Licensing for Houses in Multiple Occupation

The recent case of Taylor v Mina An Ltd [2019] UKUT 249 (LC) has emphasised the importance of understanding when a licence is required, what you should do when you acquire a property which is an house in multiple occupation (HMO) and how to apply for a licence where it is needed. A residential property may be deemed to be an HMO and need to be licensed under the Housing Act 2004 where it is occupied by more than one household.

When is Licensing required?

In Wales, a licence is required where:

• rent is paid;
• where the property is occupied by five or more people who do not form a single household (a typical household being, for example, a family); and
• where the property comprises three or more storeys.

However, since October 2018, the ‘storeys’ requirement was removed in England and therefore a licence is required where any property is occupied by five or more people who do not form a single household and rent is paid.

If you think that your property meets these criteria, then you will need to ensure that you have the appropriate HMO licence.

Local Housing Authorities have a discretion to extend the licensing requirements beyond the scope of the mandatory licensing referred to above. For example, the housing authority may designate that HMO licences are required in certain parts of its district for properties meeting specific criteria, so it is important you check your local authority’s guidance on HMO licensing for your area to see whether there are any discretionary licensing requirements which may apply to your multi-occupier property.

There are various buildings which may be caught by the occupation test, but which have been exempt from being classed as an HMO – for example, a building under the control of a local housing authority, buildings such as care homes and children homes and buildings which are occupied by students in full time education and which are managed by the education establishment which they attend (student halls), as well as many others.

There are various rules and regulations about what HMO accommodation must provide, and how large it must be, which are not a part of this article.

Obtaining a Licence

The person who owns or controls the property is the one who has the obligation to obtain a licence. A licence must be obtained for each individual property which meets the criteria – you cannot obtain one licence for a portfolio of properties.

A local housing authority will consider:

• whether the property is reasonably suited for the number of persons permitted to occupy
• are the proposed management arrangements sufficient?
• are there any banning orders or other reasons why the person to whom the licence will be granted would otherwise be unsuitable?
• whether conditions should be imposed – such as a maximum number of occupiers for each room, and a minimum requirement for room dimensions in rooms where people will be sleeping
• how long the licence should be for – this can be for a period up to five years

It is important to remember that just because a licence was granted previously for a property, does not mean that a licence will be granted again, as the circumstances or personnel involved change.

It is important to note that a licence is personal to the person who obtained the licence initially. If the licence-holder dies then the licence will terminate. If the property is sold, the new owner will need to apply for their own licence. The licence will not transfer with the property.

This was confirmed in the recent Taylor case referred to above where the property was an HMO and the sellers had a licence which was valid for a number of years. The property was sold to a new owner, who then failed to apply immediately for a new licence, as the existing licence was due to run for another 3 years. When the new owner eventually did apply for their own licence, a year later, it was granted, but the tenant of the property applied for a ‘rent-repayment order’ as the property was not properly licensed for that part of the tenancy period. The first-tier tribunal dismissed the claim as the original licence had not expired. However, this was overturned by the upper-tribunal as the licence was not transferable, and therefore the property had not been properly licensed, and the rent was ordered to be repaid.

What if I don’t have a licence?

If the owner of a property which is required to have a licence fails to obtain one, or breaches the conditions and requirements of it, then the local housing authority may prosecute and also impose financial penalties.

Where a property is not licensed, but should be, the occupier or the local housing authority can also apply to a residential property tribunal for repayment of rent, as shown in the Taylor case.

If you own or are acquiring a property which is or may be an HMO it is important to familiarise yourself with the licensing requirements and to comply with these or else you may face criminal proceedings.

Please also note that, just because an HMO licence has been granted by the local housing authority, that does not mean that the property is authorised for HMO use under planning law. This is a separate question which you will need to consider.

If you have any concerns about your multi-occupier properties and/or are looking to acquire a property which is an HMO, please do get in touch, as our Real Estate team would be happy to help you.