4 new HMO rules landlords, developers and investors need to know about

HMO landlord responsibilities are changing – again. There’s a whole new set of HMO rules coming to add to your HMO compliance handbook. In this article, we’ll share with you the most important policy and regulatory updates you need to be aware of.

Find out about the controversial Renters’ Rights Bill and Right To Rent legislation. Also, discover why and how so many local housing authorities are introducing new licensing schemes. Last, read about the council tax changes that the government introduced.

1. The Renters’ Rights Bill

The Renters’ Rights Bill brings in a host of measures, including:

• Moving to rolling contracts: Tenants can end a tenancy with 2 months’ notice, and the notice must expire at the end of a period of the tenancy (in other words, fall on or after the next rent due date.)
• Raising rent: You can raise rent once a year using Section 13 with 2 months’ notice. Tenants can challenge the increase at the First-tier Tribunal, which will set a market rent if it agrees the rise is too high.
• Banning upfront payments: You can’t require or accept any rent before the renter signs the tenancy agreement. After signing but before move-in, you can ask for a maximum of one month’s rent or 28 days if rent is weekly. Break these rules and you could receive a £5,000 fine.
• Joining an ombudsman scheme: All private landlords must join. Councils can fine up to £7,000 for initial or minor breaches, and up to £40,000 for serious or repeat breaches. In serious cases, you may face prosecution instead.
• Meeting the Decent Homes Standard: You’ll need to meet the new baseline standards being extended to the private rented sector.
• Fixing hazardous repairs: Landlords will have a legal duty to fix serious hazards (like damp and mould) within a set time, as part of the new Awaab’s Law framework. Tenants can enforce this via the courts and complain to the new Ombudsman if you don’t meet the deadlines.
• Outlawing rent bidding: You must list a clear asking rent when advertising for tenants. You can’t accept offers above it, even if a tenant makes one without prompting.
• Ending blanket bans: You can’t use “No DSS” or “No children” policies in adverts or tenancy terms.

The Renters’ Rights Bill also scraps Section 21. This was the legal route landlords used to evict tenants without giving a reason. The Bill replaces it with Section 8 whose notice periods are:

• Moving in or selling (Grounds 1 and 1A): You need to give 4 months’ notice if you want to move into the property or sell it. You can’t use these grounds in the first 12 months of the tenancy.
• Serious arrears (Ground 8): Tenants must owe you at least 3 months (or 13 weeks if they pay rent weekly or fortnightly). Arrears caused only by unpaid Universal Credit (that the tenant is entitled to) don’t count. You need to give the non-payer 4 weeks’ notice. The arrears threshold must be met both at the time the notice is served and on the day of the court hearing.

HMO Architects note: For landlords, the Universal Credit carve-out means eviction may take longer if arrears are caused by payment delays outside the tenant’s control.

• Antisocial behaviour (Grounds 7A and 14): You can start court proceedings immediately after serving notice. If the court makes a possession order, the date it takes effect is usually at least 14 days after the hearing (extendable up to 42 days for exceptional hardship) under s89 Housing Act 1980.

You must also sign yourself and your property up for the national landlord register. If you don’t, a court can’t grant possession unless both entries are active, unless you’re using antisocial behaviour grounds (7A or 14). This means your ability to regain possession will be blocked until you’re properly registered.

If you rent out student HMOs, you can regain possession at the end of each academic year under Ground 4A if you let out your property solely to full-time students. You need to give them 4 months’ notice and the date you regain possession must be between 1 June and 30 September.

You can’t use Ground 4A if you agreed the tenancy more than 6 months before the start date. So, you couldn’t use Ground 4A if a tenant signed in January and moved in on 1st September.

If it’s a joint tenancy as is common in many shared student houses, every tenant must be a full-time student (or they expect to be) at the start of the tenancy. Please note that Ground 4A doesn’t cover standalone self-contained one- or two-bed student flats.

