HMO: House in Multiple Occupation

In England, a house in multiple occupation (HMO) is a property rented to three or more people who form more than one household and share facilities such as a kitchen or bathroom. A household is a family or a couple, so three unrelated sharers are three households.

HMOs usually bring in more rent than letting the same house to one family, but they cost more to set up, need more management and come with extra rules.

• •In England, an HMO with five or more people forming two or more households needs a mandatory licence from the council.
• •Many councils also run additional licensing for smaller HMOs, or selective licensing for all rented homes in certain areas. Check the council where the property is.
• •Running an HMO that needs a licence without one is a criminal offence. It can lead to fines and to rent repayment orders, where you have to pay back rent.
• •Scotland and Wales have their own HMO licensing rules. In Scotland, a licence is generally needed once three or more unrelated people share.

Turning a family home into a small HMO for three to six people is normally permitted development in England, so it doesn't need planning permission. But many councils have Article 4 directions that remove that right in certain areas, and then you do need permission. Larger HMOs with seven or more people always need planning permission.

Check whether the street is covered by an Article 4 direction before you buy. A property bought as an HMO that can't get permission is worth far less.

• •Licensed HMOs in England must meet minimum bedroom sizes: 6.51 m² for one adult and 10.22 m² for two. Rooms under 4.64 m² cannot be used for sleeping.
• •Councils also set standards for kitchens, bathrooms and toilets per number of tenants.
• •Fire safety is stricter than for a single let: typically interlinked smoke alarms, fire doors, a protected escape route and, in larger HMOs, emergency lighting. Councils often base their requirements on the LACORS fire safety guidance.
• •Annual gas safety checks and an electrical installation condition report (EICR) at least every five years.

HMO mortgages are a specialist product, and some lenders want you to have landlord experience first. Larger HMOs are sometimes valued on the rent they produce rather than on comparable house prices. That can help or hurt when you refinance, so ask a broker which basis a lender uses before you rely on an end value.

• •Article 4 areas and licence conditions that limit how many people you can house.
• •Deal packs that assume every room is let all year. Allow for empty rooms between tenants.
• •Bills-inclusive rents, where rising energy costs come out of your profit.
• •More management work: more tenants, more turnover, more repairs and more disputes.