HMO stands for House in Multiple Occupation and generally refers to one of the following: A house split into bedsits. A house or flatshare where each tenant has their own tenancy agreement. Students living in shared accommodation.

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With the growing desire to make more money on property investments, houses in multiple occupation (HMO) are also becoming increasingly popular with landlords. As the name suggests, HMOs are created to house multiple tenants who do not form one single household. By investing to create a HMO property, landlords can benefit from much higher yields, as they can charge each tenant individually.

Like most rental properties, when creating a HMO, landlords are more likely to receive more applications from high quality tenants if they renovate the property to a higher standard. Another incentive to spend time and money on renovations comes in the form of a reduction in longer-term maintenance costs.

Depending on your property, its tenants and where you live you may be required to obtain a license for your HMO.

On April 6th 2006 mandatory HMO licensing came into force across England with the intention of raising the standard of accommodation in HMOs. Landlords must register their HMO with the council if the property has 3 habitable storeys or more AND is occupied by 5 or more people in two or more households. For licensing purposes a household refers to members of the same family living together and couples who live together (whether or not they are married). A group of friends sharing does not constitute a single household.

The council will then assess whether (in their view) there is enough space for the occupants and if the property is well managed before granting a license. Councils also have the power to introduce licensing for individual smaller HMOs or all rental properties in certain areas they want to improve so always check with your local council to see what the rules are where your property is.

For a basic guide to whether your property should have a license or not answer the following 3 questions:

  • Does your property have 3 or more storeys?

  • Is the property let to 5 or more unrelated tenants?

  • Do tenants share facilities?

If the answer to all 3 questions is yes then you may need a license.

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