Rental Property and Houses In Multiple Occupation (HMO)

I own a large three storey property near a university and have considered renting the five rooms separately to students in the next academic year, to increase my return on the investment. I understand that I may need to apply for a licence from the local council to rent my property in this way. Is this true?

1st April 2010

Recent changes to the Housing Act mean that a rented property containing 3 or more unrelated individuals is now legally classified as a House in Multiple Occupation (HMO).  

A landlord of an HMO may be required to pay a licence fee to the local council, however licensing is at the discretion of local authorities and, in most cases, only properties with three or more floors and five or more tenants are termed an HMO for licensing purposes. Part-time landlords like yourself, who hold properties more as an investment rather than as a business, are likely to be most affected.  The fee can vary from £400 to £1,000 depending on location and you may also be obliged to carry out additional work on the property.

The main objective of the licence is to ensure that sub-standard properties are no longer being let. If you choose to do nothing, then you may be served with an enforcement notice which requires you to apply for a licence within 28 days - or cease renting rooms in the relevant property.

The government and local councils raised awareness regarding the new Act with a nationwide press campaign, advertisements on the television, radio and more information is available on or from your local TaxAssist Accountant.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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