HMO Licensing and Selective Licensing Explained

Licensing requirements are a key consideration when purchasing, converting, refinancing or operating rented property. The licence required can depend on the number of occupiers, the number of households, the property's location and the licensing schemes introduced by the relevant local authority.

A property may fall within mandatory HMO licensing, an additional HMO licensing scheme or a selective licensing scheme. Local requirements should always be checked before a property is acquired or occupied.

A house in multiple occupation (HMO) is broadly a property that is occupied by persons from more than one household who share facilities such as a kitchen or bathroom. The statutory definitions are detailed, and certain types of building and certain occupation arrangements may be excluded.

Whether a property is an HMO for licensing purposes will depend on the specific occupation arrangements, the number of households and the type of building. The definitions in the Housing Act 2004 and any regulations made under it should be checked. Local councils may also apply their own requirements as part of additional licensing schemes.

Larger HMOs that meet the nationally prescribed requirements will generally need a mandatory licence from the relevant local council. Licensing requirements can change, and the current national requirements should be confirmed from the GOV.UK guidance before any transaction proceeds.

Local councils may impose additional requirements as conditions of the licence, including standards relating to room sizes, fire safety, amenities and management practices. Licence fees and licence periods also vary between councils.

Councils can introduce additional licensing schemes covering HMOs that are not subject to mandatory licensing. An additional licensing scheme can extend the licensing requirement to smaller HMOs — for example, those occupied by fewer than five persons.

The boundaries, commencement dates, property types and licence conditions vary between councils and can change over time. You should check the website of the local authority responsible for the property, using the relevant postcode, before committing to a purchase or new letting.

Selective licensing can require privately rented properties within a designated area to be licensed even where the property is not an HMO. A selective licensing scheme applies only to properties within the designated area and does not affect properties elsewhere in the same council area.

Selective licensing schemes are introduced at a local level. Schemes can change over time and may be renewed, varied or allowed to expire. The designated area may also change.

HMO licensing and planning permission are separate requirements. A property may require an HMO licence under housing legislation while also having a separate planning issue under planning legislation. Similarly, a planning permission or an established lawful use does not necessarily remove the need for a property licence where one is required.

In certain areas, Article 4 directions have been made by the local planning authority. Where an Article 4 direction applies, changing a property from a dwellinghouse (C3) to a small HMO (C4) will require planning permission, even though this change of use would otherwise fall within permitted development rights.

Whether an Article 4 direction applies should be checked with the local planning authority before acquiring a property for HMO use.

Lender policies on HMO finance vary considerably. A property that meets one lender's criteria may not be acceptable to another. Before proceeding, it is worth understanding how a specific lender approaches HMO applications.

Lenders may consider: