Guidance On Mandatory Licensing
Mandatory licensing was introduced in 2006 enacting the relevant provisions of the Housing Act 2004 which required certain large Houses in Multiple Occupation (HMO) to be licensed before they could be let out to tenants. The definition of a mandatory licensable HMO has remained unchanged since the provisions came into force. However, after 1 October 2018 the scope of mandatory licensable HMOs will be extended, and smaller HMOs will be brought within the scheme.
Mandatory Licensing Prior to October 2018
What is a House in Multiple Occupation?
The first step is to establish whether the building, or part of the building, is a HMO within the meaning of the Housing Act 2004. To do this, check whether the building satisfies one of the 5 tests set out in the 2004 Act and whether any exceptions apply.
The 5 tests set out in the 2004 Act are:
- The standard test: this covers most houses where 2 or more households share basic amenities (a toilet; personal washing facilities; and cooking facilities).
- The self-contained flat test: similar to the standard test but applies to self-contained flats.
- The converted building test: a building that has been converted into units of living accommodation that are not themselves self-contained flats.
- Buildings subject to a HMO declaration: where homes would otherwise satisfy one of the tests above, but where there are uses of the accommodation other than as living accommodation, the local authority can make a HMO declaration that makes the building a HMO anyway.
- The converted block of flat test: a separate test under s257 Housing Act 2004.
- The exceptions are set out at Schedule 14 of the Act. If it falls within one of the exceptions, then it is not a HMO. Notably, any building occupied by only 2 persons living in 2 households is exempt.
Definition of Mandatory Licensing
Under the pre-October 2018 regulations, a HMO must have a licence under mandatory licensing if the building:
- Comprises 3 or more storeys;
- Is occupied by 5 or more people living in 2 or more households; and
- Contains shared facilities such as a kitchen, bathroom or toilet.
Mandatory licensing applies nationwide as these are considered high risk properties. However, it is important to be aware that local authorities can require smaller HMOs to be licensed under their discretionary additional licensing schemes.
Mandatory Licensing After October 2018
As part of the government's wider commitment to improving standards in the private rented sector they consulted on extending the scope of mandatory licensing. On 1 October 2018, The Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018 will come into force which extends mandatory licensing by revoking the existing regulations and creating a broader description of HMOs to which mandatory licensing applies. It is estimated that the extension will bring around 160,000 properties within the scope of the mandatory licensing regime.
The New Definition for Mandatory Licensing
The new definition removes the 3-storey requirement which means that a HMO will fall within the mandatory licensing regime if it:
- Is occupied by 5 or more persons;
- Is occupied by persons living in two or more separate households; and
- The standard test;
- The self-contained test but is not a purpose-built flat situated in a block comprising 3 or more self-contained flats; or
- The converted buildings test.
What types of property will now be included?
Houses in Multiple Occupation
All HMOs with 5 or more occupiers living in 2 or more households, regardless of the number of storeys, will need to be licensed. Note that there is no requirement for the building to be converted in any way, so a conventional house could fall within scope if it meets the occupancy requirements.
Flats in Multiple Occupation
The position in relation to flats is rather more complex. Mandatory licensing will not apply to a purpose-built flat in a block with 3 or more self-contained flats. A purpose built flat is a flat that was constructed as a flat as opposed to a flat located in a converted house.
Most flats within large purpose-built blocks will therefore fall outside of the scope of mandatory licensing provided there are 3 or more flats in the block. However, purpose-built flats in smaller blocks with up to 2 self-contained flats will fall within mandatory licensing if the occupancy and household requirements are satisfied. This applies regardless of whether the flat is above or below commercial premises.
Each individual HMO is required to be licensed and not the building within which the HMO is situated.
Exemptions to Mandatory Licensing
Mandatory licensing does not apply to HMOs that meet the converted blocks of flats test, otherwise known as s257 HMOs. A local authority has the discretion to designate s257 HMOs as licensable under additional licensing schemes. However, individual flats within a s257 HMO could still require a mandatory licence if they meet the mandatory test.
Applying for a Mandatory Licence
Each local authority has its own forms and procedure for making an application for a HMO licence. The details of the application process and the standards that the local authority is required to consider when granting a licence are set out in sections 63-68 Housing Act 2004 and the Licensing and Management of Houses in Multiple Occupation and Other Houses (Miscellaneous Provisions) (England) Regulations 2006.
Most application forms are available through the local authority's website. Once the form is completed it should be returned with the appropriate fee.
If an application is made and it transpires that the property is not actually a licensable HMO then the licence application fee is fully refundable.
Once an application is duly made then no offence for operating an unlicensed HMO can be committed.
A landlord operating a licensable HMO on or after 1 October 2018 will require a licence. A landlord who fails to apply for the appropriate licence (or a temporary exemption) before 1 October will be committing a criminal offence. The penalties for operating an unlicensed HMO can include a prosecution brought by the local authority with unlimited fines imposed if found guilty or a financial penalty of up to £30,0000. Other penalties include rent repayment orders brought by tenants or the local authority and a prohibition on serving a valid section 21 notice to seek possession of the property. Repeat offenders may also be subject to banning orders and risk being placed on the rogue landlord database.
The new regulations make transitional provisions to allow landlords time to comply with the new rules.
Properties currently licensed under Mandatory or Additional Licensing
- The existing licence will be valid, and its conditions will apply until the date the licence expires
- Note that when the licence is renewed the new HMO licence conditions relating to minimum sleeping room sizes and waste disposal requirements will apply. See our guides on Room Size Condition For Houses In Multiple Occupation (HMOs) After October 2018 and Mandatory Waste Storage and Disposal Conditions for HMOs.
Properties currently licensed under a Selective Licensing scheme that will be subject to Mandatory Licensing after October 2018
- The existing selective licence has effect as if it is a HMO licence until its expiry. The existing conditions in the selective licence will continue to apply until the date the licence expires
- Once the selective licence expires, the property will then require a HMO licence to comply with mandatory licensing and the licence-holder will have to apply for a HMO licence.
- The new HMO licence conditions relating to minimum sleeping room sizes and waste disposal requirements will apply to the new HMO licence even if there is an existing tenancy in place which pre-dates the new HMO licence.