A recent case has confirmed the need for purchasers of HMO’s to obtain their own licence – even if the seller’s hasn’t yet expired.
What is a HMO?
Generally, a property will be a House in Multiple Occupation (HMO) if it is rented to 3 or more people who are not part of the same household (i.e. a family) but who share facilities such as the bathroom and kitchen. The rules get more complicated around self-contained flats and converted buildings so specific advice should be sought if you are purchasing these types of properties.
It should be noted that from 1 October 2018 (England only), the scope of mandatory licensing was widened by the removal of the ‘storeys requirement’ - previously to be a HMO the building had to be three or more storeys.
It is important that HMO licencing requirements are carefully considered if purchasing a property which is currently tenanted or if you intend to rent it out in the future as, even if the property doesn’t meet the criteria above, Local Housing Authorities (LHA’s) have the discretion to extend the licensing regime to HMOs that are outside the scope of mandatory licensing by designating all or part of their districts as subject to additional or selective licensing (section 56(1), Housing Act 2004). You should therefore check with the specific LHA if you have any doubts.
Risks of not obtaining a licence when one is needed
- It is a criminal offence to not have a licence where one is required (section 72(1), Housing Act 2004)
- The tenants within the building could apply for a Rent Payment Order (an order requiring a private landlord to repay rent paid by a tenant)
- Since March 2017 Local Housing Authorities can impose financial penalties as an alternative to prosecution (section 126 and Schedule 9, Housing and Planning Act 2016)
- Not having a licence can prevent Landlords from being able to serve section 21 notices on tenants (this may not be relevant soon as the Government has launched a consultation on the abolition of section 21 notices – see our recent blog here.)
In 2019, the Upper Tribunal (Lands Chamber) considered the licensing requirements where a Landlord has sold its interest with a valid licence still in place.
Case facts – Taylor v Mina An Ltd [2019] UKUT 249 (LC)
A landlord bought a property in October 2016. The former landlord had a HMO licence in place which did not expire until 2021. The new landlord did not apply for his own licence until May 2017. A tenant of the property applied for a Rent Payment Order as the landlord had committed an offence by not having the necessary licence. The First Tier Tribunal dismissed the tenant’s claim as the former landlord’s licence had not expired or been revoked. The tenant appealed and the Upper Tribunal confirmed that the former landlord’s licence could not be transferred. The new landlord needed to obtain a new licence – it did not matter that the existing licence had not been formally revoked.
The important point the case emphasised is that a licence is personal and cannot be transferred on a sale of the property (sections 68(6), Housing Act 2004).
Landlords should also be aware that there are rules not just around having a licence but how a HMO is managed – you should seek legal advice if you are unsure.
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