HMO management can seem a little scary to some, but it really doesn’t have to be...
What is a HMO Property?
A house in multiple occupation (HMO) is, simply put, a property rented out by at least three people who are not from the same 'household' (for example a family), but who share facilities such as bathrooms and a kitchen. It's more often referred to as a 'house share’. One of the main defining factors for a HMO is that each tenant will have their own tenancy agreement/contract in place, and pay their rent independently.
There are several types of HMO properties you need to be aware of (from most common, to least common):
A house or flat shared by three or more people, couples, or families, from at least two households with shared communal areas.
A home lived in by the landlord as the owner-occupier that has more than two tenants or ‘lodgers’, and in which some common areas are shared.
Some student accommodation is also classed as a HMO since The Housing Act 2004.
A privately owned property shared by students, who are each treated as a separate household and have exclusive use of the accommodation.
A building, or part of a building, made up of converted self-contained units which do not meet the conversion requirements of the Building Regulations 1991, and in which more than a third of the units are occupied by short tenancies. This is also referred to as Section 257 HMO.
It is certainly true that HMO’s require extra care and attention to ensure they remain compliant and provide the Landlord with a good ROI (return on investment). The safety and local council demands on HMO properties are very strict, with extensive regulations imposed for the safety of all tenants, there has also recently been an increase in the number of government regulations that must be adhered to such as EICR (Electrical Installation Condition Report) regulations which must now be carried out every 5 years. Another common issue with HMO’s is the potential for a high tenancy turnover if it is managed poorly and tenants are not placed with care. This can cause a high extra cost to the Landlord and damage their ROI/bottom line.
So what regulations do you need to be aware of if you have a HMO property?
As the Landlord of a multiple occupancy home, you are subject to a number of additional legal responsibilities versus a normal single occupancy tenancy. It is important to understand these legal obligations, as failure to do so can result in some pretty darn hefty fines of up to £5,000! It is a criminal offence to disobey licensing laws, and without a required license you are at risk of repaying up to twelve months rent and fines of up to £20,000! Equally, without the proper HMO licensing, a Section 21 Notice will not be valid and you may be in a situation where you’re unable to evict tenants. The main areas to be aware of are:
Fire Safety
It is essential to have a Fire Risk Assessment carried out periodically and maintain good records in a Fire Log book onsite. This includes testing the Smoke Detection Systems, Emergency Lighting, Fire Alarms, Fire Doors, Fire Blankets, and Fire Extinguishers.
Electrical Safety
Electrical safety is also now a major aspect. All properties must now have an EICR carried out every 5 years and it is also recommended that you ensure that tenants are not using their own portable appliances without PAT (Portable Appliance Test) Tests.
Risk Assessments
Your local council has to carry out a Housing Health & Safety Rating System (HHSRS) risk assessment on your HMO within 5 years of receiving a licence application. If the inspector finds any unacceptable risks during the assessment, you must carry out the required work/s to eliminate them and make your HMO compliant before receiving a licence.
Reporting Changes
It is also essential to report and changes to your local council when you have a HMO property, this could include:
you plan to make changes to your HMO property
your tenants made changes to the property
your tenants’ circumstances have changed (for example they have a child)
There are also lots of other little things that must be done for a HMO to be legally compliant, from displaying a notice in a prominent position within the property detailing the name, address, and contact number of yourself or the assigned property manager to providing the minimum number, and location, of shared bathrooms and kitchens.
HMO Property Licensing
Not all properties or buildings are eligible to be a HMO property. It is essential you check with your local council, and the building if applicable/not a freehold, to obtain the correct Property Licensing for setting up your HMO correctly. A HMO must have a licence if it is occupied by 5 or more people. Local councils can also include other types of HMOs for licensing. You can find out if you need a HMO licence from your local council online.
As a rule of thumb, you will need a HMO license if your property is higher than three stories and has five or more occupants from two or more households. This is called mandatory licensing. If you’re still not sure if your HMO property needs a licence, you can check with your local authorities. Note, some councils require all private landlords to apply for a license, so it’s always worth a check to avoid any unwanted fines!
How to Apply for a HMO Licence
A HMO license application can be made by a landlord or a property management company like CPL . There is normally a fee, and the amount is set by individual local authorities and is non-refundable, regardless of the success of the application. Once issued, the licence will last up to five years. Here are some of the things councils look at when making a decision whether to grant a HMO license:
If the HMO property can accommodate the number of people living there and the shared facilities are suitable.
If the landlord or managing agent are ‘fit and proper’ to take on the role.
Since 1st October 2018, councils also check that bedrooms meet the minimum size requirements.
How much should HMO management cost me?
Prices for this can vary a lot depending on the agency, some agents charge a % of the rental, which usually works out pretty badly for the Landlord. Some agencies also charge large fees whenever a tenant leaves the property or a new one comes in. This can really start to add up quickly, especially when the tenants have not been matched well which results in a quick turn over of tenancies. At CPL our HMO management fees are pretty simple, we charge a fixed rate of just £55 + VAT per room/per month and a one-off set-up cost of £350 + VAT per property.
Final Thoughts
HMO properties continue to be an appealing choice for landlords as they are often more profitable than other types of rentals. Of course, this benefit comes with the added demands we have discussed above put in place to protect tenants.
Being a responsible, capable HMO landlord takes quite a bit of work, we hope this guide has been helpful and given you a better understanding of the potentially hidden legal requirements and red tape. Managing a HMO property certainly is not for everyone, and with so many tenants under one roof vital tasks like managing rent alongside compliance regulations can prove to be an arduous task. CPL provides fuss-free HMO management services using cutting-edge management technology to ensure you get the most from your HMO property whilst making the process as simple as possible for you and your tenants.
HMO (house in multiple occupation) properties don’t have to be a headache! Yes, you read that correctly. Here at CPL we are passionate about providing you with the best possible service to achieve a fantastic ROI from your HMO property. We will ensure all of your tenants are treated with the utmost care, and the same goes for your property too. Our highly experienced team will take care of all the tedious compliance requirements as part of your set-up to ensure you don’t get lumped with any hefty fines. As an add on to our service, we can also provide full tenant welcome packs and truly detailed property guides to ensure a smooth tenancy from the day tenants move in, to the day they depart.
All our inspections are carried out quarterly as standard by our highly trained in-house team in addition to pre/post departure visits when there are any new tenants. You can also rest assured that we have a dedicated 24/7 emergency service for any issues that may arise. Our dedicated team has decades of experience, and we pride ourselves on being cost effective, and providing the absolute best service to our Landlords and tenants.
Give us a call today to find out more and see how we can help!