17 September, 2019
Where a residential property is a house in multiple occupation (HMO), the person who has control of, or manages, the property must obtain a licence from the local housing authority (LHA) as required by the Housing Act 2004 (HA 2004). Under the HA 2004 a property is automatically classed as being a HMO and as a result, subject to mandatory licencing, if it is occupied by five or more people forming two or more separate households, who also share facilities such as the kitchen or bathroom, regardless of the number of storeys the property has.
It is a criminal offence not to have an HMO licence if one is needed. Criminal sanctions may be an unlimited fine and control of the premises being taken away. If a Landlord is not exempt from obtaining a HMO licence or does not have one when required to do so, they can be fined up to £30,000 and have their name entered on the database of rogue Landlords. They may also be ordered to repay up to 12 months' rent to either the Local Authority or their tenants. A licence is personal and cannot be transferred on a sale of the property.
The aim of licensing is to improve management and safety standards. Large HMOs are seen as high risk in terms of safety issues such as fire and electrical safety. This is largely due to the temptation for some Landlords to have more people in one property to maximise rental income, but then do little to ensure conditions are acceptable by undertaking the necessary repairs.
Types of Licensing
If the accommodation is not used solely for living accommodation but there is a significant use of the building as a person's only or main residence, the LHA may declare it to be an HMO for that reason.
A recent case decision (Taylor v Mina An Ltd 2019) has been appealed, and the appeal arose from the misunderstanding of the law relating to houses in multiple occupation. Even if the HMO itself is said to be licensed, the licence is held by an individual, which cannot be transferred to another person. In this recent case law, the respondent had not applied straight away for a HMO licence because of a misunderstanding - that a licence ran with the land so that a new owner did not have to obtain another licence. The licence authority must be satisfied that the licence holder is a fit and proper person, which cannot be satisfied if they have not had the opportunity to consider the question.
The law does not expressly address what happens to a HMO licence when the ownership of the property changes, however the authority consider whether the requirements for a licence are met on application and prior to granting the licence. If any requirements cease to be met after the grant of the licence, the authority has the power to vary or revoke that licence, as appropriate. There is no provision for the licence to terminate automatically, without a decision from the authority, other than on the death of the licence holder. Essentially, the licence continues unless and until the authority decide otherwise. The circumstances of a change of ownership may provide grounds for revocation but do not themselves cause the licence to be revoked.
New Licence required on a Sale of Property
In the appeal case, it was stated that it remains the law that where a property is sold and the new owner takes over management and control from the seller, that new owner requires a licence. The previous licence cannot be transferred to the new owner and is of no assistance, whether or not expressly revoked, because the new owner does not have a licence. The exception that proves this rule is where the licence holder dies, where the law provides that the licence ceases to be in force on the death of the licence holder. There is no such provision for the case where the licence holder ceases to be the owner, or the person in control, of the property. In that event the new owner must take steps to comply with the relevant law.
A HMO licence is valid for a period of five years, and members of the public can check the register to see whether a property is licenced by contacting the local authority in the area a property is located.
For more information contact Ella Dudley in our Commercial Property department via email or phone on 0333 207 1160. Alternatively send any question through to Forbes Solicitors via our online Contact Form.