A Landlord’s Guide to Houses in Multiple Occupation

When you invest in a property with the intention to rent it out, one of the key decisions you’ll face is what kind of tenants you want to occupy it.

Some landlords prefer single professionals as it reduces the wear and tear, while others prefer the security of working couples or families,  who offer multiple income streams for rent payments,

For those considering converting their property into separate living areas to accommodate a group of tenants, this is commonly known as a House in Multiple Occupation (HMO). HMOs cater to a variety of occupants, from students to professionals seeking more affordable housing. However, it’s important to note that owning an HMO comes with a set of regulations that landlords must adhere to.

Is my property an HMO?

If there are three or more unrelated tenants living in at least two separate households within your property, sharing the toilet, bathroom, or kitchen facilities, this is classed as an HMO.

When it comes to HMOs, a household is defined as a single person, a couple in a relationship, a married couple, or an entire family living together in one property. For example, three unrelated people living in different rooms would be classed as three households.

According to the Housing Act 2004, the following all qualify as HMOs:

• Properties converted into self-contained flats that do not meet 1991 Building Regulations
• When at least a third of said flats are available to rent on short-term tenancies
• Three or more unrelated households are contained in the property
• Either bathroom, cooking or toilet facilities are shared by unrelated tenants
• Each tenant is in possession of their own tenancy agreement
• Students currently live in the property
• The property is being used as either a hostel or bedsit

However, it should be remembered that a landlord who lives in the same property as two other unrelated people is exempt from being an HMO. If only two unrelated people rent out separate rooms and share facilities in the property, this would also be exempt.

Does student accommodation follow the same guidelines?

Student accommodation is considered an HMO, and there are approved codes of practice in place to help with their management. Universities UK have published The Student Accommodation Code, while there is also the National Code. The use of these codes is completely voluntary, although they will ensure you are adhering to current legal requirements.

Do I need to get an HMO license?

Since the rule changes made on October 1, 2018, all HMOs must have a license. You must apply for a licence if 3 or more unrelated people occupy at least two different households. The maximum length for any licence is 5 years and if you wish to apply for a new one it must be renewed before the existing licence expires.

There are two types of licence available:

Mandatory: This is for properties that have three or more storeys or contain five or more unrelated tenants that consist of two or more households.

Additional: This is for smaller HMOs that have at least three different people living in two separate households, regardless of the number of stores in the building.

Selective: As of July 2023, selective licensing is implemented for properties in areas of low housing demand or significant anti-social behaviour. It only applies to properties covered by mandatory HMO or additional licensing schemes, enabling local authorities to manage specific housing issues effectively.

Minimum room sizes which are as follows:

• One person over the age of 10: 6.51m2
• Two people over the age of 10: 10.22m2
• One child under the age of 10: 4.64m2

Any room in the property that is less than 4.64m2 cannot be used for sleeping. If you own a property with a room under this size your local authority must be informed.

To apply for an HMO licence, you will need to contact your local council to start the process.

Click here to view the latest HMO licence requirements in Brent.

HMO Licensing Fees in Brent Explained

Brent council has emphasised that it cannot generate any profit from the scheme; it must operate on a cost-neutral basis. They have clarified that the price is necessary to cover costs associated with setting up, running, and enforcing the scheme. Here are some fees associated with HMO properties:

• Mandatory: £840 + £25 for each extra habitable room above the minimum five habitable rooms; renewal cost £740
• Additional: £840; renewal cost £740
• Selective: £640; renewal cost £300

If you already have accreditation via the London Landlord Accreditation Scheme (LLAS or ATLAS), you may be able to receive a £40 discount per property application. This is a goodwill gesture from Brent Council in recognition of the many well-managed properties already located within the borough.

What are the penalties for failing to maintain an HMO?

It is the landlord’s legal duty to abide by the guidelines mentioned above. If not, they will be liable to receive a fine for non-compliance, although there is a defence of reasonable excuse.

If found guilty of breaching their legal responsibility, a fine will be handed out for each separate offence. If it is deemed necessary, further action may also be taken under Part 1 of the Housing Act 2004.

Other fines imposed by the local authority can also include:

• A civil penalty of up to £30,000 as an alternative punishment to prosecution
• A banning order once the landlord has been convicted

Get in touch with our expert letting agents about our HMO consultation and management service today. We can help you maximise rental yields and understand the legal requirements and maintenance duties related to HMO property ownership.

When to contact your Mortgage Broker?