Right to rent fines

Under the Right to Rent rule, you have a legal responsibility to check the immigration status of all adults who stay in your property, not just the named tenant. The types of rental agreement this applies to are assured tenancies, licences to occupy, and HMOs, including lodgers.

The law came into effect on 13 February 2024. If you outsource the right to rent checks, liability transfers to the agent only where they’ve accepted responsibility in writing.

Penalty scheme

How to stay compliant

• Choose a verification method: There are three ways you can check a person’s right to rent. You can do a manual document check (like a passport) or a Home Office online check using a 9-character share code valid for 90 days. For British or Irish passport holders only, you can use an Identity Service Provider (IDSP)/Digital Verification Service.
• Check before the tenant moves in: Do all your checks before the tenant takes up residence. Keep the evidence for the duration of the tenancy and for 12 months after it ends.
• Schedule follow-up checks: Some tenants’ right to rent is limited by law. If a follow-up shows no continuing right, you must report to the Home Office “as soon as reasonably practicable” to protect yourself.
• Write down your process: Make a note of who does the checks, how you record each check, where you store the evidence and how you schedule follow-ups. In case of a breach, this will show that you took reasonable steps to follow the law.

If you breach the rules, the Home Office will issue a Referral Notice and assess the case. If they find you liable, they’ll serve a Civil Penalty Notice with a Statement of Case. You’ve then got 28 days to appeal to the County Court. If you’re found guilty, there’ll be a 30% discount on your fine if you pay it within 21 days.

HMO Architects tip: Make sure you follow the anti-discrimination code in this process.

3. Why so many additional licensing schemes all of a sudden?

Since 23rd December 2024, English local authorities can, without needing the approval of the Secretary of State and after 10 weeks’ consultation, launch:

• Additional licensing schemes: Owners of smaller HMOs (3-6 tenants) have the same HMO licensing requirements as owners of larger HMOs (five or more people). Large HMOs must still apply for mandatory HMO licensing, not an additional licence.
• Selective licensing scheme: This is primarily for traditional buy-to-let but local councils can extend it to HMOs.

Expect more of these from 2025 onwards. Councils are more likely to declare them in areas where the evidence shows:

• Housing conditions are poor
• There is poor management of smaller shared homes
• Antisocial behaviour

For a proposed licence holder, the new process can introduce extra complexity. However, the processes involved for HMOs are no different from the well-proven mandatory licensing schemes.

Where it’s happening now

The new General Approval has already unlocked a wave of new schemes:

• Bristol: Citywide additional HMO licensing and selective licensing from 6 August 2024
• Lewisham: Selective licensing covering around 20,000 homes from 1 July 2024
• Nottingham: Third citywide additional HMO scheme live from 1 January 2024
• Wandsworth: Additional and selective licensing from 1 July 2025
• Southampton: Additional HMO licensing across nine wards from 1 October 2025

Getting ready from an HMO licence application

Owners of three and four bed HMOs in a designated area will have to pass the licensing and renewals tests that large HMO owners currently have to pass. Those criteria include:

• Fit and proper person: You must nominate the most appropriate person with control over and responsibility for the property as the licence holder. Often, that’s the landlord or a managing agent representing the landlord. If either have a criminal record, including past housing offices, this may cause the council to block the licence application.
• Room size requirements: The minimum room size for a licensed HMO is 6.51 m² for one adult, 10.22 m² for two adults and 4.64 m² for a child under 10. Some councils may specify different sizes. You also need to factor in HMO communal space in your overall compliance assessment..
• Adequate amenities: Inspectors will check that the toilet, bathroom and kitchen facilities in your HMO are in line with the local guidance on the number of occupiers.
• Fire safety: You will need interlinked smoke alarms and, where your fire risk assessment and local standards require it, heat alarms, fire doors and emergency lighting. [Related article: HMO Heating Regulations & Solutions]

An HMO licence only covers one property. For every extra property you have that requires mandatory licensing or is in a designated additional or selective licensing area, you’ll need an additional HMO licence for each one.

HMO Architects note: Planning and licensing departments within councils have different definitions of a large HMO. For licensing, a large HMO contains five or more people from two or more separate households living in the same property. These properties require a mandatory licence. For planning, a large HMO has seven or more people living in the same property from different households.

4. Council tax changes for HMO landlords

Council tax changed for all Houses in Multiple Occupation (HMOs) in England on 1st December 2023.

In the previous system, HMOs were “multi-banded.” That meant that tenants in individual rooms with its own kitchen and bathroom had its own council tax band. If tenants in individual rooms shared the same facilities, the whole house had its own band.

Now, most HMOs must now be valued as a single property and the landlord is responsible for payment. The law applies to HMOs as defined under Section 254 of the Housing Act 2004. They are homes with shared kitchens or bathrooms rented by three or more unrelated tenants.

Some HMOs keep their own band like:

• Buildings of self-contained flats under section 257
• Self-contained studio flats inside a shared house

The VOA decides case-by-case whether a unit is self-contained or not.

Example: At 12 Oak Street, two true studio flats keep their own bands, while the five shared rooms upstairs are valued as one HMO dwelling—because only the studios meet the VOA test for a self-contained unit.

HMO Architects: your partners in building a profitable HMO portfolio

HMO landlords have had to adapt to a changing regulatory and tax environment in the past few years. The coming years look set to deliver more, like the much hyped Minimum Energy Efficiency Standards for rented homes. Of course, that’s not law yet but neither were many of the measures we’ve covered in this article until just lately.

HMO Architects works with HMO landlords, developers and investors at every stage of the process from initial feasibility calls to completion of the build and beyond. Here are three of our most recent success stories on projects that proved you can still generate strong returns in a heavily regulated market:

• Fortescue Road, London (6 units): We secured permission for a tricky ground-floor extension and added a dormer as we converted this attractive three-bed typical C3 family layout into a six-bed C4 HMO. We aligned the extension with neighbouring properties to provide visual harmony to the streetscape. Our work raised the value of the property from £900,000 to £1.6m and rent more than quintupled from £1,400pcm to £7,200.
• Beaufort Ave, London (4 units): We took a standard three-bed terrace and reconfigured it into a four-bed HMO without having to perform extension or loft work. This project really highlighted our architectural team’s skill in unlocking value within an existing structure. We also improved the building fabric and services to achieve an EPC C, helping the client save on running costs and comply with future expected standards. The value of the property leapt 63.6% to £900,000 and rent tripled to £4,200pcm.
• South Bank Road, Liverpool (6 units): We transformed a neglected terrace into a six-bed HMO with a complete re-plan, full service renewals, and a spec aimed at securing long-term lettings from the client’s target audience. We prioritised durable materials and a clear management plan to keep voids low and maintenance predictable. The value uplift in the property was £85,000 to £280,000 (+£195k, +229%) and the rental uplift was £550 pcm to £2,800 pcm (+£2,250 pcm, +409%).

Work with HMO Architects on your next project. The services we offer include:

• Investment strategy call: Tailored advice on property portfolio building and scaling from our Investment Director, Ryan Windsor. Ryan started building his own extensive property portfolio when he was 17 and has worked on over 2,200 projects throughout his career. Ask him about our portfolio building service and joint venture opportunities.
• Feasibility study: Whether you own the property you want to turn into an HMO or are looking to buy, benefit from an expert-led breakdown of your options for just £197+VAT. The service is provided by Giovanni Patani, our Architect Director, and his team.
• All the experts you need, under one roof: Choose the services you need on your next project, from architecture design and planning process management to building regs and interior design.
• Wider network: Plug into our pool of trusted professionals, from specialist builders to property development finance brokers.

Check out our detailed HMO legal FAQ and find out more about the true cost of unlicensed HMOs on our website. Discover whether HMOs, buy to lets or stocks and shares deliver the best return. Work with the team which has delivered over 750 projects, valued at nearly £100 million.

Call us on 01223 776 997 or email us direct.