly mistake

by | May 1, 2019 | Blog Posts

It is well known that landlords of residential premises must comply with various laws to ensure their tenants’ health and safety. For example, where the property is a House in Multiple Occupation (HMO), the landlord may require a licence from the local authority. We have looked previously at the hefty penalties facing landlords at the hands of local authorities if they do not obtain a licence. But landlords should also be aware that they may face financial consequences from another source: their tenants. We look at the penalties.

Houses in Multiple Occupation

First, a quick recap on the properties that require an HMO licence.

A property is an HMO if:

  • It is let out to three or more people who are not from one ‘household’. This could be, for example, three people with their own rooms or two couples in two separate rooms; and
  • These three or more people share facilities such as a kitchen and/or bathroom.

This could be a house split into separate bedsits, or a shared house where the tenants are not all members of the same family.

Landlords must obtain a licence from the local authority for those HMOs that are:

  • Occupied by five or more people;
  • Occupied by people living in two or more separate households; and
  • Who share an amenity e.g. a kitchen, toilet, bathroom or living room.

Some local authorities require all landlords of HMOs, no matter the size, to have a licence.

Penalties for lack of licence

Failure to obtain a licence for a licensable HMO is a criminal offence, and landlords who don’t comply could face:

  • an unlimited fine;
  • a banning order. This would prevent them letting out properties for a specific period; and
  • being placed on the database of rogue landlords.

On top of this, the tenants may apply for a rent repayment order.

What is a rent repayment order?

If tenants believe their landlord has failed to licence the property as an HMO, they can apply to the First-tier Tribunal (Property Chamber) for an order that the landlord must pay up to one year’s rent back to the tenants. If the tenants claimed housing benefit, the appropriate portion will be repaid to the local authority.

The BBC recently reported about a group of five student tenants who applied for a rent repayment order against their former landlord. The landlord was ordered to pay £15,000 back in rent. This was on top of any fine the magistrate’s court may have ordered him to pay.

It is clear, therefore, that failing to properly licence your HMO can be costly. For example, you let your HMO to four, unrelated tenants for £400 a month each. You don’t apply for the licence, and the local authority prosecute you. The magistrate’s court could then fine you unlimited amount; for the sake of the example, let’s call it £10,000. Your tenants then apply to the First-tier Tribunal for a rent repayment order. The Tribunal could order you to pay up to £24,000 back to your tenants, on top of the £10,000 fine.

Advice for landlords

If you are looking to let out a property and think that it may be an HMO, we would advise you to check with a solicitor or your local authority to find out whether you need a licence. You should ensure that you have obtained your licence before letting the property out. Likewise, if you are buying a property that is already let out to tenants, make sure you apply for your own licence.

HMO licences are designed to ensure the safety and security of tenants. The local authority will look at matters such as: the bathroom facilities; the kitchen amenities; the size of the rooms; and the fire safety facilities. It will also look at whether the landlord and / or the property manager is a ‘fit and proper person’

If you think you may be in breach of the HMO licensing laws, our property disputes team can help. Call us today on 0800 988 7756 for a FREE, no obligation discussion.

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