Do I need an HMO licence? Everything a new landlord needs to know

Yields on House in Multiple Occupation (HMO) are attractive. Property Investments UK reports that the yield on HMOs is 10-15+% yield compared to 4-8% for standard buy-to-lets. For landlords and developers interested in getting in building an HMO portfolio, the question they ask most often before their first build is, “Do I need an HMO licence?”

The answer is, in many cases, you do need an HMO licence. All larger HMOs with five people from at least two different households require a “mandatory HMO licence”. In some council areas, you need to secure an “additional license” for smaller HMOs. Separately, some areas run selective licensing that covers all private rental properties, including HMOs.

Not having one when you legally should is a criminal offence which leaves you open to enforcement action. The consequences can be:

• Civil penalties up to £30,000
  
• Prosecution with unlimited fines
  
• A rent repayment order (RPO) (meaning you have to pay your tenants up to 12 months rent back)
  
• Invalid section 21 while the HMO is unlicensed (with some limited exemptions)

In this article, you’ll learn who needs an HMO licence and the different types of licence. You’ll discover how licensing varies across authorities, the minimum standards you have to meet and why a council may refuse your application.

What is the legal definition of an HMO

The legal definition of an HMO is housing lived in by three or more people forming more than one household where, in the vast majority of situations, they share a kitchen, bathroom or toilet. Typical examples include:

• Shared house (standard test): A house or converted flat split into rooms/bedsits let to people from more than one household.
  
• Self-contained flat test (sharing case): A single flat lived in by people from more than one household.
  
• Resident-landlord with lodgers: An owner-occupied home with three or more lodgers is an HMO. The owner-occupier does not count as a single household in this situation.

A ‘household’ is a single person or members of the same family living together. That could be a married couple, partners, relatives, step-relatives or foster children.

There are certain situations where shared basic amenities aren’t necessary. They include section 257 blocks, council-declared section 255 HMOs and some converted buildings (including some bedsit arrangements).

The focus of this article, however, is on HMOs that do require shared basic amenities. This is because they are the types of property most landlords and developers want to invest in.

The three different types of HMO property licence

There are three licensing schemes you may fall under: mandatory HMO licensing, additional HMO licensing and selective licensing. Mandatory and additional apply only to HMOs. Selective applies to all private rentals in designated areas, including HMOs.

Mandatory HMO licence

If you rent an HMO to five or more occupants from more than one household, the law classifies the property as a “large HMO”. It is your legal responsibility to have a mandatory HMO licence.

There is an exception. Self-contained flats in a purpose-built block containing three or more self-contained flats are exempt from mandatory HMO licensing. 

This rule applies across the whole of England.

Additional HMO licence

Additional HMO licensing is a scheme many councils run that requires smaller HMOs to obtain a licence. Although not universal, additional licensing schemes are very common, particularly in cities and large towns.

How councils apply them varies across the country, for example:

• Borough-wide: Many London boroughs like Barnet, Camden and Ealing require all HMO properties to obtain a licence, regardless of size.
  
• Restricted areas: Some councils, like Havering, Merton and York, only require an additional licence within particular wards.
  
• Certain property types: Some schemes only affect Section 257 HMOs. A Section 257 property is a building that a landlord or developer has converted into self-contained flats. In Portsmouth, you need an HMO licence if you rent out fewer than a third of the flats and the building doesn’t comply with 1991 Building Regulations.

Not all schemes are permanent. The Harrow scheme lasts until 2026 while Hammersmith & Fulham’s lasts until 2027. Birmingham’s scheme stretches out longer to 2028.

Selective licences

Selective licensing schemes require landlords to have a licence for all privately rented properties, including HMOs. This applies to every property from HMOs and buy-to-lets like two-bedroom flats.

In some parts of the country, the council runs both selective and additional licensing schemes.

In Gateshead, this is the case in 16 of its boroughs, leading to a double whammy for local HMO landlords. Landlords have to pay £850 for a selective licence and £976.30 in additional HMO fees.

What are the minimum standards for an HMO licence?

Before granting a licence, you as the landlord (or the manager you appoint as licence holder) and the property itself must meet certain minimum standards.

Key property licensing requirements you’ll need to comply with include:

• Fire safety: You must carry out a fire risk assessment and make sure there are adequate fire safety measures. This includes working smoke alarms and, in some cases, FD30S fire doors with cold smoke seals and self-closers.
  
