Changes to Mandatory HMO Licensing Expected October 2018

In December 2017 the government announced that it would proceed with extending mandatory property licensing of houses in multiple occupations (HMOs). On 23 January 2018, Housing Minister, Dominic Raab, responded to a written question from Wera Hobhouse MP stating that, subject to Parliamentary approval, the necessary regulations would be brought into force in October 2018.

What is mandatory licensing?

Since the Housing Act 2004 came into force it has been a requirement that large HMOs are licensed under mandatory licensing. Currently mandatory licensing applies nationwide to HMOs that:

1. Comprise 3 or more storeys;
2. Are occupied by 5 or more people living in two or more single households; and
3. The occupiers share basic amenities such as washing and cooking facilities.

As these large HMOs are deemed high risk they are all required to be licensed regardless of where the HMO is located. Recent years have seen local authorities implement additional licensing schemes to cover smaller HMOs in an attempt to tackle poor housing conditions in the private rented sector. For example, in some areas, HMOs comprising one or two storeys need to be licensed.

What are the proposed changes?

The Housing Act 2004 allows the Secretary of State to prescribe the type of HMO that falls within the definition of mandatory licensing. The prescribed description has not been updated since 2006 when licensing under the Housing Act 2004 came into force.

The government has now decided to extend the scope of mandatory licensing to bring smaller HMOs within the scheme. Mandatory licensing will include:

• All HMOs with 5 or more occupiers living in 2 or more households regardless of the number of storeys. Effectively this means the storey requirement will be removed from the current definition.
• Purpose built flats where there are up to two flats in the block and one or both of the flats are occupied by 5 or more persons in 2 or more separate households. This will apply regardless of whether the block is above or below commercial premises. This will bring certain flats above shops on high streets within mandatory licensing as well as small blocks of flats which are not connected to commercial premises.

As is the case now, it is the individual HMO that is required to be licensed and not the building within which the HMO is situated. This means that where a building has two flats and each is occupied by 5 persons living in 2 or more households, each flat will require a separate HMO licence.

What are the proposals for implementing the changes?

The government proposes to implement the extension of mandatory licensing in two phases.

Phase one will last for 6 months. During this time local authorities will publicise the new licensing regime, process applications and issue licences. Landlords that did not require a HMO licence before the change in the rules will not be prosecuted during phase one for failure to license a licensable HMO and will not be exposed to rent repayment orders (RROs).

However, landlords will be expected to apply for a licence during the 6 month grace period and they are encouraged to do so because they will not be able to serve valid section 21 notices seeking possession until an application for a licence has been duly made (unless the landlord has instead applied for a temporary exemption in order to remove their property from licensing).

The government’s response is clear that the 6 month grace period does not mean that applying for a licence is optional. It just means that the criminal sanctions for not having a licence will be put on hold. Once the 6 month period is over and phase two begins any landlord without a licence will be subject to the full range of penalties for failing to comply.

It is also important to point out that landlords who currently require a licence under a local authority additional or selective licensing scheme and who are not licensed will not be able to benefit from the 6 month grace period just because their property has fallen within the new mandatory licensing category. These landlords could face enforcement action at any time.

What happens if I already have a licence under the local authority’s additional or selective licensing schemes?

The response paper confirms that properties already licensed under local authority additional licensing schemes will be passported into the mandatory licensing scheme without any cost to the landlord or alterations to the licence conditions for the remaining period of the licence. The distinction between mandatory HMO licences and additional HMO licences is largely artificial as both licences are granted pursuant to Part 2 of the Housing Act 2004. Passporting these existing licences into mandatory licensing should not be too problematic because they both fall within the HMO licensing scheme.

Some local authorities also have selective licensing schemes requiring all privately rented properties to be licensed whether they are HMOs or not. Selective licensing is governed by Part 3 of the Housing Act 2004. Some HMOs are only caught by selective licensing schemes, for example, where they do not fall within the current definition of mandatory licensing or the local authority has no additional licensing designation. In these circumstances, the government proposes to issue converted licences at no additional charge to the landlord. Converting Part 3 licences to Part 2 licences will require more consideration as there are differences between the two licensing schemes. Part 2 of the Housing Act, for example, requires the local authority to be satisfied that the property is suitable for multiple occupation and this includes assessing whether the property meets prescribed HMO standards.

What happens if I don’t get a licence?

There are serious consequences for landlords and letting agents who do not obtain licences for licensable properties. The local authority can bring a prosecution against the landlord in the magistrates’ court and fines for Housing Act 2004 offences have been unlimited since March 2015. Local authorities are also able to issue landlords with civil penalty notices of up to £30,000 per offence as an alternative to prosecution. Tenants and local authorities have additional remedies in the form of RROs where rent or housing benefit can be claimed back from the landlord by order of the First-Tier Tribunal.

Repeat offenders may also be subject to a banning order prohibiting them from letting property once these are brought into force. This is expected to happen in April 2018.

The new rules extending mandatory licensing are expected to come into force in October 2018. Landlords should start reviewing their properties now in preparation for the changes.

If you would like to read a related blog on government proposals regarding minimum room size, click here.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*