As the property market enjoys continued buoyancy at the same time that the UK is in the midst of a housing shortage, local authorities are under increased pressure to crack down on illegal rental activity. In order to increase regulatory efficiencies and improve living standards, many councils are now re-examining inspection procedures and legislative guidelines surrounding the need for landlords to gain a house in multiple occupancy (“HMO”) licence. With HMO prosecutions on the rise, it is imperative that landlords take a proactive approach, following stringent due diligence procedures to avoid any undue liability.
In general, a property is classified as a house in multiple occupation if it is inhabited by three or more tenants, who share toilet, bathroom or kitchen facilities and form more than one household. Traditionally, only properties classed as “large HMOs” required a licence – those being properties three or more storeys high, inhabited by five or more tenants who form more than one household. However, this is beginning to change.
Councils getting tough
Councils have devolved powers to assign their own, tougher rules as to when an HMO licence is required and many local authorities now utilise HMO licensing legislation as a tool to improve living conditions in their area by passing down more stringent guidelines.
In practice, the application and inspection of properties vying for an HMO licence allows local authorities to ensure that landlords are providing tenants with a safe, hygienic living environment. Any properties found to be damp, cold, insecure or possessing inadequate fire precautions will have their applications rejected, significantly limiting the landlord’s commercial earning potential until these issues are remedied.
Such tactics have already been adopted by Luton Borough Council, which in 2013 introduced an additional licensing scheme requiring all landlords renting out HMOs to gain a licence. In addition, Southwark Council has similarly specified that a licence is required for all rented property occupied by three or more people who are not related. These guidelines reflect the changing housing landscape within the UK’s cities; as average property sizes decrease and demand outstrips supply, larger numbers of tenants are increasingly being accommodated in smaller properties.
Council data shows that enforcement activity in Southwark involving multiple occupied properties has increased by almost 300% over the past five years, with the borough experiencing a 500% rise in prosecutions over the same period. This reflects a national trend that is set to continue, as housing standards remain a high priority. Accordingly, many local authorities are devoting additional resources to the enforcement of HMO legislation and are doubling their efforts to identify non-compliant parties, through the implementation of more frequent and stringent, on-the-spot checks.
Landlords need to take responsibility
Crucially, it is the responsibility of the landlord to ensure that they adhere to the HMO regime set out by their local authority. For many property owners, the goalposts are moving, so regularly monitoring for changes to licensing criteria is essential – while a landlord may have been compliant two years ago, this may no longer be the case, and ignorance is not a defence that will stand up in court.
This can be especially challenging for property investors who rent out accommodation spanning a wide geographical area, as the application of legislation must be monitored across numerous local authorities. Here it may be wise to seek professional counsel, and schedule in regular checks, say every six months, to ascertain whether any changes have been planned or implemented.
In order to ensure compliance, landlords must also carefully consider the estate agent they deploy to rent out and service their property. Although the estate agent is responsible for much of the day-to-day contact with tenants, it is the landlord themselves that are liable to prosecution if they are found to be in breach of HMO legislation, even inadvertently.
A significant proportion of HMO prosecutions are caused when tenants illegally sublet additional rooms of a property without the landlord’s knowledge, increasing the amount of occupants above the threshold requiring an HMO licence.
As this is an area where landlords are particularly vulnerable, contractual agreements must be put in place to ensure that estate agents actively monitor for illegal subletting and that all staff are aware of the number of tenants that are, and should be living in the property. However, while these checks can be made during routine, planned inspections, landlords must ensure that they are not overzealous and provide tenants with fair and reasonable notice for inspection.
Legally, aside from the completion of urgent maintenance and repairs, landlords or agents must notify occupiers of an inspection or visit 24 hours before it takes place, as specified in the Housing Act 1988.
For landlords, adherence with HMO licensing legislation is vital. With the number of successful prosecutions on the rise, individuals found to be operating without the correct licence are subject to fines of up to £20,000, while tenants can make a claim to receive up to 12 months’ back-paid rent.
In addition, individuals or companies found guilty of a violation could be prohibited from holding a licence for five years, a decision which would have potentially devastating effects and significantly reduce properties’ rental yield.
Therefore, it is essential that landlords take matters into their own hands, to monitor for changing legislation and to reduce the likelihood of illegal subletting activities by tenants.
Andrew Ford is a solicitor at law firm Shakespeare Martineau
