If you have been looking into buying property as an investment, you may have come across the acronym ‘HMO’. But what is an HMO property exactly?
Put simply, HMO stands for a House in Multiple Occupation. It typically occurs in shared houses where some of the facilities, such as the kitchen are shared among all residents of the property.
Houses are often turned into HMOs by investors as they help to increase the yield, and therefore the profitability, of a property.
What Classifies As An HMO?
According to the official Government website, a property is classed as an HMO if at least three tenants live there, forming more than one household – AND – the toilet, bathroom, or kitchen facilities are shared between the tenants.
So, if your property has at least three separate tenants and they are sharing some facilities, the property may be classed as an HMO. They key thing is whether the tenants are classed as forming more than one household.
A household is either a single person or members of the same family who live together. A family includes people who are:
- married or living together – including people in same-sex relationships
- relatives or half-relatives, for example, grandparents, aunts, uncles, siblings
- step-parents and step-children
Examples of HMO Properties
Houses in multiple occupations can come in many different forms. Most commonly they will be normal houses that have been divided up into separate rentable rooms but with some rooms being shared among residents.
However, they can also be houses that have been split into multiple bedsits, hostels, or even B&B’s that aren’t just used for holidays. Therefore, if you think your property may class as an HMO, it is always best to check with your local council to ensure you are complying with any applicable regulations.
Do HMOs Need A Licence?
Some HMOs will require a licence, some will not. It depends on a number of factors, not least the specific requirements of the local council.
As a guide, if the following statements both apply to your property, you will need a licence:
- it’s rented to 5 or more people who form more than 1 household
- tenants share toilet, bathroom or kitchen facilities
This is because when these statements are true, your property is classed as a large HMO. And large HMOs are automatically required to have a licence.
Note that previously the licensing only applied to properties of 3 storeys or more. However, this requirement was removed in October 2018 and the number of levels of a property is no longer taken into account.
Are There Special Regulations For HMOs?
Yes, regardless of whether your HMO requires a licence or not, there are building regulations and fire regulations that your property must comply with.
The duties of the property manager include the following:
- To provide all occupiers with the manager’s name, address and telephone number, this information must be clearly displayed within in the property
- To ensure that all fire escapes are clear of any obstacles and that they are kept in good order, to ensure that all fire safety measures are maintained in good working order and that adequate fire safety measures are in place with regards to the design, structural conditions and number of occupiers in the HMO
- The manager must maintain adequate water supply and drainage to the dwelling
- They must also not unreasonably cause the electric and gas supply to be interrupted
- The manager must ensure that every fixed electrical installation is inspected and tested by a suitably qualified person, at intervals not exceeding five years
- Plus, they must provide the electrical and gas inspection certificates within seven days of receiving a request in writing from the local housing authority
- To ensure that all common parts of the HMO are maintained in good decorative order and a safe and working condition. This includes out-buildings, boundaries, and gardens
- The manager must ensure each unit of living accommodation and its contents are clean before occupiers move in and are maintained in good repair and clean working order throughout the occupation by the tenant
- The manager must provide adequate facilities to dispose of all waste produced by the property
Of course, many of these regulations apply to any type of rentable accommodation, not just HMOs. If you require more detailed information on dealing with HMOs as a landlord, we recommend downloading the guide on the Rentify website.
Should You Convert A House Into An HMO?
As you can see, there are a number of additional considerations you will need to make before deciding whether to convert a property into an HMO.
Not only will you end up spending more money turning a normal house into shared accommodation, you’ll also have to be familiar with the regulations that go with it. You may even have extra paperwork to complete if you need an HMO licence.
However, if you do decide to go ahead and convert a house into an HMO, you’ll be rewarded for the extra effort with increased yields and greater profits when managed correctly. That is why HMOs are so popular with investors.