What is an HMO property?
You may have heard of the term House in Multiple Occupation, or its abbreviation, HMO. But perhaps you’re not 100% sure of what it means.
Well, for a property to qualify as a house in multiple occupation (HMO) it meets these criteria:
- There are at least 3 unrelated tenants living there, and therefore forming more than 1 household
- The tenants share communal areas such as toilet, bathroom or kitchen facilities
- If there are more than 5 tenants living there, then this is considered a large HMO
HMO is sometimes called ‘house share’ but can also cover hostels, bedsits, lodgings, private halls of residence, refuges, blocks of converted flats, and employee accommodation.
If you are interested in renting out your property as an HMO, it’s best to contact the local council, as you will most likely need to apply for a licence.
An HMO licence is valid for a maximum of 5 years, and once it runs out you must replace it. You also need a separate licence for each HMO you run.
Not all HMO properties need a licence, so if in doubt it’s best to talk to an expert.
The average cost of an HMO licence in the UK is around £600.
But license costs vary from authority to authority, with some as cheap as £60 and others as costly as £1,000.
Your obligations as an HMO landlord
HMO properties must follow specific rules to be eligible for a licence. You could receive an unlimited fine if you rent out an unlicensed HMO.
You must ensure the house is suitable for the number of occupants you rent it out to. That is, it must offer communal facilities, rubbish disposal facilities, be kept clean and proper, and meet certain room size requirements to avoid overcrowding.
Here are some guidelines regarding room sizes:
- No more than two people must sleep in any room, regardless of age
- Rooms can only be shared if the individual's consent to do so
- Nobody over the age of 12 should share a room unless they are cohabiting as a couple
- For people aged over 10, their room must be no less than 6.51 square metres
- If two people aged over 10 inhabit a room, it must measure no less than 10.22 square metres
- For one person aged under 10, their room must measure no less than 4.64 square metres
Further compliance rules
As manager of the house, you must be deemed ‘fit and proper’. You cannot be an HMO landlord if you have a criminal record or have ever breached landlord laws or code of practice
It is also your legal obligation to:
- send the council an updated gas safety certificate every year
- install and maintain smoke and carbon monoxide alarms
- provide safety certificates for all electrical appliances when requested
- organise electrical safety checks every five years
Health and safety standards in HMOs are taken extremely seriously by local authorities.
If your tenant has a grievance it is very likely to be brought to the attention of their Tenant Liaison Officer (TLO).
Are HMOs profitable?
HMOs are generally a sound investment and more profitable than standard buy-to-let properties. That’s because the rooms are let separately and the use of space can be maximised. For example, by converting a parlour into an extra bedroom you could be earning extra income.
What are the pros and cons of HMOs?
Every investment has pros and cons.
Here are the pros of investing in an HMO:
- Higher yields
- High demand
- Fewer void periods
If one tenant moves out, there is always someone who remains to pay their part of the rent.
Here are some of the perhaps trickier aspects of investing in HMO:
- Mortgages and finance
- An HMO mortgage is not possible until the property is converted, which takes investment and time.
- Tighter legislation
- You will probably need a licence and need to meet strict compliance rules, as detailed above.
- Higher costs upfront
- You must provide the HMO accommodation as fully furnished and decorated.
One other thing to consider is HMO insurance. It’s not legally binding to take it out, but many mortgage lenders require it as part of their terms and conditions.
That’s because an HMO property is at higher risk of damage due to increased footfall and normal wear and tear expected by having multiple occupants.
It makes sense, then, that any landlord would see HMO insurance as an investment and one of your HMO landlord responsibilities.
If you want to know more about HMO properties or get a little more advice about where to start, get in touch with one of our friendly professionals today.