If you used a mortgage broker to secure finance for your properties, and one (or more) of the properties in your portfolio now fit in as an HMO due to the rule changes (October 1st, 2018), we advise contacting them. This is to ensure you can still secure the right level of finance, as lending on your portfolio may be impacted as a result. An alternative option may be to seek a mortgage via a commercial mortgage lender.

Get in touch with us today, and we can put you in touch with our partner mortgage company to discuss HMO financing.

If you’re uncertain whether your property qualifies as an HMO, it’s advisable to apply for an HMO licence. Additionally, seeking the assistance of a solicitor can be beneficial if you encounter any legal challenges with your local authority.

Do HMO landlords have any different responsibilities?

Whether you own an HMO or not, as a landlord, you have a duty to meet all of your legal responsibilities.

In addition to this, there are a number of additional duties that come with owning an HMO:

• Communal areas and facilities must be maintained and repaired
• Good quality fire safety equipment, such as heat detectors and mains powered smoke alarms, must be installed
• Make sure a gas safety check is carried out each year by a qualified professional
• Ensure the property is not overcrowded with too many occupants
• Provide an adequate amount of cooking and washing facilities for the tenant’s present
• Ensure that the electrical systems are inspected at least once every five years
• Conduct a fire risk assessment, with guidance available from your local authority
• Ensure there are accessible fire escape routes and that these are always kept clear
• Give the tenants enough waste bins for the property

Regardless of the terms stated in an individual’s tenancy agreement, the above points are legally binding. Many HMO landlords engage a professional management company to fully manage, such as Regal Estates, to ensure that they comply.

Do HMOs yield more rent?

HMOs will produce a higher total yield than any other type of rental property. According to the Leeds Building Society, rental returns are producing an average of 7.2% or more.

Due to the slow wage growth experienced by many over the past five years, a growing number of tenants have been unable to find the funds required for a property deposit. This has led to a boom in the rental market, as living in a self-contained flat or individual room has become more financially attractive for both tenant and landlord.

The 2024 Q1 Data sourced from SpareRoom indicates that the average room rent outside of London now stands at £653, including bills. This represents a 9% rise compared to the same quarter in 2023. 

The increase is more noticeable in London at 16%, with rooms now averaging £971. Interestingly, all London postcodes now have average rents exceeding £780.

This escalation in rents is significantly higher than the Consumer Price Index (CPI) inflation rate, indicating a sharper rise than in rents for single-occupancy properties. For comparison, Rightmove reports that the average increase for new single-let tenancies outside London over the year ending in the fourth quarter of 2023 was 9.2%, amounting to an average monthly rent of £1,280.

As you can see, the more rental agreements you have in place for a single property, the more opportunity you have to maximise the return on your investment.

Real-Life Examples of Houses in Multiple Occupations

Beaconsfield Road, Willesden, NW10

Our team has transformed a two-bedroom flat in Willesden into three en-suite bedrooms, creating four rentable rooms and increasing monthly rent from £1500 to £2895. The renovation added about £60,000-£70,000 to the property value, maximising rental yield while adhering to Brent Council's HMO standards. Our property management team now fully manages the tenancies, ensuring continuous occupancy and client satisfaction.

North Circular Road, Neasden, NW10

Regal Estates transformed a first-floor commercial office into a profitable residential HMO, obtaining necessary planning permissions for a triple loft conversion. This upgrade not only increased property value but also allowed for eight rentable rooms, some with en-suites. The project is now under Regal Property Management, bringing in a substantial monthly rental income of £5020.

See more HMO Use Cases.

Ready for Houses in Multiple Occupation Consultation?

Our HMO consultation and management service has helped countless landlords over the years to make sure their properties are fully compliant and ready to maximise rental yields. If this is your first time managing an HMO, or you are considering converting your property into one, contact our expert lettings team today on 020 8459 2530 or email lettings@regalestate.co.uk.

Additional Resources

To find out more information related to safety procedures and HMO licencing, this government guidance document will provide full details.

You can find out more about the Brent Council HMO and the Additional licencing scheme by visiting their website.

More about HMO licencing within Harrow can be found here.

To get more insight into HMOs in Westminster and Central London, visit the City of Westminster council website.

Visit the Camden Council website if you wish to find out more about HMOs in the borough.

Disclaimer: The information on this website regarding regulations is provided for general informational purposes only and should not be considered professional advice. While we strive to keep the information accurate and up-to-date, we cannot guarantee its completeness or suitability for any specific situation. It is your responsibility to verify the information with the relevant authorities before relying on it for making critical decisions. We disclaim any liability for errors, omissions, or outdated information.