An HMO, a house in multiple occupation, is a property rented to tenants from more than one household who share facilities such as a kitchen or bathroom. Large HMOs, those let to five or more people forming two or more households, must be licensed by the local council in England, and operating an unlicensed HMO can bring an unlimited fine. HMOs also need specialist insurance, because standard landlord policies often exclude or do not properly rate this higher-risk letting.
HMOs carry more risk than a single-family let: more occupants, more turnover, shared facilities and stricter regulation. Both the licensing rules and the insurance need to reflect that, and getting either wrong can be expensive.
What counts as an HMO?
Broadly, a property is an HMO where at least three tenants live there forming more than one household, and they share a toilet, bathroom or kitchen. A large HMO that requires a mandatory licence is one let to five or more people forming two or more households with shared facilities. The exact boundaries can be widened by local rules.
When does an HMO need a licence?
Under the mandatory scheme in England, any large HMO, five or more occupants forming two or more households, must be licensed. In addition, many councils operate additional or selective licensing that can require a licence for smaller HMOs, or for all rented property in an area, so the local council should always be checked. A licence lasts up to five years and applies to that specific property.
What happens if an HMO is not licensed?
Operating a licensable HMO without a licence is an offence that can carry an unlimited fine, and it can also expose the landlord to a rent repayment order requiring up to twelve months’ rent to be repaid, and restrict their ability to evict. It can also prejudice an insurance claim if the property was being let unlawfully.
Why do HMOs need specialist insurance?
A standard buildings or landlord policy is often rated for a single-family let and may exclude or under-cover an HMO. HMO insurance is written for the higher occupancy and turnover, and typically covers the buildings, property owners’ liability, loss of rent, and often the additional fire-safety exposures that come with multiple tenants. Insurers will usually expect the licensing and fire-safety obligations to be met.
Getting the cover right
HMO cover needs to match the size of the property, the number of tenants and the licensing position, and it is an area where the wrong policy is easily bought. A broker can make sure the cover fits the letting and the regulatory requirements. To review HMO or landlord cover, get a quote or speak to the team.