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Houses in Multiple Occupation (HMOs)

November 2021

The demand for houses in multiple occupation (HMOs) has been on the rise as landlords look to protect their investments. HMOs are seen to be more profitable as they can generate higher yields. There is also less risk if, for example, income is lost from one or two tenants in an HMO as opposed to all the income being lost from a single-let property.

An Assured Shorthold Tenancy (AST) is the usual form of tenancy granted by private landlords to HMOs. There is now a suite of template Assured Shorthold Tenancy (AST) agreements which are to be specifically used for an HMO and these have been added to Houses in Multiple Occupation and Rented Property Licensing. These agreements are similar to those in the main Tenancy Agreements folder, but they have been adapted to contain specific HMO clauses, for example, the agreements contain the tenant obligations as set out in HMO regulations and tenant obligations in relation to HMO licences (if any apply).

The HMO AST templates are suitable for different types of properties, including both furnished and unfurnished houses, flats and bedsits. The template agreements for houses and flats can be used by joint sharers who will be joint and severally liable under the agreement. The bedsit agreements will typically be granted to an individual tenant.

Student tenancies may be HMOs (if they fall within the definition). There have also been updates to the Student Letting Agreements to incorporate tenant covenants specific to HMOs which have been left in square brackets. If your student property is not an HMO these clauses can be deleted. Additional clauses have been left in square brackets if the property is licensed.

Whilst an HMO may seem more profitable than a single-let, there are increased obligations upon a Landlord (and their agent). It is a criminal offence if a landlord or managing agent is not holding a licence when required. It is also a criminal offence not to comply with the conditions of a licence and/or HMO management regulations. Cases where rogue landlords or agents are in breach of the HMO regulations or have not obtained a licence (where required) are repeatedly making headlines. It is important that landlords and agents comply with their obligations or face the consequences.

For information on the definition of an HMO, licensing requirements and management regulations, please see the updated Guidance Notes which can be found in Houses in Multiple Occupation and Rented Property Licensing.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.

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