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Does your business let HMOs? Here’s what you need to know

For businesses in the private rental sector, particularly those in population-dense urban areas, Houses in Multiple Occupation (HMOs) are an increasingly popular investment option.

These properties are defined as homes (typically houses) with:

At least three tenants living there forming more than one household
A shared bathroom or kitchen facility.

In this context, a ‘household’ is comprised of either a single person or members of the same family.

The benefit to businesses

Property rental businesses may be keen to buy and convert HMOs because they may provide a higher rental yield than single-family properties without needing a significantly larger space.

Common examples of HMOs are private rentals to students and rentals to single people in urban areas.

However, despite these advantages, HMOs carry a number of obligations upon purchase and conversion that businesses will need to consider when making their investments.

Legal considerations of HMOs

Some regulations relating to HMOs depend on the local authority or council, but commercial landlords will typically require:

Planning permission – converting a single dwelling into an HMO often requires planning permission
Additional permissions – In some areas, Article 4 Directions require additional permissions for even minor changes to a property within a conservation area
A licence – All large HMOs (with five or more occupants) must have a licence, and local councils may require additional licencing for all or some HMOs.

Additionally, you may be required to take extra steps to ensure that your property is safe for the number of people that live there.

Safety and rentals

Any conversion work will need to comply with building regulations, particularly concerning fire safety, sound insulation, and adequate facilities.

This may include installing:

Fire doors
Smoke and carbon monoxide alarms
Adequate waste disposal
Measures to avoid overcrowding
Escape routes in case of fire

It’s important to engage with a surveyor or architect familiar with HMO conversions to make sure that these are in place before anyone moves in.

The Housing Health and Safety Rating System (HHSRS) is used by local authorities to assess whether a property is free from serious hazards. Your HMO must meet the standards set out under this system to avoid legal challenges and hazards to your tenants.

The above is a brief overview and does not constitute legal advice. For support with renting out HMOs as a commercial landlord, please contact our Commercial Property team today.

Carl Jones

Director - Head of Commercial Department

I qualified as a Solicitor having completed my training with Mander Hadley in 1992 and am a member of the Law Society Property Section and The Warwickshire Law Society.