Most landlords will be familiar with the existence of licensing regimes for Houses in Multiple Occupation (HMOs). But fewer will be aware of the different ways that a property can count as an HMO under the legislation, or that properties which aren’t HMOs at all might need a licence. Managing or controlling a property which requires a licence, but does not have one, is a criminal offence, and as well as a prosecution or civil penalty , can also lead to a Rent Repayment Order made against you for up to 12 months of the rent paid by the tenants at that property.
There are three main schemes for licensing private rented properties: the mandatory scheme, the additional scheme, and the selective scheme. Each has different requirements and affects different areas.
The Mandatory Scheme
The mandatory scheme is the most well-known and widely applied scheme. It applies automatically to all HMOs in England shared by at least five unrelated people forming more than one household. In the past, there were also requirements about the number of stories a building needed to have to fall under this scheme, but those requirements have been abolished. If you are letting a property to five or more unrelated people who share facilities like a bathroom or kitchen, you are likely managing an HMO under this scheme. There are additional requirements that need to be satisfied , before the property can be declared an HMO, but these remain the primary determining criteria in most cases.
The Additional Scheme
The additional scheme is another common scheme. This scheme requires the council in a given area to issue a “designation”, setting out that the scheme applies to a particular area. Some councils will apply it to just a few parts of the borough, some will apply it to the entire borough, and some will have no additional scheme at all. The details of the scheme will be posted on the council website, and there will be public announcements before a scheme comes into force, but councils are not required to write directly to landlords in their area when setting up one of these schemes.
The scheme will vary from council to council, but the primary feature is that it will include properties where a smaller number of unrelated people than five share the premises; three unrelated people from at least two households is a very common condition introduced by councils. If you are letting a property to three or more people, it is very important to check if such a scheme has been introduced for the postcode of the property.
The Selective Scheme
Selective schemes are less common and have some similarities with additional schemes. A selective scheme also requires a designation, which applies licensing requirements to non-HMO private rented properties in an area defined by a council. A selective scheme applies to all non-HMO properties in a given area, which can be a part or the entirety of a borough area. These schemes are very broad, with even one-bed flats caught by the need for a licence. If you are renting any property, it is important to check whether a selective scheme is in place.
Which properties are affected?
The additional and selective schemes both apply to existing tenancies and properties as well as new ones. This means that if you start renting a flat to three unrelated tenants, who share facilities , and there is no additional licensing scheme, but halfway through the tenancy one is introduced, you will then be required to get a licence for that property, even though you would not have needed one when you initially signed the contract. This fact, combined with the fact that landlords are not required to be notified by a council before thy introduce one of these schemes, means that landlords are sometimes surprised to discover they are managing licensable HMOs with the attendant consequences. Sometimes, the first a landlord hears that their property is licensable will be the Rent Repayment Order paperwork dropping through the door from the tribunal.
The First-Tier Tribunal has held that merely being unaware of the existence of a licensing scheme will not be sufficient for a reasonable excuse defence to an application for a Rent Repayment Order. The Tribunal might take it into account when deciding how much money should be paid under a Rent Repayment Order.
Protecting yourself
As a landlord, there are practical steps you can take to protect yourself against being surprised at managing an HMO.
First is to check the council website carefully before renting out any property. Have a look at the sections about private rental and check for any references to an additional or selective scheme. If you are unsure, call the council and ask to talk to someone from the private rented sector team and ask if there are any additional or selective schemes in force for the postcode of your property.
Second, it is important to carry out checks regularly to make sure no additional or selective schemes have been introduced since you started renting your property out. Have a look at the council website for any documents about new schemes or consultations about the schemes. Call the private rented sector team and ask them to confirm that no schemes have been introduced or are being considered. If one has been introduced or is being considered, send off a licence application form as soon as possible.
Finally, you could have an annual meeting with an HMO lawyer for the latest legal advice on your property business. This kind of “regulatory MOT” could cover both HMO licensing rules and other legal matters of interest to you and your properties.
All these steps may sound time-consuming, but a few hours invested in checking your regulatory position will save you from the risk of a Rent Repayment Order worth potentially thousands of pounds, not to mention the time and stress of tribunal or court proceedings.
How can we help?
Expert advice is the best way to find out if your property needs a licence under any of the schemes. Freemans solicitors are a leading provider of Rent Repayment Order advice and our experienced team will be happy to help with your enquiry. Contact Michael Field, Karol Hart or Julian Hunt in our Crime Team on 020 7935 3522 or crimelawyers@freemanssolicitors.net or in an emergency please call our 24/7 number 07973 259382 and let us help. We can advise on investigations , diversion from prosecution, prosecutions of HMO Offences and ancillary matters such a Rent Repayment Orders.
Whatever your personal circumstances the above is only a guide and we would advise you to contact us to obtain definitive advice as you will appreciate that each person’s circumstances are unique to them.