A house in multiple occupation (HMO) is a property rented by at least three tenants who form more than one household and share toilet, bathroom, or kitchen facilities. This is in comparison to a single household property, which typically consists of members of the same family living together, including married or cohabiting couples, or a foster child living with foster parents.

The standard test for properties considered HMOs requires that three or more tenants from two or more households occupy a building; that the property serves as the main residence for these individuals; and that rent is paid for the accommodation. This frequently applies to shared houses where young professionals, students, or migrant workers live together to reduce individual living costs.

Investing in the UK rental market and HMOs in particular requires a thorough knowledge of the associated legal obligations, as HMOs represent one of the most strictly regulated areas. JMW advises investors and landlords on securing their investments and maintaining full compliance with the Housing Act 2004 and local authority requirements. Here, our expert HMO property solicitors explain what constitutes an HMO, when you need a licence and which other legal requirements must be met under current regulations.

Shared Houses vs HMOs: What Is the Difference?

A common question investors have is about the differences between a shared house and an HMO. In fact, most shared houses are HMOs from a legal point of view, provided there are more than three tenants and they make up more than one household. However, this does not mean that they require licensing in the same way that large HMOs do.

The definition of a single household

If three or more tenants live in a property and they are not all from one family, the property is usually a house in multiple occupation. Under the legal definition, a household lives together as a single unit. If one family occupies an entire house, it does not fall under HMO housing regulations, even if tenants are step or half-relatives. However, if other tenants move in and are not part of the same family, and there are three or more people living in the property in total, the classification changes.

As such, a property can become an HMO during the course of a tenancy, and landlords should monitor whether separate families are occupying a property to determine whether their legal obligations may have changed at different stages of a tenancy.

What is the standard test?

The "standard test" determines if a property is an HMO based on whether the tenants use it as their only or main residence. This does not have to be a permanent arrangement - for example, it includes students who reside in the property during term time. If the occupants share basic amenities like cooking facilities or shared areas, the property meets the criteria for multiple occupancy.

For investors and landlords, it is important to note that although different legal standards apply to an HMO in some cases, it does not always require a transformation of your strategy. A large HMO always requires a mandatory HMO licence, but while a small shared house with three tenants meets the legal definition of an HMO, it may not require a mandatory licence unless the local authority has implemented additional licensing schemes.

What Are the Licensing Requirements under the Housing Act 2004?

The Housing Act 2004 established the framework for HMO regulation. JMW helps landlords determine which category their HMO property falls into and whether they must apply for a licence from their local council. In general, the licensing rules apply as follows:

Mandatory licensing for a large HMO

Mandatory licensing applies to any HMO property that houses five or more people living as two or more households, regardless of the size of the building or any other factors. HMO landlords must make at least one person responsible for the management of the property and ensure that they pass a "fit and proper person" test conducted by the local council. These licences usually require renewal every five years, but licensing is managed by local councils and matters regarding applications and renewals depend on local policies.

Additional and selective licensing schemes

Even if your HMO property does not meet the criteria for a large HMO, your local authority may require a licence under additional or selective licensing. These apply in specific geographical areas and may be introduced by local councils to improve management standards in shared houses or self-contained flats. 

The local authority can issue civil penalties of up to £30,000 per offence or prosecute you in the Magistrates’ Court, where the court can impose an unlimited fine, if you operate an HMO without the necessary licences in place. Tenants can also apply to a tribunal to recover up to 12 months' rent if the property was unlicensed, through a rent repayment order.

If you own or operate an HMO and are unsure about the licensing requirements in your local area, speak to an experienced solicitor at your earliest opportunity. The team at JMW can advise you on licensing and support you to comply, which is important given the significant legal risks associated with operating an unlicensed HMO.

What Should Landlords Know to Manage a House in Multiple Occupation Effectively?

Because HMOs may house a larger number of people than an ordinary family home, the property may face higher wear and tear than a standard family living arrangement. The local authority will also carry out inspections to verify that certain standards are being met and that any potential safety issues are suitably addressed. These could include anything from exposed electrical wires to structural damage, all of which should be taken care of at the landlord’s earliest opportunity to prevent injury to tenants. With these obligations in mind, any operator of an HMO requires legal support to meet their ongoing obligations.

Among the legal requirements for HMOs, the UK government has set strict minimum bedroom sizes for HMOs to prevent overcrowding. For a single person over the age of 10, the room must be at least 6.51 m2. If the room is smaller than this, it cannot legally be used as sleeping accommodation. For two people, the room must be at least 10.22 m2.

In some areas, "Article 4 Directions" are in place and mean that you may need planning permission to convert a house from a single-family dwelling (C3 use class) to an HMO (C4 use class), even if it houses fewer tenants as an HMO than as one household. Converting an entire house into self-contained flats or an HMO without checking Article 4 status can lead to enforcement action from the council, so it is important to verify this before making any decisions.

In most shared houses, the landlord is responsible for paying the Council Tax directly to the local authority, although it is possible to incorporate this cost into the rent. Clear tenancy agreements should be prepared that will specify who is responsible for utility bills and clarify other divisions between landlord and tenant obligations. This is key to preventing disputes, although it is vital to seek legal advice on these documents as landlords have certain legal responsibilities that cannot be avoided through contractual means.

Fire safety regulations

Because shared houses have a higher occupancy density, fire safety regulations are more stringent for HMOs than for single household dwellings. To meet the required standards, landlords must install mains-powered smoke alarms on every floor and a heat detector in the kitchen facilities, and keep them in good working order at all times.

HMO properties must have fire-rated fire doors fitted to all bedrooms and high-risk rooms to prevent the spread of fire. Furthermore, HMO landlords must conduct annual gas safety checks and provide an Electrical Installation Condition Report (EICR) every five years. Failure to maintain these safety standards can lead to inspections under the Housing Health and Safety Rating System and enforcement action by local authorities. 

Finally, a failure to provide an EICR, gas safety check, energy performance certificate or other key documentation can affect a landlord's ability to legally evict tenants, so it is vital to meet all of the expected requirements from the outset of a tenancy. Working with the experienced team at JMW is the best way to understand and meet your legal obligations in this respect.