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LANDLORD’S GUIDE FOR LETTING

Licensing & Houses in Multiple Occupation (HMOs)

The purpose of licensing, especially for HMOs, is to ensure that residential accommodation within the Private Rented Sector (PRS) is safe, well managed and of good quality with a particular focus on safety.

Guide to HMO

Definitions

What is a HMO?

A House in Multiple Occupation (HMO) is any residential property occupied by three or more people sharing facilities like a bathroom and/or kitchen who form two or more ‘households’.

What is meant by the term ‘Household’?

A household is either a single person or members of the same family who live together. A family includes people who are:

  • Married couples or couples living together as married (including people in same-sex relationships)
  • Relatives or half-relatives e.g. grandparents, aunts, uncles, siblings, nieces, cousins
  • Step-parents and step-children and half-relatives
  • Foster parents and foster children

Some domestic staff would be included in the household if they are living in the house as a result of the terms of their contract e.g. an adult carer and up to three people receiving care are a single household.

Licensing types

There are three types of HMO licensing

Mandatory licensing of large HMOs
Applies nationwide for HMOs where there are five or more occupants in a property of three or more storeys and the buyers comprise of two or more households.

Additional licensing
When a council imposes a policy requiring other sizes of HMOs to also be licenced. For example, a council can bring in additional licensing requiring all HMOs to be licenced.

Selective licensing
This is at the discretion of the borough and can affect all rental properties regardless of size, number of storeys, or number of occupants. For example, a council can instigate compulsory licensing of all residential rental properties within a street, ward or the whole borough.

Before granting a licence, the local authority must be satisfied that the owner and any managing agent of the property is fit and proper to hold a licence and that the property meets required physical standards.

A licence will normally be granted where…

  • Appropriate fire safety measures are in place such as smoke detectors, extinguishers etc
  • Annual gas safety checks are up-to-date
  • The electrical wiring and appliances have been checked and certified as safe every five years
  • The property is not overcrowded
  • There are adequate cooking and washing facilities
  • Communal and shared areas are kept clean and in good repair
  • There are appropriate refuse storage and disposal facilities

Once granted the licence must be clearly displayed within the communal areas along with the name, address and telephone number of the licencee or property manager of the premises. A copy of the current gas safety certificate must also be on display.

How can I check if a property needs to be licenced?

If you are not sure whether it needs to be licenced then contact the local borough council in question – often their website contains the relevant information.

Can a landlord evict a buyer to avoid licensing?

No. Landlords are not allowed to evict existing buyers in order to avoid licensing. Any attempt to get a buyer out of a property that should be licenced but isn’t may be considered a crime under the Protection from Eviction Act 1977, and the landlord or anyone else involved may be prosecuted. The Deregulation Act 2015 has also changed the law so a valid notice cannot be served to end a tenancy if the property should be licenced but isn’t currently.

Licensing requirements

What will the council take into account when deciding whether or not to grant a licence?

  • The suitability of the HMO for the number of occupiers
  • The suitability of the facilities within the HMO, such as toilets, bathrooms and cooking facilities
  • The suitability of the landlord and/or the managing agent to manage the HMO (this is called the “fit and proper” test)
  • The general suitability of existing management arrangements of the property

The council also has to carry out a Housing Health and Safety Rating System (HHSRS) risk assessment on a HMO within five years of receiving a licence application. If the inspector finds any unacceptable risks during the assessment then the landlord will be instructed to carry out works to eliminate them. The landlord must also notify the council if they plan to make changes to a HMO (structural or decorative), if the buyers make changes to the property, or if the buyers’ circumstances change (e.g. they have a child).

The council must ensure that a licenced HMO is not overcrowded and has suitable shared amenities and facilities for the number of persons occupying it. If there are too many people living in the HMO at the time the licence is granted, the landlord must take reasonable steps to reduce the number of occupiers to the permitted number. Existing buyers will not normally be evicted. Instead, when they move out, it will be an offence for the landlord to allow new buyers to move in if that would bring the total number of occupiers above the maximum number allowed.

Enforcement

What happens if a landlord doesn’t apply for a licence?

It is a criminal offence to operate a HMO that should be licenced but isn’t and if convicted, the fines for non-compliance are unlimited.

Local authorities also have a range of other enforcement options including the power to vary the terms of a granted HMO licence or to revoke an HMO licence.

