Property is one of the most popular ways to invest your money and it can offer both long- and short-term returns. If you can finance a second property, you could obtain a good rental income by leasing it out. Furthermore, if the property’s price increases, you may make a substantial return if and when you decide to sell.
However, landlords are under increasing pressure. As well as changes to the tax liability for rental income, there is a myriad of licencing issues which may affect how you rent out your property. If you own a rental property or you’re thinking of investing in one, it’s essential to consider the licencing requirements first.
What Is an HMO?
A house in multiple occupation, or HMO, refers to properties in which multiple unrelated tenants reside. A common example is a student share house, where the landlord of a five-bedroom property lets each bedroom to an individual student tenant. Alternatively, an HMO may occur where a house is split into numerous studio bedsits, with each tenant sharing bathroom and/or kitchen facilities.
Ultimately, an HMO isn’t identified by the size of the property. Instead, it’s how the property is used that determines whether it’s classified as an HMO. Rather confusingly, apartments and flats can also be HMOs. Whilst the term ‘house in multiple occupation’ is routinely used, ‘property in multiple occupation’ may be a simpler definition.
When Do You Need an HMO Licence?
Not all HMOs need to be licensed – only those that are occupied by five or more people from two or more ‘households’, which are known as ‘large HMOs’.
If you’re the landlord of one or more properties that fit the ‘large HMO’ criteria you will need to obtain an HMO licence for each one before you let them out. There are strict licensing requirements that landlords must abide by, so it’s vital you consider the licensing requirements before you decide whether to let your property.
The sanction for renting out an HMO without a licence is an unlimited fine, so there can be serious financial consequences for anyone who breaches the licencing requirements. Of course, landlords can also face serious repercussions if their properties aren’t maintained properly as well.
Who Can Get an HMO Licence?
Any landlord can obtain an HMO licence, providing they meet the relevant criteria. This includes making sure the property is suitable for the number of people you intend to let it to, and that the manager of the property is ‘fit and proper.’ In addition to this, you will need to submit a valid gas safety certificate every year, submit safety certificates for all electrical appliances when requested, and install and maintain smoke alarms throughout the HMO.
Although the government sets out requirements for ‘large HMOs’, there are additional criteria which might be applicable. Every council has the jurisdiction to enforce their own licencing requirements, so they may add extra requirements before they will grant your licence.
For example, your local council may request copies of your HMO insurance policy before they will grant your licence application. You can compare HMO insurance policies from different providers by visiting Quotezone.co.uk.
Whilst the HMO licencing requirements won’t prevent you from making a return on your investment, it is vital you comply with the rules. If you’re unsure whether your property qualifies as a small HMO or a large HMO, your local council will be able to confirm its status and provide you with the licencing information you need before you put it on the rental market.
Author – Emily Roberts
