Definition of a HMO (House in Multiple Occupation)
Posted by Phil Ashford
Let's be clear from the outset - This can be confusing!
**Trigger Warning** word count exceeded!
The term HMO is used by many different institutions and legislation - You must first place the use of the term HMO into the correct context, and then carefully consider the meaning, as detailed below.
The most fundamental mistake made by far too many people is distinguishing between HMO as per the Housing Act 2004 (and requirements thereon), HMO Licensing and HMO Planning Permission, I will make it clear today - You must think about all three separately! If all you take away from this blog are the below three points, you will be well on your way to getting HMOs right...
- Just because you don't need a license, it does not mean that statutory obligations do not apply by virtue of being a HMO as per Housing Act 2004;
- Just because you don't need a license, it does not mean you do not need planning permission; and
- Just because you have a HMO as per the Housing Act 2004, it does not mean that you have a HMO in the eyes of your mortgage company or insurance company.
The following institutions / legislation uses the term HMO - Each of them can be different:
- The Housing Act 2004
- Council Tax definitions
- Housing Health and Safety Rating System (HHSRS)
- Local Council HMO Licensing departments (Three types of licensing exist)
- Mandatory Licensing
- Selective Licensing
- Additional Licensing
- 3 - 6 Person HMO - "C4" Use Class HMO
- 7+ Person HMO - "Sui Generis" Use Class HMO
- Mortgage companies (the plural is important here - every lender will vary their definition)
- You may have a HMO by virtue of the Housing Act, but not according to the mortgage company!
- Insurance companies
The Housing Act 2004 definition of a HMO
The definition of a HMO is fairly long winded, but for your reference I have linked the Act and it is contained in Section 254 to 258 of the Act. If you have a HMO, as per this definition, then you need to comply with the Management of Houses in Multiple Occupation (England) Regulations 2006, link here.
Ultimately, a brief overview is that a HMO will be a property "occupied" by "more than one household" and "more than two people" who "share" one or more basic amenities and it could include shared houses, some self contained flats and bedsits.
I have put into quote marks three important parts of the definition: Occupied, Household and more than two people.
To be a HMO the property must be Occupied - That doesn't mean an AST (Assured Shorthold Tenancy) agreement dated for occupation in the future, but when it becomes the main residence of the tenants who have taken active occupation of the building. This is important, since you could have a signed tenancy dated 1 February that commences on 1 April, but the tenants do not move in or 'Occupy' it until 3 May. To meet the definition of a HMO, it needs to be occupied by the tenants as their main residential dwelling, thus in this case, it would be a HMO as of 3 May.
Household - People get confused here, so take care. This is defined in Section 258 of the Act. Broadly speaking, a household equates to a family, and a family can consist of parent, grandparent, child, grandchild, wife, husband, cohabiting couple, brother, sister, uncle, aunt, nephew, niece or cousin.
Share basic amenities - If you share a toilet, washing facilities or cooking facilities then you will meet this test.
Some examples, assuming they all share some form of basic amenity:
- If you share with a friend as two in a shared house, then the house consists of two people and two households = Not an HMO
- Owner Occupier has two lodgers, none are related, then the house consists of three people and three households = Wait for it... Not an HMO (This is an exclusion)
- Owner Occupier has three lodgers, none are related, then the house consists of four people and four households = Now you have a HMO (confusing I know)
- Three friends sharing a house, then the house consists of three people and three households = HMO
- A married couple renting with another person, then the house consists of three people and two households = HMO
- A married owner occupier couple with two lodgers, then the house consists of four people and three households = Not a HMO (I know, another exclusion!)
Confusing right?! It is, and that is why it is a very tricky area of legislation for landlords and owners to get right. I hate to say it, but that is just a summary of the first definition of a HMO, as per the Housing Act 2004!! If your property is a HMO in accordance with section 254-258 of the Act, then you have certain responsibilities that you need to think about. The 'Manager' of the HMO is important, the gas and fire safety is important, notices in the property and many other considerations - Please read the Management of Houses in Multiple Occupation (England) Regulations 2006, link here - it is a statutory requirement as the owner or manager of a HMO as per the Housing Act 2004 (HA 2004).
