If you have additional rooms in your house, you may be thinking of letting them out in order to bring in an additional income. Alternatively, you may be in the process of building a home that you can turn into an HMO (“House in Multiple Occupation”). What you may not be aware of is that there are strict rules when it comes to HMOs and it is worth knowing this before you begin letting out rooms or beginning work on any extension or construction project.
What you need to know
An HMO is defined as “a property rented out by at least three people who are not from one household (not family members) who share facilities.” It can vary depending on your local area, but in a lot of cases you will be expected to apply for an HMO license.
In England and Wales you must have a license if there are five or more people renting your property, facilities are shared and if at least one person in the house pays rent (this also applies if their employer is paying their rent). If your property is smaller and rented to fewer people, it is still possible that you will be required to get a license. In order to be sure, it is recommended you check with your local council.
The definition of an HMO is further sub-divided into use classes, each one defining how many people can stay in them and what you need to do in order to get a license for these properties.
Class 4 covers any HMO with up to six tenants in a small shared space. In recent times, this category has seen the level of planning permission reduced in order to meet the increased demand for shared tenancies. If an HMO has five tenants from more than one household, it is referred to as a large HMO and there are stricter conditions (something that needs to be checked with your local council).
C3 refers to “dwelling houses”. This is similar to C4 in that it allows for up to six people but it specifically covers groups such as small religious communities, foreign exchange students or someone living with a lodger in their home. This category can be beneficial, as it allows for exemption from licensing fees and reduced rental taxes. However, if at any point your property is converted for multiple households, then it becomes classed as a C4 HMO.
If your HMO has more than six tenants you need to get planning permission, as this falls outside these two categories. Landlords must adhere to these rules and maintain standards. For example, if a landlord runs an unlicensed HMO, tenants can apply to a tribunal to reclaim lost rent.
An HMO license is valid for five years and only covers one property. For example, if you owned three different properties you would need a license for each individual property, with each one appropriate to their particular use class. The license is also dependent on the holder having a clean criminal record.
Important conditions that come with the license include an updated gas certificate sent to the council each year, the installation and maintenance of smoke alarms and being able to produce safety certificates on appliances if requested. Other conditions may also be added by the local council, as they will consider additional factors such as the condition of the furniture, the amount of toilets available per tenant, finance handling and any reports regarding the behaviour of the landlord.
If you are not licensed or you continue to rent out a property after your HMO license has expired, then you can face fines of up to £10,000.
HMOs can potentially be beneficial for both landlords and tenants. One issue with renting out properties to an individual renter is they could be priced out of a move and it may be too narrow a niche. By splitting between several renters, it becomes easier to get the market value for your rent and you have a wider pool of potential tenants.
For the tenants, this means that the rent can be more affordable. This is often appealing for students when they first move out, as this can cut costs, especially when sharing with friends.
With a new build, there is also the advantage of being able to tailor your property for potential tenants. For example, you may wish to include an en-suite in addition to a shared bathroom, allowing for a range of pricing options. Including a desk or some form of study space would also be perfect if you are looking at promoting student accommodation.
We’re here to help
At Agora Architects, it is not just about designing a property or extension to make it more aesthetically pleasing, we also ensure that all the legalities and practical aspects are covered.
Whether you are converting an existing property into an HMO or building a new one, our experienced team of architects can guide you through the process.
To find out more, please email Agora Architects today at firstname.lastname@example.org and we will be happy to discuss your HMO project in more detail.