• HMO room sizes: By law, a room for one adult must be at least 6.51 square metres. For two adults, it must be at least 10.22 square metres.
  
• Amenities: Tenants must have access to bathrooms, kitchen facilities and waste disposal facilities. You also need to ensure there are enough toilets, washbasins and cooking facilities for the number of tenants.
  
• Safety certificates: The council will expect a current Gas Safety Certificate if gas is present. They also want an Electrical Installation Condition Report (EICR) at least every 5 years. You must also install smoke alarms on each storey containing living accommodation to BS 5839-6 (category or grade to suit the HMO) and CO alarms in rooms with a fixed combustion appliance (excluding gas cookers).
  
• The ‘fit and proper person’ test: You need to show the council that you/the licence holder are a suitable person to manage an HMO. Councils run a background check to make sure you haven’t committed offences involving fraud, dishonesty, or breaches of landlord law or housing law.

What are the costs and timelines for an HMO licence?

Local authorities charge a range of fees across the country. Within council areas, the fees can vary depending on the size of your property. Many councils charge two types of fee: a fee for applying and a fee to cover the costs of running their scheme.

The length of time it takes to get your new licence varies, whether you make a postal or online application. For example, Wirral advises no longer than eight weeks while Sheffield advises more than 16 weeks. Many licences are for up to five years but shorter ones are available.

If you require licensing, look for the contact details for the private housing or HMO licensing team on the relevant council’s website. Apply before tenants occupy the property. You can usually let while a duly-made application (or a Temporary Exemption Notice) is in place, but you can’t serve a valid section 21 until the HMO is licensed or that protection applies.

Tip: If you already have a licence and its end date is approaching, check out our guide on how to renew an HMO licence.

Your HMO licence application checklist

When you apply for an HMO licence, have the following information and documentation ready:

• A completed application form with your contact details
  
• An up-to-date Gas Safety Certificate
  
• An Electrical Installation Condition Report (EICR)
  
• Evidence that electrical appliances you’ve supplied are safe (PAT testing as required by your licence and risk assessment)
  
• A fire risk assessment and a fire alarm commissioning/test certificate (and, if installed or required, an emergency lighting test certificate to BS 5266)
  
• A floor plan of the property, showing the sizes of the rooms and the location of amenities
  
• Proof of ownership or the right to rent the property
  
• A copy of the proposed tenancy agreement (or agreement in place if you’re renewing your HMO licensing)
  
• The planning decision notice, if the council required HMO planning permission for the property
  
• A Building Regulations completion certificate for any recent works
  
• An Energy Performance Certificate
  
• Fit-and-proper person declaration and a simple management plan (how the HMO will be run, including 24/7 contact)
  
• Payment

The information and documentation required varies between councils. Check your relevant council’s website for their application checklist.

Three reasons for refusing an HMO licence

The three most common reasons councils refuse HMO licences are:

1. Inadequate safety standards

Poor safety is the main reason for rejection of an application.

Issues like inadequate or broken smoke alarms or a lack of escape routes almost always lead to refusal until you get them fixed. Other problems include no documented fire risk assessment and inadequate fire doors/closers and escape provision.

2. Lack of proper planning permission

You may want to change the use of a property into an HMO. Sometimes, you don’t need planning permission, like a C3 to C4 use class change. Other times you do, for example changing from C3 to C4 in Article 4 or conservation areas.

Planning and licensing are separate processes run by different teams. A licence does not grant planning permission, and having a licence won’t protect you if planning consent is required and missing.

H3: 3. The landlord is not a ‘fit and proper person’

As mentioned earlier, past criminal convictions for serious offences or breaches of housing law for a prospective licence holder can lead to a refusal.

Can you transfer an HMO licence?

You can’t transfer an HMO licence from one person to another. The licence on a property is tied to the licence holder and not to the building itself. So, if you purchase an HMO property with a licence, you don’t inherit the licence. You must apply for your own licence.

Get advice from HMO Architects

HMOs have proven to be a great investment strategy. With yields on buy-to-lets low, landlords and developers have shifted their focus to HMOs, Airbnbs and holiday lets. [Related article: Planning permission for Airbnb and holiday lets in the UK].

HMO Architects help clients with HMO licensing as part of our end to end service.

