How HMOs could be the answer to our ageing population

We are increasingly seeing specialist accommodation for the elderly being built as a result of people living longer. For example, specialist extra-care housing is built with the needs of older people in mind, and varying levels of care and support are provided on site. People living in extra-care schemes have their own self-contained homes, their own front doors and a legal right to occupy their property. Such accommodation is occupied as a result of the purchase of a leasehold interest, often with a high price tag which may be out of reach of many, or under a tenancy agreement. An alternative for ageing people who cannot afford to live in such accommodation would be to look at living in shared accommodation, such as a house or flat. Such accommodation is called a “house in multiple occupation” (HMO), and is often occupied by people on lower incomes. The reason for this is that sharing such accommodation with others is a good way of reducing the costs of renting, as rents for a single room will be lower than renting an entire property. It can also be a good way of making friends if moving to a new area, etc. HMOs are popular among students, however they may prove increasingly attractive to older people as, if managed well, there are great advantages to be had from living communally as opposed to living alone – one of which is combatting loneliness. So what are HMOs, what considerations should landlords have regard to when thinking about entering this arena, and what issues do older residents need to think about? What is an HMO? Under the Housing Act 2004, a property is automatically classed as being an HMO – and as a result, subject to mandatory licensing – if it is occupied by five or more people forming two or more separate households, who also share facilities such as the kitchen or bathroom, regardless of the number of storeys the property has. Furthermore, there are a number of specific tests, known as the “standard”, “self-contained flat” and “converted building” tests. If any of the criteria for these tests is met, it will result in a building (or part of it) being classed as an HMO. In addition, a property will be an HMO if it is declared to be one (this is rare), or is defined as being one, under the provisions of the Housing Act 2004. It should be noted that the owner of an HMO, rather than the occupiers, will be liable to pay the council tax. What is considered a household for HMO purposes? A household is defined as either a single person or members of the same family who live together. The definition of a family includes: people who are married or living together (including same-sex couples); relatives or half-relatives (including grandparents, aunts, uncles and siblings); and step-parents and step-children. In a nutshell, relationships by either blood or marriage will mean the individuals concerned count as a single household. Mandatory licensing requirements The Licensing of Housing in Multiple Occupation (Prescribed Description) (England) Order 2018 revoked the 2006 Order, and abolished the requirement for a property to have three storeys or more before it automatically falls within the mandatory licensing regime. With effect from 1 October 2018, a landlord has been required to obtain a mandatory licence if an HMO is merely occupied by five or more people living in two or more separate households. This requirement will be reviewed in April 2023. An HMO licence is valid for a period of five years, and members of the public can check the register to see whether a property is licensed by contacting the local authority in the area a property is located. If a landlord is not exempt from obtaining an HMO licence, or does not have a licence where one is required, they can face enforcement action by their local authority and can be fined up to £30,000 – as well as having their name entered on to the database of rogue landlords. They may also be ordered to repay up to 12 months’ rent to either the local authority or their tenants, by way of a rent repayment order. Furthermore, under section 72(1) of the Housing Act 2004, criminal proceedings can be instigated against anyone who, without a reasonable excuse, is found to be controlling or managing an HMO property without a licence. On conviction, a court may impose an unlimited fine and control of the premises may be taken away from them as a result of a management order being made where they are not considered to be a “fit and proper” person to hold an HMO licence. Why is there licensing? Large HMOs are seen as high risk in terms of safety issues such as fire and electrical safety. This is largely due to the temptation for some landlords to squeeze lots of people into a property to maximise rental income, but then do little to ensure conditions are acceptable by undertaking necessary repairs. There are three different types of licensing: Mandatory licensing: This requires landlords to comply with the legislation and regulations which govern the same to avoid being subjected to the types of enforcement action already discussed. Discretionary licensing: Some local authorities adopted the “additional licensing scheme” which is discretionary, and is commonly called “discretionary licensing”. Such discretion is exercised to assist a local authority to deal with the problems associated with HMOs that are not covered by the mandatory licensing scheme. Discretionary schemes usually last for five years, and can be renewed if there is evidence to support the effectiveness of the scheme and support its continuation. A discretionary scheme may cover the whole of a local authority borough or just a designated area which, for example, has a large amount of HMO accommodation. Selective licensing: In addition to the two types of licensing already discussed, a “selective licensing scheme” may be adopted by a local authority which requires landlords letting property that does not meet the criteria for mandatory or additional licensing to obtain a licence if their property is located within the designated selective licensing area. Again, such schemes are introduced to help address problems associated with privately rented properties, and typically include smaller privately rented shared houses and flats. It is important for landlords to note that it is the property that requires a licence, as opposed to the landlord. Hence, for example, if one landlord owns five HMOs, each property, unless exempt, will require a licence, whether it be under either the mandatory, additional or selective licensing schemes. What security of tenure do HMO tenants have? As a minimum, people living in HMOs will be classed as being assured shorthold tenants. As a result, it is essential for landlords to comply with the regulatory and legislative requirements to protect any deposits taken, provide tenants with prescribed information relating to tenancy deposits, serve gas safety certificates prior to the commencement of a tenancy, carry out the requisite immigration checks, give tenants the how-to-rent checklist, and supply tenants with an Energy Performance Certificate. Failure to take the necessary steps may result in a landlord being unable to validly serve their tenants with two months’ notice of their intention to recover possession under section 21 of the Housing Act 1988, or to require a landlord to reimburse any tenancy deposit before such action. How are HMOs managed? There are management regulations which apply to HMOs, and which apply to both landlord and tenants. Unsurprisingly, these regulations are more onerous for landlords. The regulations require the manager of an HMO to, among other things, be responsible for fire safety. This requires the means of escape to be visibly displayed; reasonable measures to be taken to protect occupiers from injury; the roof and any balconies to be safe; the water supply and drainage system serving the HMO to be maintained in good, clean and working condition; and for gas and electrical safety checks to be undertaken. In relation to the common parts, such as corridors, the manager must ensure they are free from obstructions, as well as being in good and clean decorative repair. There is also a need for compliance with the Regulatory Reform (Fire Safety) Order 2005, which requires a full risk assessment to be carried out of common parts. The obligations imposed on landlords and managers of HMOs are extensive. However, for those who are committed to abiding by them, the benefits for both landlords and ageing tenants are substantial. For example, for landlords, the potential to have a number of people living in their accommodation on a long-term basis can equate to guaranteed rental income. This is because a group of older residents who are able to bond are unlikely to be transient. For tenants, the ability to share good-quality, well-maintained accommodation and engage with others will undoubtedly go a long way to help address loneliness and isolation. Yetunde Dania is a partner at Trowers & Hamlins