Licensing is a way for local authorities to keep track of the number and quality of rented properties in their area. It helps to make sure:
Licensing was introduced in England and Wales in 2006 (under the Housing Act 2004), with the original aim of raising safety standards in Houses in Multiple Occupation (HMOs), which were particularly vulnerable to house fires.
Over time, the scope of licensing and licence conditions has been adjusted to help raise standards in HMOs and other rented properties more generally.
Not every rented home is subject to licensing, but for those that are, a valid licence must be secured from the local council before it can be legally let.
Whetheryou need a licence for your property or not depends on the size and type oflet, and where in the UK you live.
DoI need an HMO licence for three tenants in England?
Ifyou have three or four occupants where one (or more) is not related, then yourproperty is legally an HMO. With three or four people you do not need aMandatory HMO Licence. However, you may still need a licence as many councilshave introduced what is known as an ‘additional HMO licensing’ scheme or a ‘selectivelicensing’ scheme
So,as a basic guide, if you are renting to more than two unrelated sharers, this could mean you are likely to require a licence under ‘mandatory’ licensing laws:
As a basic guide, if you are renting to more than two sharers, this could mean you are likely to require a licence under ‘mandatory’ licensing laws:
See the next section for specific details on mandatory licensing for HMOs.
InEngland and Wales, local authorities also have the power to impose their ownfurther licensing rules under a selective licensing scheme, which can apply to any rentedproperty – not just HMOs.
So,if you’re thinking of investing in England or Wales, it’s advisable to contact the relevant local council before you buy, to make sure you know and understand the specific licensing rules for the area.
The one type of rental property that falls under mandatory licensing conditions across the whole of the UK is a House in Multiple Occupation (HMO).
However, it does depend on the size of the HMO and where it’s located:
Under national licensing regulations, every large HMO – where five or more people forming more than one household live in the property and share toilet, bathroom or kitchen facilities – requires a licence, which is valid for five years.
Key conditions that must be satisfied to gain a licence:
You must also:
The council may then add other conditions to your licence, such as requiring you to upgrade facilities.
The fee for a five-year licence can vary greatly between local authorities butt ends to range from around £500 to £1,000 – although landlords in London can expect to pay up to 50% more than that.
The regulations governing HMOs are The Management of Houses in Multiple Occupation (England) Regulations 2006
In England, a licence may also be required for smaller HMOs and other types of rented property, depending on your local authority’s policy.
Every property rented out by at least three unrelated people who share bathroom or toilet and kitchen facilities must have a licence, which lasts for three years.
You must provide the local authority with:
Asin England and Wales, the council can add other conditions to the licence.
The fee is based on the number of tenants and tends to range from around £200 to£300 per tenant, plus an initial validation fee all depending on the local council.
More detailed information is available at the GOV.UK website.
Every property which is the main residence of three or more people from more than two households – requires a licence, which is valid for five years.
The licence fee is based on the number of tenants – currently a five-year licence costs £185 per person.
More information is available at the Belfast City Council website.
Note: In addition to obtaining licences for properties as required, landlords in Wales, Scotland and Northern Ireland must also be registered with a relevant scheme.
In addition to the national HMO licensing requirements, every council in England has the power to introduce its own licensing rules, which fall into two categories:
While the national law only applies to ‘large’ HMOs, councils can impose licensing requirements on smaller HMOs – properties rented by at least three tenants who form more than one household and share toilet, bathroom or kitchen facilities.
This is where a council can require any type of privately rented home to be licensed.
However, if councils want to introduce a licensing scheme that would cover more than 20% of their area or more than 20% of their rented homes, they need to get government permission. Selective licensing schemes run for five years.
For example: Hammersmith and Fulham ran a selective licensing scheme that affected every rented property in 128 streets in the borough, from 2017 to 2022. Although the council is running another scheme for the five years from 2022 to 2027, it now applies to just 24 streets.
And the Croydon landlord licence requirements also changed following an initial scheme that required every privately rented property in the entire borough to be licensed. Between October 2015 and September 2020, a total of 38,596 licences were issued and roughly 40% of licensed properties were inspected.
Under a selective licensing scheme, the council can make checks on whether someone is a ‘fit and proper’ person to be a landlord and make various stipulations around safety measures and management of the property.
