At Rosevale, we understand that HMO licenses are increasingly popular. With benefits such as increased income and greater stability, they can be a sensible option for landlords with suitable properties.
While there are clear advantages, landlords must consider several factors and adhere to various conditions before obtaining an HMO license.
As specialists in this field, we at Rosevale Letting have outlined some key areas of consideration to help you confidently pursue this option.
What is an HMO license?
‘HMO’ stands for ‘Houses in Multiple Occupation’. Although many properties have multiple occupants, HMO properties specifically refer to those that house two or more unrelated tenants or ‘households’.
HMO licenses may be necessary if you own a single flat, multiple flats in one building, or even a student accommodation block. For this reason, HMO properties are a popular choice for students.
A fixture of UK law for some time, HMO laws were introduced in England and Wales in 2006 and have been part of Scottish property legislation since 2000, due to the Civic Government (Scotland) Act 1982 (Licensing of Houses in Multiple Occupation) Order 2000.
Benefits of claiming an HMO license
Landlords with an HMO property license can be significantly more flexible in accepting tenants than those without.
Here are a few key benefits:
High popularity
As more students flock to major cities, licenses are becoming increasingly sought after to meet demand. If you own a property or multiple HMO-licensed properties, students are more likely to enter into tenancy, which provides a steady source of income.
Higher rental income
With an HMO license, landlords can admit more tenants to their property for residence, provided the property is suitably equipped. This means that, in some cases, rental yield can be doubled or even tripled.
Lower risk of void periods
If your tenant decides to move out and you have difficulty immediately filling the property, your property may lie dormant and fail to generate income. If you have multiple households living within your property, this temporary income reduction is less impactful as long as other residents remain.
Avoid costly fines & other legal issues
Under Scottish law, disobeying licensing laws is a criminal offence. As a landlord, you may be unable to evict or give a notice period to tenants unless you have a license. While not a ‘perk’ per se, if you’d like to avoid this issue, or prevent repaying the equivalent of twelve months’ rent, or avoid being fined up to £50,000, then all the more reason to apply for a license!
How to check if your flat qualifies for HMO licensing
Now that we have the basics of HMO properties, let’s examine the finer details to better understand what qualifies as an HMO-licensed property. In Scotland, a mandated HMO license requires that both of the following stipulations apply:
- The property contains at least three tenants residing within it, forming more than one ‘household’, i.e. two or more non-related tenants as described previously
- The property includes a shared toilet, bathroom or kitchen with other tenants
However, there are instances where a ‘large HMO’ license from the property’s local council is required. You will require such a license as this if both of the following stipulations apply:
- Five or more tenants live there, forming more than one household
- These tenants share a toilet, bathroom or kitchen with the other tenants
Differences in HMO licenses between Scotland & England
As you may have noticed in the example above, we have referred only to Scottish property law regarding mandatory HMO licenses. This is because Scottish law differs subtly from English and Welsh law on this matter.
Number of unrelated occupants
In Scotland, HMO licenses are mandatory for properties that contain more than one ‘household’ or three unrelated individuals.
Under English and Welsh property law, this requirement increases to five unrelated individuals and only applies to properties with more than one storey. In essence, Scottish law is far more prescriptive on these matters.
License application
Additionally, Scottish law requires these licenses to be obtained before a tenant takes residence, whereas, in England, applications can be submitted simultaneously with tenant occupancy. This means that in Scotland, landlords must prepare well in advance before renting out their properties.
If you’re seeking additional information or advice on the nuances of Scottish property law, our team will be more than happy to provide assistance. Continue reading to learn more about the expectations associated with an HMO property and license application.
How to apply for an HMO license
When applying for an HMO license, your local council will be your primary point of contact and will have the final say on whether the license is granted. If you are in Scotland, you can begin your application process here. The property manager can also complete this application on behalf of the landlord.
When submitting your application, you can expect a fee imposed by your local council, and you must also be prepared to notify ‘relevant persons’ of your activity. If you are a landlord, these will include:
- Leaseholders
- Mortgagees
- The proposed licence holder,
- Managing agents of the application.
Expectations & requirements for an HMO property
Once an HMO license is obtained, it can be held for up to five years, provided that the property is properly maintained and kept in good condition.
Additionally, licenses are not transferable to newly owned properties, even if the property has previously held an HMO license. In such cases, a new owner can reapply for this license.
Failure to adhere to this aspect of the process will require the new owner to start the application over, exposing the property to the latest legislation, which may render it untenable as an HMO property.
Now that we have established these conditions, we can closely examine the expectations related to a typical licensed property.
Expectations of the landlord
To maintain an HMO license, a landlord must be regarded as ‘fit and proper’ to the council’s satisfaction where the application is submitted.
This means that the landlord must not have:
- Committed a crime
- Discriminated against a tenant
- Harassed or illegally evicted a tenant
- Allowed antisocial behaviour in their rented property
- Failed to perform repairs when ordered by a council or court of law
If you do not meet these standards as a landlord, you may not be granted an HMO license.
Expectations of the Property
Moving to property-based regulations, there are several factors to take into account. To stand a good chance of attaining HMO status, your property must:
- Have rooms of a decent size
- Not be overcrowded
- Have kitchen and bathroom appliances with adequate hot and cold water
- Have safe-for-use gas and electrical appliances
- Meet fire safety standards
- Have an acceptably maintained interior and exterior
- Be secure, e.g. locks on windows and doors
- Have signage that covers emergency procedures, and contact details regarding the management and care of the property
- Have an up-to-date legionella risk assessment
If these conditions are not met or maintained throughout the rental period, your tenant can contact the local council to ensure they are executed correctly.
This can lead to intervention by the local council on behalf of the tenant, which may incur additional costs for any necessary services rendered or even prosecution in more serious cases. Such actions can result in considerable fines and/or license revocation.
For specific guidance and additional information on regulations in your area, visit your local council’s website.
Since backlogs of applications are common, applications should be completed thoroughly and to the best of the landlord’s or property manager’s ability.
How to manage an HMO license refusal
If your property is denied a license through your own application as a landlord, you may reapply through your property manager.
Following a denial, you will receive feedback regarding why, allowing you to adjust your application accordingly.
When to seek professional HMO advice for your property
If you have read this far, you will likely appreciate that HMO law can be complex and time-consuming to navigate, particularly while managing other important commitments.
With significant consequences for non-compliance, ensuring that all bases are covered and avoiding any unnecessary costs or complications is worth its weight in gold.
To help you meet the strict HMO licensing requirements, Rosevale Letting can take a tailored approach to satisfy your needs for maximum landlord and tenant satisfaction. Get in touch today.
