As a property investor or landlord, you might be considering investing in a House in Multiple Occupation (HMO). In this article, we will discuss what an HMO is, and the licensing requirements, and answer the all-important question: is a HMO licence linked to the property or to the landlord?

What is an HMO?

An HMO is a property rented out by at least three people who are not from the same household but share facilities like a bathroom and kitchen. It is a popular choice for landlords looking to maximise rental income, as it typically generates more than a single-occupancy property.

HMO Licensing

To legally operate an HMO, a landlord must obtain a licence from their local council. The licence sets out the minimum standards that must be met, including health and safety, living space, and management.

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Types of HMO licences

There are two main types of HMO licences:

1. Mandatory HMO licence
2. Additional HMO licence

Eligibility

To be eligible for an HMO licence, a landlord must satisfy the following criteria:

1. Be a fit and proper person
2. Ensure the property meets the required standards
3. Have a management plan in place

licence Application Process

Applying for an HMO licence typically involves submitting an application form, paying the relevant fee, and undergoing an inspection by the local authority.

HMO licence Linkage

This is the crux of our discussion: is a HMO licence linked to the property or to the landlord? The answer is that it depends on the type of licence. Let’s explore the two different types of HMO licences and how they are linked.

Property-Based licences

A property-based HMO licence is linked to the specific property. This means that if the property is sold or transferred to a new landlord, the licence remains with the property. The new owner would need to apply for a new licence or have the existing licence transferred to their name.

Landlord-Based licences

In some cases, the HMO licence is linked to the landlord rather than the property. This means that if the property is sold, the licence would not transfer to the new owner. Instead, the new owner would need to apply for their own HMO licence before being allowed to rent out the property as an HMO.

HMO licence Transferability

As mentioned earlier, the transferability of an HMO licence depends on whether it is a property-based or landlord-based licence. However, it is essential to check with the local authority responsible for HMO licensing, as the rules may differ between areas.

Selling an HMO Property

When selling an HMO property, it is crucial for the seller and buyer to communicate about the licensing situation. If the licence is property-based, the buyer should apply for a new licence or transfer the existing one. If the licence is landlord-based, the buyer must obtain their own licence before renting the property as an HMO.

Buying an HMO Property

When buying an HMO property, it is essential to understand the licensing requirements and how they apply to the specific property. Ensure you check the type of licence and the process for obtaining a new licence or transferring an existing one.

Advantages of HMOs

There are several benefits to investing in HMO properties, including:

1. Higher rental income
2. Diversification of risk across multiple tenants
3. Increased demand due to affordability for tenants

Disadvantages of HMOs

However, there are also some drawbacks to consider, such as:

1. Higher management and maintenance costs
2. Licensing requirements and associated fees
3. Potential for more tenant-related issues

Conclusion

In conclusion, whether a HMO licence is linked to the property or the landlord depends on the type of licence and the local authority’s regulations. It is vital for landlords to be aware of their responsibilities and the licensing requirements for HMO properties in their area. By understanding these factors, landlords can make informed decisions about investing in HMO properties and maximising their rental income.

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