This ability of local authorities to make their own rules on licensing rented homes has pros and cons.
On the positive side, it means:
However, these schemes also present challenges, including:
To find out whether any additional or selective licensing schemes are currently in force in your area – or are likely to be introduced in the near future – contact your local council housing department.
It’s important for landlords – particularly those in England – to understand licensing, as the rules can be amended, and new laws may come into force at any time. Even if your property doesn’t currently fall under the scope of either national regulations or a local licensing scheme, that could easily change in the future.
And if your property does become licensable, satisfying the conditions of the licence may mean you need to invest some money in changes or upgrades to the accommodation and facilities.
So, it’s not only the licence fee itself you need to consider, but also the potential cost of carrying out any required works and maintaining those standards.
It’s well worth knowing about licensing in the areas where you currently let property – and also any areas you might be considering for investment – as that could affect your decision about what type of property to buy and where.
Unfortunately, not all councils are good at promoting their licensing schemes, so it’s important that you, as a landlord, have a reliable way of staying up to date with the latest licensing regulations.
If you’re a member of a national association, such as the National Residential Landlords Association (NRLA), they should keep you informed about any changes to lettings legislation. You can also subscribe to LandlordZONE to be notified about all the latest national regulations affecting landlords and receive tips from industry experts. In London, you can access a free research resource called London Property Licensing.
Then, to make sure you know when your local authority makes any changes to its own licensing rules, you can join a local landlords’ association or, even better, a landlord accreditation scheme – just contact your council to find out if they run one.
And if you use a professional letting agent to let and manage your rental, they should know ahead of time when new regulations are coming into force and be able to advise you on what you need to do.
Renting out a property without the right licence is classed as a criminal offence. That means in the most serious of cases – for example, where an unlicensed property is also found to be flouting a number of fire safety regulations – you could be prosecuted, given an unlimited fine and even face jail.
As licensing for rented properties – particularly HMOs – has been expanded, the number and level of fines handed out by local councils has increased. Even if your local council chooses not to take you to court, if you fail to secure a required licence or breach any of the licence conditions, they could:
For a comprehensive round-up of all the different things a landlord can be fined for, take a look at our article, ‘Landlord fines: How much are the charges and how do you avoid them?’.
Recent amendments to the Renters Reform Bill passed on 25 April 2024 indicate substantial changes to the regulations affecting Houses in Multiple Occupation(HMOs), specifically the roles and responsibilities of superior and immediate landlords with regards to property licensing.
Under these amendments, the accountability for licensing HMOs will include superior landlords and property owners, not just those directly managing or controlling the property.
The new regulation is likely to read:
“If an HMO is required to be licensed under this Part, but is not so licensed, an offence is committed by—(a) any person within subsection (1A), and (b) any person who as landlord under a tenancy or licensor under a licence to occupy has an estate or interest in, or a right in relation to, the HMO that is superior (whether directly or indirectly) to the estate, interest, or right of any person within subsection (1A).”
This effectively reverses the position as determined by the Supreme Court in the case of Rakusen v Jepsen, which protected the superior landlord from the responsibility to license. The superior landlord is likely, in future, to face fines and rent repayment orders if the immediate landlord (manager) defaults,which many of these companies have had a habit of doing.
Finally,do bear in mind that if you let a property without the required licence, you could be in breach of your buy to let mortgage conditions and your landlord insurance may be invalid in the case of you needing to make a claim. So, it really is important that you:
1. Understand where mandatory HMO licensing applies
2. Find out from your local authority (in England and Wales) what additional and/or selective licensing schemes they have in place
3. Understand what you have to do to comply with the terms of the licence and make sure those standards are upheld in your rented property
4. Check the terms and conditions of your mortgage and insurance
5. Keep up to date with any changes to the above rules and regulations
“HMO landlords are in a category of their own. They have to meet licensing conditions and work to a particular set of health and safety standards. As a result, it is essential to make sure your insurance provider is aware the property is being used as an HMO and to advise them how many potential tenants could be living there. The reason this is so important is that some insurers won’t cover HMOs or may require different terms and / or premiums – and be aware that this principle also applies to mortgages. If you don’t disclose the correct material facts, the insurance policy you hold may not be valid and insurers could refuse to pay out in the event of a claim.”
Steve Barnes, Head of Broking at Total Landlord
