Applying for an HMO property licence sounds straightforward, but there are a lot of things to bear in mind. Although the HMO license application is designed so that it can be completed by a landlord, rather than a professional company; what you need to consider is how much time you have available and what that time is worth. The process can be complex and lengthy with penalties for misinformation and requirements for specific documentation before submitting. But If you do decide you are willing to go through the process on your own, here are the things you need to consider.
Do I need an HMO property licence?
The first question you need to ask yourself is whether or not you need an HMO licence. When it comes to larger properties, this is an easier question to answer – as across England and Wales all properties with 5 or more unrelated tenants require a mandatory HMO license. We hit a grey area when it comes to smaller properties.
Property that contains three or more unrelated persons or two separate households (for example a couple and one sharer or siblings and a friends); whether or not these smaller HMOs need a license depends on the council. So, the first stage of every HMO license application is contacting the council to determine whether or not you actually require one.
Is it worth getting an HMO property licence?
When considering tenants for a smaller property, it is worth factoring in whether or not you want to take on a set of tenants (for example a couple and a sharer) that will require an HMO or whether you’d prefer to avoid the issue. The main benefit to getting an HMO license is that it broadens your potential tenant base and can increase your rental yield (more households in a single property means the potential for higher rent). The cons, however, are the legwork involved and the additional costs around converting the property and applying for the HMO license, which varies from council to council, but can run into the thousands.
What do I need to do?
If you do decide to go ahead, it’s not as simple as just filling in a form. Although they vary by council, each application form requires detailed information about the property’s tenants, fire precautions, types of soft furnishing, room proportions, make and state of amenities and facilities, as well as details of your mortgage and information about both landlord and manager. Some of these can take time to obtain. In some cases, building certifications and maintenance improvements may be required as part of the process.
You will also need to inform in writing the freeholder of the property, your mortgage lender and any tenants who have more than 3 years left on their existing tenancy.
Don’t forget – you need an HMO for every instance – the HMO covers the property rather than the landlord so those with larger portfolios may need to go through the process multiple times, each using different councils and subject to different regulations.
What are my alternatives?
Landlords can ask their managing agents to apply on their behalf. There are also HMO specialists that will guide you through or take on the process for you. In addition to saving time and stress, in the case of overseas landlords (who many councils will not grant an HMO license to) these companies can take on the HMO conversion and application on their behalf.
For more information, pick up our FREE HMO & Property Licensing e-book? You can also browse our selection of guides for letting agents and property managers on our website.