New rules aimed at protecting tenants from poor living conditions will make mandatory licensing of shared dwellings much more common from the 1 October. An estimated 160,000 properties in England will need a licence for the first time.
A wide variety of properties fall under the various and convoluted definitions of a "House in Multiple Occupation" (HMO) under the Housing Act 2004. Not all of these require HMO licences however. Until October licences were only mandatory for properties which housed five or more residents forming two or more households (to comprise a "household", individuals must be married/ living together as spouses or relatives of each other or a couple) and which spanned 3 stories or more. It is that final element which is being removed bringing large numbers of flats and 2 storey dwellings into the mandatory licencing regime for the first time. In every case, it is the individual HMO which requires a licence. As such, where one building contains more than one HMO, multiple licences will be required.
A failure to obtain a licence has serious consequences, first and foremost being that letting without one is a criminal offence. Tenants can also have the power to claim back some or all of their rent. Even if they do not, that rent is proceeds of crime, something which Councils have increasingly sought to pursue in other areas such as planning. Alternatively, instead of pursuing criminal charges, Councils are also able to impose a civil penalty of up to £30,000 for unlicensed HMOs. Some Councils have already imposed penalties in this context as a way of increasing revenues and we expect to see it being used more frequently once the legislation changes.
An exemption is granted for purpose-built blocks of flats where there are two or more flats in the block. This is crucial for student housing where "cluster flats" have generally been exempt from mandatory licencing because they are single storey. However, converted (even very recently converted and high-standard) buildings get no such protection.
Councils were already able to bring all kinds of HMOs into the licencing regimes under the Act if they want to and these powers are frequently used in areas of high pressure or historically low standards, often near universities. A property which was licensed under these provisions is transitioned automatically to a mandatory licence if they qualify and so should not suffer any disadvantage.
With the changing nature of the housing market and affordability issues, it isn't just students who house-share anymore. Transitional provisions protect the landlord as long as a valid application is made before 1 October. Applications can, and should, be made before that date to avoid committing an offence. Landlords should therefore urgently review their portfolios and apply for any licences needed as soon as possible.
For more information, please contact Daniel Farrand or Victoria Dacie-Lombardo.