Is your property actually an HMO? You might be surprised

Is your property actually an HMO? You might be surprised

Many landlords operate under the assumption that they own a standard rental property, let to individuals or groups who live together in a straightforward arrangement. However, what appears on the surface to be a simple letting agreement can, in fact, fall under the legal definition of a House in Multiple Occupation (HMO). If it does, the responsibilities and legal requirements change dramatically. Misunderstanding where you stand can lead to costly mistakes.

A common misconception

The term “HMO” tends to conjure images of large, student houses or hostels filled with bedsits. In truth, the definition is far broader. In England and Wales, a property becomes an HMO if it is occupied by three or more people who form more than one household and who share amenities such as a kitchen or bathroom. That definition alone captures a significant number of ordinary rental properties.

A government briefing paper estimated there were around 497,000 HMOs in England and Wales as far back as March 2018. The market has evolved since then.

What many landlords do not realise is how easy it is for a property to cross the threshold into HMO territory. A three-bedroom flat rented to three friends, each signing a separate tenancy agreement and sharing a bathroom, would qualify. So would a house let to a couple and a friend, or to two unrelated individuals with a lodger. These scenarios are more common than one might expect, particularly in towns and cities where tenants are seeking affordable rent through shared living arrangements.

Why it matters

If a property qualifies as an HMO, the landlord has additional legal obligations. In many areas, licensing is mandatory for HMOs housing five or more people from multiple households. However, local councils have the power to impose additional licensing schemes that apply to smaller properties. In some boroughs, for example, any property let to three or more unrelated individuals requires a licence.

Failing to obtain the necessary licence can have serious consequences. Councils are empowered to issue civil penalties of up to £30,000 per offence. In some cases, landlords may be ordered to repay up to 12 months of rent to their tenants. Properties found to be non-compliant may also be subject to enforcement notices requiring costly upgrades to safety standards, including the installation of fire doors, mains-wired smoke alarms, or new escape routes.

Beyond legal penalties, unlicensed HMOs can create difficulties when remortgaging or selling the property. Most mortgage lenders will not offer finance on unlicensed or non-compliant HMOs, which may severely limit your exit options.

Understanding households and shared use

A key part of the HMO definition lies in how “household” is defined. A household can be a single person, a couple, or a family unit. Three unrelated tenants would therefore be considered three separate households. It is not the number of tenants alone that triggers the classification, but the combination of multiple households and shared facilities.

Shared kitchens, bathrooms, or even common stairwells can be enough to bring a property under HMO regulation. Even converted flats or maisonettes can qualify, especially if they were not originally built for multiple occupancy. Properties with separate rooms let on individual tenancy agreements are almost always classified as HMOs, but even joint tenancy arrangements can fall within the scope, depending on how the tenants live and share space.

Local variations further complicate matters. Councils are permitted to set their own licensing criteria, particularly in areas with high population density or a history of poor housing conditions. A property that is not considered an HMO in one local authority might very well require a licence just a few miles away.

The compliance burden

Operating a legal and safe HMO involves more than obtaining the correct licence. Landlords must comply with a range of health and safety obligations. These include minimum room sizes, limits on the number of tenants per bathroom or kitchen, and detailed requirements for fire protection and waste disposal.

In England, for instance, a bedroom used by one adult must measure at least 6.51 square metres, while a room for two adults must be at least 10.22 square metres. Fire regulations are particularly stringent. In most cases, landlords must fit interlinked smoke alarms on every floor, provide fire doors with self-closers, and maintain clear escape routes. Electrical safety checks must be conducted every five years, and a valid Gas Safety Certificate must be held at all times.

Failure to meet these standards can render a landlord liable for enforcement action, which may include substantial fines or even prohibition orders preventing further letting.

The importance of record-keeping

Given the complexity of HMO regulation, thorough record-keeping is vital. Councils often request documentation such as tenancy agreements, floorplans, safety certificates, and maintenance logs as part of the licensing process. Having these ready to hand not only ensures compliance, but also demonstrates a proactive and responsible approach to property management.

This is where tools like August come into their own. Designed specifically for landlords, August allows you to manage your properties, tenants, and compliance documents from one dashboard. Whether you are storing your latest EICR report, keeping track of renewal dates for your licence, or logging fire alarm tests, everything is in one place and accessible when you need it. For landlords with growing portfolios or complex lettings, this kind of system can be crucial.

Could your property already be an HMO?

The uncomfortable truth is that many landlords are managing HMOs without knowing it. If you are letting to unrelated individuals who share a kitchen or bathroom, you should not assume you are exempt simply because your property is small or the arrangement feels informal.

If you are unsure whether your property qualifies, the safest step is to contact your local council’s private housing team. Most councils provide online resources or postcode lookup tools that allow you to check whether your property falls within an additional licensing area.

A formal declaration of the property’s status may not always be required, but taking steps to clarify it early can save significant time, money, and stress down the line.

Why it’s worth doing properly

While HMOs require more management, they can also provide greater rewards. Rents are often higher on a per-room basis, and tenant demand for shared accommodation remains strong in many parts of the country. If run professionally, an HMO can offer stable income and strong returns, provided it is compliant.

A well-run HMO with appropriate safety standards, clear documentation, and structured communication with tenants will not only meet the council’s expectations, but also create a better living experience. That, in turn, tends to result in longer tenancies, fewer disputes, and more consistent rental income.

In summary

If you have never considered your property to be an HMO, now is the time to double-check. The definition is broader than many landlords realise, and the consequences of misclassification can be severe. Licensing requirements differ across the country, and compliance obligations are extensive.

August now supports HMO tenancies, making it easier for landlords to manage shared properties with confidence. You can track multiple tenants under one roof, store individual agreements, and stay on top of compliance tasks like licence renewals, fire safety checks, and EPCs.

Disclaimer: This article is a guide and not intended to be relied upon as legal or professional advice, or as a substitute for it. August does not accept any liability for any errors, omissions or misstatements contained in this article. Always speak to a suitably qualified professional if you require specific advice or information.