Will taking in a lodger turn your property into an HMO?
HMO stands for ‘House in Multiple Occupation’. If you are considering renting out one or more rooms in your house, compliance with the HMO rules is not something that will probably cross your mind!
In most cases, you should be fine and you won’t have to worry about it.
However if the rules apply to you and you fail to comply, you could be making yourself liable for quite substantial fines and penalties. So it is something we need to consider.
What is an HMO?
One of the confusing things about the term ‘House in Multiple Occupation’ is that there are different types of HMO. For example, HMOs are defined differently for Council Tax purposes.
However here we are discussing HMOs as defined in the Housing Act 2004 (which is the act which set up the HMO licensing regime). This is where:
- There are three or more occupiers,
- Who form two or more ‘households’, and
- Who share a kitchen, bathroom or toilet
A ‘household’ is generally a family unit (including parents, grandparents, children (and step-children), grandchildren, brothers, sisters, uncles, aunts, nephews, nieces or cousins, plus half relatives and foster children). Although live-in employees such as nannies and carers are treated as being in the same household.
If therefore, you take in your cousin as a lodger, this will not count as a separate household. Similarly any ‘domestic staff’ for example an au pair or nanny.
So when will these rules affect you? There are three situations we need to consider:
- Whether your property is already an HMO, or
- Whether by taking in lodgers you will create an HMO, and
- Whether, if your property is an HMO, you will need to get a license
1. Is your property already an HMO?
This may be the case if you are a tenant in the private sector. For example, if you are sharing a property with people who are not family members, e.g. if you live in a student house.
Following on from this, if your landlord has had to obtain a license, he may not be able to give you permission for a lodger as most HMO licenses limit the number of people allowed to live in the property.
So if, for example, your landlord’s license permits the property to be occupied by five people and there are already five people living there, your landlord will risk being fined or losing his license if he permits anyone else to live there.
If your landlord refuses permission for this reason, there is nothing you can do about it.
If you allow an extra person to live in the property without permission, you risk being evicted.
Or, your landlord could alternatively go to court to get an injunction order, ordering the unauthorised person to leave. He would almost certainly be successful as you would be causing him to break the law, and you would almost certainly be ordered by the Court to pay his legal costs.
2. Will taking in a lodger create an HMO?
As a live-in landlord, you are allowed two ‘non-family’ lodgers before your property will be classed as an HMO.
So, if you take in three non-family lodgers your property will probably be an HMO. The regulations* say ‘persons’ not ‘households’ so if you take in three sisters this would probably create an HMO even though they would form one ‘household’ as they are related. The regulatins also say though that members of the property owners household will not count, so if you take in three of your OWN sisters, this will not create an HMO.
Note, however, that this is only if you are an owner-occupier. If you are a tenant, then your landlord can only allow you to sublet to a lodger if you live alone – as if three or more unrelated people live in the property it will become an HMO. As the rules are different for a tenanted property.
Your landlord will not want this as it will likely put him in breach of his mortgage, his insurance policy and possibly the planning regulations.
The HMO Management regulations: One of the main consequences of running an HMO is that you need to comply with the Management of Houses in Multiple Occupation (England) Regulations 2006 – whether or not you need to get a license. You can find the English regulations online here. Or here for properties in Wales.
3. What about licensing?
Many people with lodgers do not realise that in some circumstances, they may have to obtain a license from their local authority. This will be if:
- Taking in lodgers has turned your property into an HMO – as discussed above, and
- (In Wales only) The property has three or more storeys, and
- There are five or more persons living at the property who form two or more ‘households’.
- In some areas, you may need to get a license even if there are fewer than five occupiers. We cannot specify exactly when this is the case as the rules vary across the country.
If you are not sure whether your house or flat will require a license, have a word with someone at your Local Authority. Generally, they will have a separate department that deals with HMOs and the licensing of HMOs.
However, if you are an owner-occupier and only have two non-family lodgers, you should be safe.
HMO Lodger Landlords
In most cases, if you rent to one or two lodgers, you do not need to worry about the HMO rules.
They are most likely to affect you if you are a tenant, as your landlord will invariably refuse permission if it will result in his property either becoming an HMO or (if it is already an HMO) if it will breach the occupation limit in their license.
However, if you are an owner-occupier living in a large house with three or four rooms which you wish to sublet, you will come up against the HMO rules.
If this is something you wish to do, you should do some research first.
If taking in the lodgers will turn your property into a licensable HMO, most Councils require landlords to carry out improvement work to the property as a condition of granting the license, plus there is the cost of the license which in some areas can exceed £1,000. This may make your lodger HMO business unviable.
You can find your Local Authority and contact details via the page here.
Here are a few examples to help you:
1 You own your own house and wish to take in two lodgers.
This will not create an HMO. So long as you are not a tenant, you can have up to two lodgers without creating an HMO.
2. You own your own house. You rent a room to your cousin and wish to rent out three more rooms in your house to lodgers.
You and your cousin (as you are related) will form one ‘household’. However, if you rent more than two lodgers (who are not relatives), this will create an HMO. Also as there are then more than five people living in the propeprty would result in the property coming within mandatory licensing (which applies if there are five or more occupiers forming two or more households).
3. You are a tenant of an assured shorthold tenancy of a house. You live there with your wife and two children. Times are hard and you want to rent out your spare room to a lodger.
Check your tenancy agreement, but it will almost certainly forbid subletting, which will include subletting to a lodger. Your landlord will almost certainly not permit this. The lodger, unless it is a relative of you or your wife, will form a separate household. As there will be five occupiers, this would put the property into the mandatory licensing category. Your landlord could be fined if he fails to obtain a license. The Local Authority would almost certainly require expensive remedial works to be done as a condition of granting a license. Your landlord will not want this to happen. If you proceed, you will be at risk of eviction or maybe injunction proceedings brought by your landlord, ordering you to regularise the situation.
4. You rent a small house which you share with your partner. You wish to take in a lodger to help with the bills.
Unless the lodger is a family member of you or your partner, this will create an HMO as there will be three occupiers in two or more households. However, in most cases, the HMO will not be licensable as there are less than five occupiers. Unless (and you would need to check this) there are special ‘additional HMO’ or ‘selective’ licensing schemes in your area.
You will almost certainly, though, under the terms of your tenancy agreement, need to get your landlord’s permission.
5. You rent a small terraced house and live there alone. You want to rent a room to a lodger.
So long as only you and your lodger are living in the property, this cannot be an HMO. As the rules say that you cannot have an HMO where there are only two occupiers. Note though, that you will still need to get your landlord’s permission if your tenancy agreement forbids subletting (which in most cases, it will).
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* The rules about when an HMO is created when the owner is in occupation are found in section 6 of Schedule 14 to the Housing Act 2004 and section 6(2) of the The Licensing and Management of Houses in Multiple Occupation and Other Houses (Miscellaneous Provisions) (England) Regulations 2006. There are similar regulations for Wales.
Getting further advice
If you have an HMO-related problem and wish to discuss it with a specialist solicitor, note that the Landlord Law telephone advice service has an HMO Hotline service you can use.
Readers Questions
Q: If my lodger is a licensee how can this create an HMO? I thought you could only have an HMO if you had tenants.
A: I’m afraid the HMO legislation makes it quite clear that the HMO rules apply to licenses as well as tenancies. Lodgers are specifically mentioned so are certainly not exempt.
Information flagged with the Welsh flag only applies in Wales.
Important note
This guide ONLY deals with lodger agreements where you are renting a room to a lodger in your own home.
If you require information about tenancies with resident landlords and Welsh occupation contracts, you need the Landlord Law site.
