Since April 2017, fines of up to £30,000 per breach in landlord licensing can be imposed by local authorities.
It's important to understand this covers licensing regulations for any type of rented residential property, but where and when regulations apply varies between Local Authorities.
So how do you know if a property needs a licence?
And what can you do to stay protected?
Let's start with the basics:
A property is made up of people, people live as households and properties have a number of storeys.
Let's first define these terms in the context of the Housing Act 2004.
A Person is anyone who lives at the property as their main place of residence. Careful, this isn't the same as the number of tenants... Children, carers and domestic staff have to be counted too.
A Household is a group of related people forming a single family living together. Married, co-habiting and same-sex partners all count and extends to parents, grand-parents, children, siblings, uncles, aunts, nephews, nieces and cousins. Half-relatives, step-relatives and foster children are also included as part of the same household. Carers and domestic staff are also included so long as they live in the property of the person for whom they work without paying rent.
A Storey is any floor, including basements, attics and mezzanines of the building the property is in. Storeys are counted if they are part of the living accommodation or if it is the only/principal entry to the property from the street. You must also count storeys belonging to other properties or business premises above or below because this is about the building as a whole, not just your property.
The smallest type of property would have 1 person, forming 1 household, on 1 floor.
A couple with a baby, would be 3 people, forming 1 household and could live in a 2-storey maisonette.
2 friends living together does make 2 households, however, to qualify as an House in Multiple Occupation (HMO), you need at least 3 people.
If you happen to be a live-in landlord, with 2 lodgers, then you have 3 people and 3 households ... is this an HMO?
No, because live-in landlords and their family aren't counted if they live in their own home.
Live-in landlords and their household don't count in this scenario, meaning we're still in a 2-person, 2-household scenario - so not an HMO!
Under the Housing Act 2004, a property becomes an HMO when at least 3 people forming 2 or more households live in a rented property together.
There is also a distinction between the types of HMO. A house-share type is known as a Section 254 HMO, and a building which is converted into flats is known as a Section 257 HMO, if the building is less than 2/3rds owner-occupied and does not meet all building regulations at the time of construction.
Since October 1st 2018, in England and Wales, an HMO is classed as Licensable when at least 5 people forming 2 or more households live in a property together, no matter how many storeys. Before this date, the property had to be in a building of at least 3 or more storeys. Licensable HMOs require a Mandatory HMO Licence.
While this means more properties require mandatory licences, flats in purpose-built blocks are exempt from Mandatory licensing as long as there are 3 or more apartments in the block.
In Scotland, all HMOs with 3 people in 3 households require a Mandatory HMO Licence, and in Northern Ireland, all HMOs, no matter their size, require a Mandatory HMO Licence.
HMOs in England and Wales with fewer than 5 people don't qualify for a Mandatory HMO licence.
This creates a gap between what is an HMO (3 people, 2 households) and what is a licensable HMO (5 people, 2 households).
Section 2 of the Housing Act 2004 allows Local Authorities to fill this gap by passing legislation so that a licence is required even if the Licensable threshold is not met. These are known as Discretionary Schemes but can only apply within the boundaries of that local authority (either full or partial geographic coverage), and only for a set amount of time (usually 5 years).
The first Discretionary scheme requires landlords to apply for an Additional HMO Licence and covers HMOs below the 5-person threshold for a mandatory licence. The threshold could be set at 3 people on 1 storey (the smallest definition of an HMO), or with other conditions too (such as 4 people on 2 storey building, or only above a shop).
The second Discretionary scheme applies to any rented property, including non-HMOs, no matter the number of people or households. This is known as a Selective Licence.
This will mean all rented properties in a selective licensing area will require a licence, HMO or otherwise.
A significant number local authorities have both Selective or Additional licensing schemes, and a few even have multiple of each type covering different areas. In these cases, it is important to check where, when and which conditions apply for your property
And this is where we can help you.By tracking all licensing schemes in the UK and registering your portfolio with us, we can keep you informed in realtime.
Whether through changes in legislation or property management, you're always kept informed to avoid fines of up to £30,000.