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What is an HMO and do I need it?

What is an HMO and Do I Need It?

With a growing UK population and fewer people in a position where they can afford to buy a house, it’s no surprise that renting rooms in shared accommodation has become increasingly popular. The private rental sector now offers more houses of multiple occupation than ever before. A house of multiple occupation or HMO is, simply put, a home that is occupied by more than two households or individuals who are not members of the same family. Shared homes are ideal for students and professionals and are often a top choice for people who want affordable accommodation and the chance to meet somebody new. If you’re considering renting a property, do you need an HMO?

What is an HMO House?

For your property to qualify as an HMO, it needs to meet some key criteria. It should be appropriately sized and there should be amenities that are ideal for the number of people that are going to be living in it. A property is an HMO if at least three tenants are living in the property and forming more than one household, and they share bathroom or toilet facilities and/or kitchen. An HMO that is occupied by five or more unrelated people or at least to families that share facilities will need a licence. This can vary between councils.

Choosing an Area for HMO in London:

HMOs are in high demand when they are in the right area. If you’re considering renting out a potential HMO then it’s important to consider the location. Don’t assume that because the property is the right size, it will do well as an HMO. When choosing a location, it’s important to consider the type of tenants that you’re looking to let to. Properties located close to universities and colleges are the ideal choice for student HMOs while professional HMOs tend to fare better closer to city centres.

Property Management and HMO Letting Agents in London:

Self-management of an HMO is no easy task. Not only do these properties tend to be larger compared to the average rental property but there are additional rules and regulations to adhere to when you let to multiple tenants sharing the same home. In addition, managing multiple tenants in one property can often mean that there are more demands on your time. At GLP, we can help with experienced HMO property managers ready to take on the hard work for you, look after your tenants, and ensure that all regulations are followed.

What are the Benefits of a Camden HMO?

If your property is the right size and meets all the relevant requirements, there are several benefits of letting it as an HMO compared to renting it out to a single tenant or family. Many landlords choose to rent out larger properties as HMOs due to the following:

#1. Easier to Fill:

Generally speaking, most larger properties will get tenants in faster when the rooms are rented out on an individual basis compared to renting the whole property to one tenant. Since the price per tenant is much cheaper when renting the rooms individually, there is often much more interest in the property once it is on the market. As a result, landlords can begin earning money from the HMO much faster, even if all of the rooms are not filled.

#2.  Higher Rental Yields:

Compared to single-tenant properties, HMO cash flow can be much steadier and provide a much higher return. With multiple tenants in the property, you can earn money on each room that typically adds up to a significant amount more compared to a single rental payment for the entire home. In addition, cash flow is smoother thanks to multiple tenants. With several tenants in the property, there is less risk of arrears as one tenant falling behind on their rent will be a lower risk to your rental income as long as the other tenants are up to date.

When Does a Property Require an HMO Licence?

The following checklist will help you determine if an HMO licence is required for your property. A licence will be required if:

  • The property is home to five or more tenants that are split into two or more unrelated households
  • The tenants share facilities such as a kitchen or bathroom

If you’re considering renting a property as an HMO, it’s important to be aware of new licence conditions that introduce minimum bedroom sizes. These are:

  • At least 4.64m2 for a child under ten years old
  • At least 6.51m2 for one single person over ten years old
  • At least 10.22m2 for two people sharing the room

You will also need to obtain the following safety certificates for the property:

  • GSC Gas Safety Certificate
  • EPC Energy Performance Certificate
  • At least one smoke alarm on each habitable floor
  • Carbon monoxide detectors in any rooms that contain a solid fuel-burning appliance
  • in some cases, a selective landlord licence from your local authority

We are going to answer the question ‘What is an HMO and do I need it?’

What is an HMO?

HMO stands for a house for multiple occupation and it is a residential property occupied by three or more people sharing facilities like a bathroom or kitchen who form two or more ‘households’.

A household is either a single person or members of the same family who live together. A family includes people who are:

  • Married couples or couples living together as married (including people in same-sex relationships)
  • Relatives or half-relatives e.g. grandparents, aunts, uncles, siblings, nieces, cousins
  • Step-parents and step-children and half-relatives
  • Foster parents and foster children

There are 3 types of property licensing: mandatory licensing of large HMOs, additional licensing and selective licensing.

Mandatory licensing

This applies nationwide for HMOs where there are five or more occupants in a property and the tenants comprise of two or more households. This will be changed on the 1st of October from the current definition of ‘in a property of three or more storeys’. This therefore requires single storey flats or two storey maisonettes to have a mandatory licence if they have 5 or more occupants. In addition, new mandatory licensing conditions will be introduced prescribing national minimum sizes for rooms used as sleeping accommodation. This requires landlords to adhere to council refuse schemes.

Additional licensing
This is when a council forces a policy requiring other sizes of HMOs to also be licenced. For example, a council can bring in additional licensing requiring all HMOs to be licenced.

Selective licensing
This is at the discretion of the borough and can affect all rental properties. For example, a council can release compulsory licensing for all residential rental properties on a street.

Before granting a licence, the local authority must be satisfied that the owner and any managing agent of the property is fit and proper to hold a licence and that the property meets required physical standards.

To find out if you specifically need an HMO if you are still not sure, do not hesitate to call us on 020 7113 1066.

We hope this answers your question ‘What is an HMO and do I need it?’.  If you are looking to rent a property in Central London, please visit Greater London Properties, Central London’s largest independent estate agent or call us on 0207 113 1066.

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