Tenants

What is a HMO?

A HMO (House in Multiple Occupation) is commonly summed up as “any dwelling occupied by three or more unrelated persons”, but it’s more complicated than that.

There are several definitions of HMO – all of which can be found in the Housing Act 2004 – but we’ll do our best to explain each one in layman’s terms on this page.

At this stage, we feel it’s important to point out the common misconception that every HMO requires a HMO licence. They don’t. A HMO will only require a licence if it falls within a licensing scheme. More details on these schemes can be found below.

Your property will be a HMO if it is one of the following: Housing Act 2004 section and schedule numbers
A house or building lived in by people who belong to more than one family* and who share one or more facilities**. S254(2) – ‘The standard test’
A house in bedsits lived in by people who belong to more than one family* and who share one or more facilities**. S254(4) – ‘The converted building test’
An individual flat lived in by people who belong to more than one family* and who share one or more facilities**. S254(3) – ‘The self-contained flat test’

A building of self-contained flats that do not meet 1991 Building Regulation standards.

Exemptions:

  • If it is occupied by two people.
  • If it is occupied by the owner (and their family, if any) and one or two lodgers.
  • If it is occupied by a religious community.
  • If the occupiers have their own residences elsewhere**.
  • If no-one in the property is required to pay rent.
  • If the owner or manager is a public body.
  • If the owner or manager is an educational institution.
  • A building of self-contained flats if two thirds or more of the flats are owner-occupied.
  • If the property is part of a guesthouse or hostel (unless an ‘HMO Declaration’ is made).

S257

 

  • Sch 14, 7
  • Sch 14, 6(c)
  • Sch 14, 5
  • S259 (S)
  • S254(2)(e)
  • Sch 14, 2
  • Sch 14, 4
  • S257(2)(b)
  • S254(2)(d)
  • S255(1)

* Family – husband, wife, co-habitee, child, stepchild, foster-child, grandchild, parent, stepparent, fosterparent, grandparent, brother, half-brother, sister, half-sister, aunt, uncle, niece, nephew, cousin.

** Facilities – basic amenities: WC; wash hand basin, shower, bath, cooking facilities.

*** Accommodation used by full-time students while they are studying is taken to be their main residence.

S258

S254(8)

S259(2)(a)

In short, a HMO can be best defined as “three or more unrelated occupiers sharing a house or flat, such as a group of students”. A family of five, therefore, would not be classed as a HMO. This is all laid out in Section 254 of the Housing Act 2004.

However, a block of self-contained flats can still be classed as one whole HMO, even if the individual units are only occupied by one or two people. If the building was converted into flats before 1992 or does not meet the 1991 Building Regulations, and over a third of the flats are rented out, then the whole building will be deemed a HMO, as dictated by Section 257 of the Housing Act 2004.

Even if the whole building is not a HMO, it’s important to remember that individual flats within it can still be HMOs in their own right. For example, a flat occupied by three unrelated tenants in a building that meets 1991 Building Regulations would be a HMO, and may require a licence if it falls within a licensing scheme. Again, we have more information on the different types of licensing schemes.

What type of investment is a HMO?

HMOs offer investors the opportunity to own larger properties and let them out to groups of either student or professional sharers. They can offer a good rate of return for investors in Cardiff, but they also need to be managed properly to ensure long-term viability. To help you decide what type of HMO property to invest in and to calculate your return on your purchase, you may wish to read our Investing section.

In an ever-changing student market, making the correct purchase is vital, so with over a decade of experience in the student market and three branches throughout Cardiff, CPS Homes are extremely well placed to advise you on where to buy a HMO property.

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