Back to Basics: What is a house in multiple occupation?

Whether you are a tenant searching for somewhere to live, a property practitioner or a landlord looking for property to invest in, chances are you have come across the term HMO at some point. HMO means house in multiple occupation. Straightforward enough, right? Well, maybe not. While most HMOs are houses/flats shared by several different tenants, all renting their rooms and the property’s communal space on an individual basis, various other types of accommodation may constitute an HMO, including, but not limited to: Hostels Buildings containing numerous bedsits with some shared facilities Shared houses Lodgings Buildings containing flats with their own facilities, but which are not self-contained Private halls of residence Refuges Blocks of converted flats Employee accommodation As a rule of thumb, a property that is occupied by three or more tenants, who form more than one household and share facilities such as a bathroom, toilet or kitchen area, could be deemed an HMO. How do HMOs differ from other rental properties? It is certainly clear that there is an increasing need for HMO properties and, with demand for affordable, flexible housing increasing, the growth of multilet properties has never been higher. On the face of it, it is also logical to see how this style of property can prove to be a great investment, with the potential to provide much higher rental yields than what can be achieved with standard buy-to-lets. However, it is not all plain sailing. Many additional considerations must be contemplated when dealing with such properties, as stringent rules and obligations are placed on those involved with HMOs. One must be alert to the numerous pitfalls to ensure one does not fall foul of the rules. In practice, the following areas give rise to the most confusion and contention. Licensing While not all HMOs require a licence, licensing will always be required when an HMO is deemed to be a large HMO. An HMO is considered a large HMO when: More than six tenants live there, forming more than one household; and toilet, bathroom or kitchen facilities are shared between tenants. Before 1 October 2018, there was an additional criterion that the building forming the HMO was three or more storeys, although this was removed by the introduction of the Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018. Some local authorities also require other HMOs to be licensed. If you are in doubt as to whether or not a property is indeed an HMO or requires licensing, contact your local planning authority/HMO officer for guidance. It is essential that all licensing requirements are complied with in relation to HMOs as failure to comply can constitute a criminal offence. Penalties can also be levied against non-compliant landlords, meaning that tenants may be able to recover up to 12 months’ rent from an unlicensed HMO landlord. HMO compliance In addition to the more familiar landlord responsibilities, such as protecting deposits and meeting energy efficiency rules, HMO landlords also have further legal responsibilities in regard to compliance. These extra rules seek to protect tenants and to make sure that people living in multilet properties or flats have adequate facilities; a main focus being on health & safety, quality of living and fire protection. Landlords must ensure that: Fire safety measures are in place, including operational smoke alarms on each floor Carbon monoxide detectors are installed in any room with a solid fuel burning appliance An annual gas safety check is carried out An Electrical Installation Condition Report (EICR) is carried out every five years Right to Rent immigration checks are undertaken on any adults living in their HMO The property is not overcrowded There are enough cooking and bathroom facilities for the number of tenants Enough rubbish bins are provided Communal areas are clean and in good repair Repair and maintenance of the structure and exterior of the property, water systems, gas pipes, electrics and sanitary ware are carried out This is not an exhaustive list, but it represents some of the legal responsibilities placed on HMO landlords, regardless of what is stated in the tenancy agreement. Planning considerations As a starting point, large HMOs always require planning permission, giving local authorities a mechanism by which to control the growth of these properties and to influence where they are developed. The landscape is somewhat more complicated in regard to general HMOs that will house six people or fewer as, presently, these do not require planning permission and can be converted directly from dwelling houses under what are known as permitted development rights (PDRs). Under the Town and County Planning (Use Classes) Order 1987 (as amended) a dwelling house will fall under use class C3 and an HMO will fall under use class C4. Deemed planning permission is granted for such a change of use by class L(b) of Part 3 (changes of use) of Schedule 2 to the Town and Country Planning (General Permitted Development) (England) Order 2015. Over the past decade, many areas, particularly those with growing student populations and areas more susceptible to local authority housing benefit cuts, have seen a significant growth in the number of HMOs. This has culminated in a large number of landlords converting, most commonly, traditional three-bedroom terraced properties into six-room HMOs through the use of PDRs. While many recognise the important part HMOs play in the housing sector, providing an affordable solution for people looking for cheap and often short-term accommodation, it is felt in some areas that there are simply too many being created. Fears have been expressed by local authorities, for example in Liverpool, that the volume of HMOs has reached “a tipping point”, threatening the housing offer available in the city for families and causing parking, anti-social behaviour and waste collection issues in certain neighbourhoods. To combat the issues, and to regain an element of control over these properties (and in particular the areas in which they are located), more and more LPAs are taking steps to adopt measures to remove PDRs from certain areas. This can be done under powers granted by what is known as an Article 4 direction. Article 4 directions and restrictions on permitted development Under powers granted by Article 4(1) of the 2015 Order and in exceptional circumstances, an LPA can make an Article 4 direction restricting/removing PDRs within a controlled area. The direction can cover a single building, street or neighbourhood and has the effect of removing deemed planning approval. Express planning permission, by way of an application, would therefore be required to convert a property into an HMO in such an area. In practice, Article 4 directions have become more widely adopted in areas where there is already a high concentration of HMOs – such as university towns. An Article 4 direction is registered as a local land charge, so should be revealed by a local search. The withdrawal of PDRs under an Article 4 direction means that, rather than deemed planning permission being granted automatically, a planning application needs to be made to the LPA. In practice, it is not uncommon to see an LPA implement Article 4 directions covering a whole borough while acknowledging that the whole borough is unlikely to be affected. Such LPAs do not necessarily refuse all planning applications for HMOs, using Article 4 directions to allow continued development, but regain control over highly concentrated areas. If you locate an HMO away from the main concentrations, and meet other policy requirements, you are more likely to be granted planning permission. The future is complicated With increasing demand for rented housing not matched by supply, the battle continues between those in favour of HMOs stressing the importance of low-cost housing during a time of nationwide housing shortages, and those against such properties on the basis of them being a breeding ground for poor standards and inadequate living conditions. What is certainly clear is that HMOs will continue to play a part in the housing landscape up and down the country for the foreseeable future. This will inevitably result in continued investments in such projects and when coupled with the ever-changing regulations and evolving rules, it is more important than ever that those involved continue to keep up to date. Taking specialist advice should always be considered when dealing with such properties. Talking to your local HMO officer/LPA to ascertain any particular requirements within your concerned area can be invaluable for all involved to stick to local regulations and to operate within the rules. Adam McDonald is a solicitor in the investment and property management team at Brabners