Under a rent repayment order, landlords may have to pay back to a buyer any rent they have received, or to the council any housing benefit they have received, up to a maximum 12 months. The tenancy itself will not be affected if the landlord has failed to apply for or obtain an HMO licence, although the council may take over the management of the property as another method of enforcement.

LEGAL MUSTS FOR LANDLORDS AND LETTING AGENTS

Gas Safety

Where there are any gas appliances in the property provided by the landlord, the landlord must ensure that annual gas safety checks are carried out. These checks must be carried out by a gas fitter/engineer who is registered on the Gas Safety Register (which has replaced Corgi). A copy must be given to the buyer before the buyer moves in and the check must have been carried out within the 12 months before the new buyer takes up occupation. Checks must be done annually at no more than 12 month intervals and copies of all certificates for checks must be handed over to the buyer. If landlords fail to do this they may lose their Section 21 rights in England as of 1st October 2015.

Fire Safety Order

Where a landlord controls flats, bedsits or hostels there must be a risk assessment in place to comply with the Fire Safety Order. It should be in writing. A statutory risk assessment is not required for shared houses or single dwelling lets.

Energy Performance Certificates (EPCs)

Before a buyer moves in there must be an energy performance certificate in place for most types of property. A copy of the certificate must be given to any buyer who moves in to the property. If not you cannot serve a Section 21 notice for a new tenancy in England after 1st October 2015.

Deposits

If you take a deposit from a buyer under an assured shorthold buyer, the deposit must be protected under one of the three tenancy deposit schemes and the prescribed information regarding the deposit must be given to the buyer within 30 days of receiving the deposit.

Payments of rent/administration fees

It is very important that advance payments of rent and non-returnable administration fees are not confused with deposits. You should always make clear to buyers what money is being taken for; otherwise it could be regarded as a deposit which shall be protected under one of the deposit protection schemes.

Licensable HMOs

If your property is a house in multiple occupation (e.g. bedsits, shared house or a shared flat) then an HMO licence may well be needed from the local authority. Landlords should check with their local authority on what licencing requirements, if any, that they have. If they do not they may not be able to serve a Section 21 after 1st October 2015.

Electrical inspections

If your property is a house in multiple occupation of any kind then you must have a five yearly electrical safety check carried out by a competent electrician even if you do not need a licence. This will cover shared houses, flats in multiple occupation, bedsits, hostels and certain converted blocks of flats. These are blocks of flats which are not converted in compliance with 1991 (or later) building regulations and less two/thirds of the flats in the block are owner/owned.

Electrical appliances

Where a property is provided with electrical appliances it is the landlords responsibility to make sure that they are safe at the outset of letting.

Fire alarm systems and fire precautions in HMOs

Where fire alarm systems are provided in a house in multiple occupation because the landlord is responsible for insuring fire alarms are checked regularly. You must also make sure that the means of escape from the property (normally the halls stairs and landings) are unobstructed. Houses in multiple occupation include shared houses, flats in multiple occupation, bedsits and certain types of converted flats.

Carbon Monoxide and alarms in non-HMOs

Landlords in England are required to provide smoke alarms on every floor of their property and a carbon monoxide alarm in every room with a solid fuel source. (copy from RLA)

Prescribed information to buyers in England

As of 1st October 2015, upon starting a tenancy landlords are now required to provide the most up to date copy of How to rent: the checklist for renting in England. If they haven’t they will not be able to serve a valid Section 21 notice in England.

Legionella assessment

Landlords are required to perform a risk assessment for Legionaire’s Disease. If they don’t do this they could be issued with a fine. However, the amount of risk assessment required depends on the type of property and landlords should be wary of claims that all properties need extensive water sampling tests.

Illegal eviction/harassment

You must not harass your buyers. It is unlawful to evict a buyer without a Court Order. You cannot throw a buyer out because he is in arrears with his rent or breaking the terms of his tenancy. You must go to Court to get a possession order. Any possession order obtained must be enforced by the Court Bailiff.

Agents Duties to publicise fees/their redress schemes

Under the Consumer Rights Act 2015 it is now a legal requirement for all letting and managing agents in England and Wales to publicise details of their fees and to say whether they do not have client money protection. They must also give the name of the redress scheme of which they are a member. Membership of a redress scheme is compulsory for agents. The intention is that there should be full transparency to deter double charging to both the landlord and the buyers and enabling buyers and landlords to shop around.