Consequences of having an unlicensed HMO property

Landlords and agents were sanctioned in Camden and Mansfield after investigations were carried out into unlicensed Houses of Multiple Occupation (HMOs). North Northamptonshire Council joined forces with Northamptonshire Police in a raid of 76 properties of which four were unlicensed.

Badly managed or unlicensed HMOs can cause overcrowding, anti-social behaviour and illegal activity like the existence of a cannabis factory that was discovered in one North Northamptonshire HMO. This can put a strain on the local council and the local community as a whole as it can attract unwanted issues and become an unpleasant area to live. This is the reason that landlords and agents can receive huge penalties if they are found to be running an unlicensed HMO.

What is an HMO?

Houses of Multiple Occupation (HMOs) are properties rented out to three or more people who are not from the same household. They could be students, professionals or friends who share a house.

When Do You Need an HMO Licence?

The size of the property and how many bedrooms it has, along with the location will determine whether an HMO licence is needed. It is best to check with the local council to see whether a licence is necessary before turning a home into an HMO, as the requirements vary depending on the postcode.

Generally, large HMOs of five or more people who come from more than one household and share facilities such as bathrooms and living areas will need a licence. Smaller properties may also need a licence, depending on the local council regulations.

In some areas of England and Wales, Article 4 directions are in force which means that if someone wants to turn a single occupancy home into an HMO, they will need planning permission from the council to do so. For example, in 2019, the council enforced an Article 4 direction on Doncaster which meant that anyone wanting to change a property into an HMO that would house 3-6 unrelated independent people would need to apply for planning permission. Prior to this, only for HMOs that were being shared between seven or more people required planning permission.

When Can You Receive a Penalty For Non-Compliance With HMO Regulations?

Unlicensed HMOs can receive an unlimited penalty (previously a maximum of £20,000) and a civil penalty. For instance, in June 2023, a private landlord in Mansfield was given a civil penalty of £17,000 after it was found that he was running a 6-bed HMO without a license.

A fine is not the only consequence of having an unlicensed HMO, landlords with unlicensed properties are restricted from using Section 21 and gaining access to their property if they want to evict their tenants (Section 21 is soon to be abolished, but is in force at the time of writing). In addition, the council can take over the property and take any rental income earned. Tenants may be able to claim back up to 1 year’s rent too if an HMO is found to be unlicensed.

In some cases, landlords may be able to say that they have a reasonable excuse for not complying with the HMO regulations, however, it is often hard to prove. In Thurrock Council v Palm View Estates [2021] EWCA Civ 1871, it was found that landlords could not provide the defence of “reasonable excuse” when they were told by another agent or member of the council that they did not require a license for their HMO.

It is the responsibility of the landlord to thoroughly research and gain all the information they possibly can about the HMO regulations that are applicable to their property. On the other hand, they may have a reasonable excuse if they tried to apply for a licence multiple times but the local authority did not respond to their applications.

An HMO licence must be renewed every five years and landlords have ongoing obligations when managing an HMO. They must ensure that the HMO is suitable for the number of people living there and that the gas and electricity safety certificates are updated each year. Non-compliance with these obligations can also result in penalties.

Councils have a duty to inspect HMO properties to make sure they are safe to live in. As such, the council may inspect the property once an HMO licence has been submitted, or even if you haven’t applied for one. The council can apply for a warrant to enter the property if they have reason to believe it is not in line with requirements. 

The rules around HMOs can be quite complex and are susceptible to change. As such, it is important that landlords and agents gain advice about upcoming changes and existing rules in their area.

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