• Flat 107, London (4 units): We turned a challenging maisonette above a print shop in a conservation area into a high-yield, four-bed HMO. We handled the HMO licensing for the project from day one to completion. We tripled the monthly rent from £1,600 to £4,800 and lifted the value from £550k to £950k.
• Beaufort Ave, London (4 units): We replanned a standard house into a four-bed HMO without extensions, keeping the build simple. We built it with compliance in mind for future HMO licensing by upgrading it to EPC C, so it was ready for expected laws coming in 2030. The property value increased from £550k to £900k and rent quadrupled to £5,600pcm.
• South Bank Road, Liverpool (4 units): Through a rapid back-to-brick regeneration, we transformed a run-down terrace into a six-bed HMO, streamlining the management of planning, regulations and licensing. The property increased in value from £85k to £280k and now generates £33,600 in annual rent. 

Whether you have an existing property you want to turn into an HMO or want to build a brand new HMO property from the ground, contact us. Here’s how we can help:

• Investment strategy call: Get tailored advice on how to build and scale your property portfolio from our Investment Director, Ryan Windsor. Ryan has worked on over 2,200 projects throughout his career, having started building his own extensive property portfolio when he was 17. 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.
  
• Planning process: We have a 97% success rate across more than 200 local councils. Although planning and licensing are separate, we can help you with both.
  
• A proven track record: We have delivered over 750 projects, valued at nearly £100 million.
  
• End-to-end service: We combine a range of services from architecture design and planning to building regs and interior design. Access all the expertise and resources you need in one place.
  
• 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. When you get in touch, ask Ryan about his BRRR method and how to use it as your investment strategy.

Call us on 01223 776 997 or email us direct.

Frequently asked questions

When exactly do I need an HMO licence?

The rules depend on the number of occupants and your local council. The core legislation states:

• If you have five or more people from more than one household living in your property, you need a mandatory HMO Licence.
  
• If you have three or four people from more than one household, the law considers it an HMO property. It is not subject to a mandatory HMO licence but you may need an additional HMO Licence. This depends on the specific rules of your council.
  
• In some areas, all private rented properties occupied by a single person or family and HMOs may be subject to selective licensing.

Purpose-built self-contained flats within a block comprising three or more self-contained flats are exempt from mandatory HMO licensing requirements. They still however may need additional or selective licences.

Do the rules change for converted or purpose-built flats?

Yes. Converted flats that do not have proper Building Regulations sign-off may be classed as “Section 257 HMOs”. Some councils require these to have an additional licence. The government has excluded purpose-built, self-contained flats from the mandatory licensing scheme where they are in a block comprising three or more flats. However, your council could still require an additional or selective licence for them.

What are my key legal responsibilities as an HMO landlord?

In addition to licensing, landlords must comply with the Management of Houses in Multiple Occupation Regulations (2006) when managing an HMO. To comply, you need to:

• Provide annual gas safety certificates.
• Ensure an Electrical Installation Condition Report (EICR) is conducted every five years.
• Keep all electrical appliances you supply safe, with PAT testing where required by your HMO licence.
• Install smoke alarms to BS 5839-6 on every storey and carbon monoxide alarms in any room with a solid fuel appliance.
• All electrical appliances made available to occupants in an HMO must be kept in a safe condition and must have a Portable Appliance Test (PAT) certificate if they are over twelve months old.
• Ensure that all fire escape routes in the HMO are maintained clear of obstructions.
• Provide suitable facilities for waste and recycling storage.
• Give tenants a written statement of their occupancy terms.

Are any properties exempt from HMO licensing?

Yes, certain properties are exempt from HMO licensing. Buildings managed by the local housing authority, registered social housing providers, the police, fire authorities or health service body buildings do not require a licence. In specific circumstances, you may be granted a Temporary Exemption Notice (TEN), but this cannot be used to simply avoid licensing.

How many licences do I need and what happens if I don’t get one?

You need a separate licence for each individual HMO that you manage, and you must renew it up to every five years. Failing to apply for a required licence is a criminal offence. Councils can issue civil penalties of up to £30,000 or pursue a prosecution with potentially unlimited fines. Tenants can also seek rent repayment orders for up to 12 months’ rent. Section 21 evictions are not valid when an HMO that should be licensed is unlicensed (subject to limited exceptions).