, Property
A three-bedroom semi is let to five people who answered separate adverts. The landlord thinks of it as a house share. Legally it is a house in multiple occupation, it needs a mandatory licence, and every week it operates without one is an offence.
When the council finds out, and they usually find out through a tenant complaint or a council tax query, the landlord faces a civil penalty of up to £30,000 per offence and a rent repayment order that can hand the tenants up to twelve months of rent back.
Three kinds of licensing, and two of them are local
Mandatory HMO licensing under Part 2 of the Housing Act 2004 applies across England to any HMO occupied by five or more people forming two or more separate households, who share a toilet, bathroom or kitchen facilities. The storey requirement was removed in October 2018, so a two-storey house or a flat is caught exactly as a three-storey one is.
Additional licensing is a scheme a council may introduce, after consultation, to cover smaller HMOs in a defined area, typically houses with three or four occupants in two or more households. Whether you need a licence therefore depends on which side of a borough boundary the house sits.
Selective licensing under Part 3 goes further again and can require a licence for any privately rented property in a designated area, regardless of whether it is an HMO. Councils use it in areas with low housing demand or significant antisocial behaviour, and designations above a threshold size need confirmation from the Secretary of State.
The practical instruction is simple: before you buy or convert, check the council's own licensing pages for that specific address, because these schemes come and go on five-year cycles and neighbouring authorities do different things.
A household means a single person or members of the same family living together. Five friends who each signed up separately are five households. A couple and three individuals are four.
Room sizes are in the regulations, and they are specific
Since October 2018, mandatory licences in England must include conditions on minimum sleeping room sizes:
- 6.51 square metres for one person aged over 10.
- 10.22 square metres for two people aged over 10.
- 4.64 square metres for one child aged under 10.
- Any room below 4.64 square metres cannot be used as sleeping accommodation at all.
Floor area under a ceiling height of less than 1.5 metres does not count towards these figures, which matters in loft rooms and under stairs. The council can set higher standards than the national minimum, and many do, so check the local HMO standards document rather than working to the floor.
Alongside room sizes sit amenity standards: the number of toilets, wash basins, baths or showers and cooking facilities required for a given number of occupants. These are set locally and are usually expressed as ratios, commonly one bathroom per four or five occupants. Councils publish them, and they are the reason a four-bedroom conversion often needs a second bathroom to be licensable at all.
Then there are the management regulations. The Management of Houses in Multiple Occupation (England) Regulations 2006 place duties on the manager covering fire safety, maintenance of common parts, water and drainage, gas and electricity supply, waste disposal and the display of the manager's contact details in the house. Breach of those regulations is a separate offence from operating without a licence.
Planning is a different permission from licensing
People assume that a licence resolves everything. It does not.
Under the Use Classes Order, a dwellinghouse is class C3 and a small HMO occupied by three to six unrelated people sharing facilities is class C4. Nationally, permitted development rights allow a change from C3 to C4 without a planning application. But a council can remove those rights in a defined area by making an Article 4 direction, and many university towns and cities have done exactly that in order to control the concentration of student housing.
Where an Article 4 direction is in force, converting a family house into a small HMO requires planning permission, and it can be refused. Larger HMOs, above six occupants, fall outside C4 entirely and need planning permission everywhere.
Building regulations apply to the physical work, particularly fire separation, escape routes and means of escape windows. A landlord who licenses a property but never applied for the planning consent it needed has solved one problem and kept another.
The penalties are the reason to take it seriously
Operating an unlicensed HMO is a criminal offence, and on conviction the fine is unlimited. Councils increasingly use the civil route instead: a financial penalty of up to £30,000 imposed by the local housing authority as an alternative to prosecution, with a right of appeal to the First-tier Tribunal. Penalties can be imposed per offence, and a landlord who has also breached the management regulations can receive several.
The part that surprises landlords most is the rent repayment order. A tenant, or the local authority where universal credit has been paid, can apply to the tribunal for an order requiring repayment of up to twelve months of rent where the landlord has committed certain offences, including operating without a required licence. That runs alongside the penalty rather than instead of it.
There is more. While a property required a licence and did not have one, a landlord cannot serve a valid section 21 notice, so you cannot remove a tenant through the no-fault route until the position is regularised. Councils can also make a management order and take over the running of the property.
Finally, the Housing Health and Safety Rating System gives councils a separate route to act on hazards in any residential property, licensed or not, with improvement notices and prohibition orders. Category 1 hazards must be acted on.
Where this shows up in the game
Property and lettings arrive in Business Baron with the Property & Construction Track, an add-on to the full game. The council is one of the bodies that writes to you, and inspectors turn up on a risk rating that complaints pull forward, asking for the records you actually kept. A house run as though the rules were optional tends to meet them in the least convenient month.