HMO Licensing 'definition' of a HMO
This is a topic that often hits the headlines. "Landlord failed to apply for HMO Licence, fine of up to £20,000 payable". Understandably it is the area of HMO management that many are concerned by, but it is one that causes confusion - licensing does not redefine a HMO, it merely states which HMOs may or may not need to apply and pay for a licence from their local council.
Strictly speaking, the licensing of HMOs only involves certain HMOs (as per HA 2004), but unfortunately the criteria for which HMOs need licensing is often confused with the true definition of a HMO. There are three types of licensing scheme, the first is Mandatory Licensing, the most quoted type of licensing in force and yet also the source of most confusion when defining a HMO. Under Mandatory Licensing, a rented house 5 or more people forming two or more households will need a HMO Licence (the definition used to include 3 storeys, but this was changed in 2018) - This is not a definition, but a set of criteria. Note that such a house is a HMO with respect to HA 2004 but it is just now a 'Licensable HMO' due to it falling within the scope of Mandatory Licensing requirements. A house that only had 4 unrelated people in it forming two or more households, would also be a HMO but it would not be a Licensable HMO by virtue of the Mandatory Licensing laws.
In certain areas, local councils will enforce Additional Licensing, widening the scope of which types of HMOs need a licence. An example is here, where Hounslow Council seeks to license the above example 4 person HMO that does not fall within Mandatory Licensing - In this case (each Council can vary the scope) the Council chose to also license any HMO with four or more people in, and who form two or more households.
With Selective Licensing the Council can seek to license any rented property within a given area, not just HMOs - So the defintion of a HMO is not critical, as any rented accomodation would need licensing.
Planning Permission? "But I don't need a licence?"
Please, please, please do not confuse the above licensing requirements with HMO planning requirements - the two are separate and different, please do not just speak to one Council department without consulting the other (Planning and Licensing are separate and very distinct departments). Generally, all conversions between a dwellinghouse C3 Use Class dwelling and a HMO C4 dwelling are a 'permitted development' meaning you can change a house from having a family in it to having a group of up to 6 unrelated people who would form a HMO as per HA 2004 without the need for any planning permission. The pertinent question you need to ask your local planning department is whether they have an 'Article 4' direction in place. If they do, then your house has had its permitted development rights for converting C3 houses into C4 HMO houses removed, meaning a new HMO will need planning permission. If the area already has a 'high concentration' of HMOs in it, then planning permission will be very difficult to obtain. For the purposes of planning permission, the definition of HMO is as per HA 2004 - so any of the examples listed above that are HMOs would need planning permission. Please note, that this doesn't mean that they need licensing!
We have plenty of blog posts on Article 4, just take a look back over the older blog posts. Remember, planning permission is needed for any HMO that will have more than six people, i.e. 7+. This is called a Sui Generis HMO and always needs planning permission.
Mortgage company and Insurance company HMO definitions
Private companies who provide financing and insurance services use their own definitions of a HMO. In each case, read their small print to find out what a HMO is as per their definition. Some mortgage products say that you cannot get finance on a 'HMO'. When you look on the face of it, the house could be a HMO as per HA 2004, as well as needing planning permission and also needing licensing but the mortgage company might state that their definiton is 5+ people, meaning by their definition 'real' HMOs will not be a HMO as per their own quirky definition. Watch out therefore! Just because your house is a HMO according to HA 2004 and the mortgage or insurance product states that it will not accept HMOs you may find that the product is still suitable and available, make sure you check the small print!!
Council Tax definition of HMO
This area of HMOs does get more confusing and is causing concern for many investors. We have a really important blog that details what you need to know about this and you can read it here.
Hope you enjoyed the marathon and I hope that has helped clear up possible confusion.
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