Houses in Multiple Occupation

Houses in Multiple Occupation

jigsawHouse in multiple occupation (HMO) is a term used to describe accommodation in which part of the property is shared by multiple, unrelated households. These are becoming increasingly popular with investors and residential landlords as the yields on HMOs can be significantly higher than for other properties. However, owning and running an HMO does work in a slightly different manner to other properties that you may let out and it is important to be aware of what is considered to be an HMO, what regulations govern them and if your property will require a licence.

What is an HMO?

The Housing Act 2004 introduced licensing for HMOs and also provides us with the definitions of what is considered to be an HMO. Typically HMOs are properties such as houses split into bedsits where tenants share amenities, i.e., kitchens and bathrooms, house or flat shares with three or more tenants who are unrelated, students living in shared accommodation with exclusive use of the entire property. There are several tests which a building or part of a building must meet to be considered an HMO under the Act. These are as follows:

The Buildings Test:

–          More than one household shares an amenity such as a bathroom or cooking facilities, or

–          It is a converted building that does not entirely contain self contained flats or

–          The building is converted self contained flats but the standard of the conversion does not meet the minimum standards required by 1991 Building Regulations, and more than third of the flats are occupied under short tenancies

The Residence Test:

To be classified as an HMO a property must also be occupied by more than one household as their main residence or only residence, this includes:

–          Occupation by people escaping domestic violence

–          Students in higher education

–          Asylum seekers, migrant and seasonal workers

The Consideration Test:

To be classified as an HMO, some sort of “consideration” such as rent payments or fees must also be payable for the occupation.

The “More Than One Household” Test:

A household is considered to be either a single person or members of the same family who are living together. A group of people who are not all members of the same family will form more than one household.

How are they different?

Letting an HMO is different to letting a standard property out. There are a number of rules and regulations which apply to HMOs and it is important landlords are aware of these.

The most important aspect of these regulation for landlords to consider is fire safety for HMOs. Recent national statistics have shown that you are eight times more likely to be injured or die in a fire if you are resident in an HMO. Whilst a landlord of any property will need to be aware of fire safety regulations, the rules governing fire safety in HMOs are stricter than for other residential property. Generally the person responsible for fire safety in the property will need to consider the following points:

–          A fire risk assessment and fire precautions in common areas

–          Escape routes with fire barriers

–          Fire alarms which should be extended into the living accommodation, i.e., an alarm in each individual room

–          Emergency escape lighting

–          Fire fighting equipment and facilities

–          The need for signs and notices

Apart from fire safety there are a number of other considerations that the landlord or manager of the property will be responsible for including the number and location of shared facilities in the property such as kitchens and bathrooms. This is typically a ratio of 1:5 for shared kitchens and 1:4 for shared bathrooms or toilets. However your local Environmental Health Officer will be able to advise on the number of facilities that you need to provide for a particular property and number of tenants.

A third factor that landlords will need to be aware of is the Management of Houses in Multiple Occupation (England) Regulations 2006. Regardless of whether you live in the property and let out rooms, or if you are letting the whole property out these Regulations cover the basic duties a manager needs to be aware of in respect to the HMO. These regulations cover the following points:

–          The manager must provide contact details to the occupier

–          The means of escape from the property must be unobstructed in case of a fire, and all fire fighting equipment and alarms must be properly maintained

–          The manager must take any reasonable measures to ensure the occupiers are not injured in the HMO on account of its design or condition

–          There must be an adequate water supply and drainage and this must not be unreasonably interrupted

–          The council must be provided with annual gas safety certificates, carry out checks on electrical equipment every five years and ensure the supply of gas and electricity is not unreasonably interrupted

–          Keep the common areas in repair and good order

–          Maintain any shared gardens and the structure of the HMO

–          Keep in repair any living accommodation belonging to the occupiers

–          Provide suitable facilities for rubbish disposal

As the manager of the property it is important to abide by these regulations as any breach of these without a reasonable excuse can result in prosecution and fines of up to £5,000.

Will I need a license?

The Housing Act 2004 introduced mandatory licensing for some types of HMOs. If your property:

–          Is three storeys or more in height (including basements and HMO buildings located above shops)

–          Has five or more occupiers

–          Requires some or all of the occupiers share facilities

Then the property will require a licence. Each local council will have its own guidance and requirements for the licensing of HMOs within its district which will be based upon government guidance and the Housing Act 2004. Some councils may have additional licensing for HMOs in the area that are not included within the mandatory licence category specified in the Housing Act, when looking to take on an HMO it is important to contact your council and be fully aware of whether a licence is applicable for the property.

The landlord of the property will be required to apply for the licence, although a managing agent may also do so provided the landlord has been notified of this. When applying for the notice the landlord must also notify any other owners of the HMO, any mortgagee, the propose managing agent (if any), any long leaseholder and any person who has agreed to be bound by the conditions in a licence if it is granted.

Once a licence has been granted it will typically be valid for five years, however in some cases the council may grant it for a shorter period of time if necessary. There will be a fee for the licence and to be granted one the council will look at the following factors.

–          If the HMO is suitable for the number of occupiers

–          If the facilities within the property are suitable

–          If the landlord or managing agent is deemed to be a “fit and proper” person

–          The suitability of the management arrangements

Any licence which is granted will come with some conditions attached that must be complied with in order for the licence to remain in place, these will typically encompass annual gas safety certificates, the safety of electrical appliances, smoke alarms throughout the property, and providing the occupier with a statement of terms under which they may occupy the HMO.

As with any property investment that you are looking to make it is important to fully research any legislation and regulations that will govern it and the potential return you will make on your investment. With the additional laws and regulations governing HMOs it is vital that landlords are aware of how these apply to them as the effects of contravening planning laws can be severe.

Written by Sarah Male @ Urban Sales and Lettings .

Author: urbansalesandlettings