HMOs can make a tidy profit for landlords, but it’s certainly not easy money. The extensive regulations surrounding HMO management, the draconian powers of local councils, and heavy-handed enforcement procedures can result in ruinous penalties.
According to the global data and business intelligence platform Statista, houses in multiple occupation (HMOs) enjoyed the highest property yield in the UK in 2023, with a rate of six percent. Some HMO landlords claim yields as high as 11 to 12%, even when taking into account the higher operating costs of an HMO.
As with all businesses, it’s a case of risk versus reward.
What many landlords don’t realise is that they face a massive risk that can wipe out any profit and quickly lead to financial ruin: HMO fines.
The complicated legislation governing HMOs means that even just one breach of the regulations can incur HMO fines of up to £30,000. Multiple breaches are commonplace and lead to multiple fines.
And as breaches of HMO rules are an instant criminal offence, it’s essential to know who’s liable, what for, and how to minimise the risk of being on the receiving end of draconian council enforcement.
What is an HMO?
The bar for classifying a privately rented home as an HMO is much lower than many landlords may think. According to the Housing Act of 2004, a dwelling is an HMO if it forms the primary residence of as few as three people who aren’t all part of the same household, and those people share a basic amenity such as a kitchen or bathroom.
The definition of one household includes people who are related to each other (including foster families), couples who live together as partners, a carer and the person they care for, and in some cases an employer and a domestic employee.
Using this definition, a landlord could find themselves unwittingly classed as the owner of an HMO in some common scenarios: a couple who invite a friend to live in their spare room; well-meaning couples who live in a rented property and agree to take in a lodger; two single flatmates who offer their sofa to a friend who’s fallen on hard times.
In any of these scenarios, the landlord could be oblivious. But under the Housing Act 2004, ignorance is not a defence in law. All breaches of the legislation are strict liability, meaning that the moment they occur, a criminal act has been committed.
What will the local authority do if it suspects an unlicensed HMO?
If the local authority suspects a privately rented property is operating as an HMO without the appropriate licence, more often than not it will act first and ask questions later.
HMO regulations stipulate that the property should be the only residence of every person in the household. But even if a friend ends up staying on the sofa after a relationship breakdown, if it’s technically their only residence, the rules will apply. And if the council suspects a breach, it has the power to conduct a dawn raid.
It may seem incomprehensible that a team of enforcement officers resembling a drug squad can demand entrance to a rented home at 5am, get everyone out of bed and examine their credentials – but it happens. And if that friend on the couch innocently explains they’re only staying a couple of nights while they’re between homes, that can be all the evidence required to trigger a prosecution.
I have an HMO licence, should I be worried about enforcement proceedings?
The licensing requirements for HMOs, whether they’re mandatory (for HMOs with five people or more), additional HMO (required for three people or more at the discretion of individual local authorities) or selective (required for every rental property in certain areas within a local authority area) are just the tip of the iceberg.
Aside from the fact that licences of any kind and the conditions they contain are a mix of mandatory and property specific conditions (there’s no single checklist to consult), there are a whole raft of regulations governing HMOs that were created as a result of the Housing Act 2004. A breach of any one of them is an instant criminal offence that can result in a penalty of up to £30,000 per breach.
When an enforcement officer inspects an HMO it will also be looking for breaches of the Management of Houses in Multiple Occupation Regulations (England) 2006 and the Housing Health and Safety Rating System (HHSRS). The wording of many of these regulations is open to interpretation, allowing the officer to claim that a breach has occurred and decide the amount of any penalty.
How can I make sure I stay within the law?
The sheer number and scale of potential breaches make it incredibly difficult to ensure that an HMO can ever be completely in the clear. The safety of tenants should, of course, be the foremost concern of any property owner – but many regulations are difficult to understand and can be breached without the landlord understanding that they are being breached.
Failing to maintain drainage is a criminal offence under regulation 5 – so if a drain gets blocked and the tenant decides not to report it (as is often the case) and the landlord or agent doesn’t inspect regularly to discover the issue, the landlord is open to criminal prosecution. If a property’s wheely bin goes missing and isn’t replaced, the landlord has committed a criminal offence under regulation 9 (failure to provide waste disposal facilities).
If the manager’s details are not on display in the HMO (even though all tenants may have the managers WhatsApp), the landlord has committed a criminal offence under regulation 3. Councils have been known to issue fines of up to £20,000 for this simple omission.
These examples aren’t the product of an over-active imagination – they’re all genuine examples of the types of breach local authority enforcement officers can and do find every day in HMOs.
What should I do if an enforcement officer contacts me?
If you receive a communication of any kind from the local authority regarding an HMO, do not respond without consulting an expert.
Think of the actions of an enforcement officer in the same way as those of a police officer when you’re carrying a large bag of cocaine in the street: they’re not going to wave you off with a cheery grin no matter how hard you explain you just found it and are on your way to the local station to hand it over. Be in no doubt, everything you say will be used as evidence against you!
The laws and regulations that landlords are subject to are no different: except that you need advice from an HMO law and regulations expert – who specialises in the relevant regulations and has extensive experiences of the holding councils to account over the processes that must be followed (yet often are not, which can make a strong defence).
Think of the council as the housing police and stay silent until you have a have a suitably qualified representative acting on your behalf.
Otherwise, you could find yourself not just with a hefty fine, but also a rent repayment order requiring you to repay up to 12 months’ rent to your tenants, possibly a ban from renting out properties – and even a criminal record.
