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  • A guide to HMO property for landlords

    If you're considering investing in the HMO market, whether you’re buying a new property or converting an existing one, it's important to understand what it involves. Our guide is here to help you understand everything you need to know about owning and managing a property with multiple occupants – making the process clearer and more straightforward for you.

    Houses in Multiple Occupation

    What is a HMO?

    Under the Housing Act 2004, a HMO, or House in Multiple Occupation, is a property where three or more tenants from different households reside, sharing facilities like bathrooms, kitchens and living areas. This setup is common in student accommodations or shared professional housing.

    Managing an HMO differs from managing single-household properties and often involves a more hands-on approach. HMOs can offer greater financial returns due to their ability to rent to more people; however, they also require careful management due to higher tenant turnover.

    What is a HMO licence?

    A HMO licence is a legal document landlords must have if they rent out a HMO – to ensure the property meets safety and management standards. When you apply for an HMO licence, the local council will assess several aspects of the property. This includes checking that the property is up to standards and your ability to manage it effectively and responsibly. If you fail to comply with the legal requirements, they have the authority to either refuse the licence or revoke it if it's already been granted.

    As a landlord, it's crucial to understand that not having the appropriate HMO licence, or allowing more people to live in your property than the licence allows, can lead to steep fines of up to £20,000. Also, if you don't meet other licence requirements, you could face additional fines of up to £5,000.

    If your tenants receive housing benefits, the council has the power to ask for a rent repayment order. This means they could require you to pay back up to a year's rent for the time your property was without the correct licence.

    How long is a HMO licence valid?

    A HMO licence typically lasts for five years, although some councils may require more frequent renewals. Remember that a licence is not transferable; a new landlord must reapply. If you have concerns about managing your HMO property, contact the council for support.

    What are a landlord's legal responsibilities for a HMO property?

    HMO landlords have a set of legal responsibilities to ensure the safety and well-being of tenants, as well as compliance with housing regulations. These include:

    Minimum room sizes: To combat overcrowding, the government has set minimum bedroom sizes. The minimum size requirements are

    • 4.64 square metres for children under 10.
    • 6.51 square metres for individuals over 10.
    • 10.22 square metres for two people over 10.

    Covering council tax and utilities: As an HMO landlord, you're typically responsible for the council tax, TV licence, internet and any other essential utilities.

    Safety compliance: Regular safety checks are crucial. This includes annual gas safety checks, five-yearly electrical appliance tests, and ensuring fire safety measures (like smoke detectors and clear escape routes) are in place.

    Waste management: There must be enough bins for the number of tenants living in the property. The landlord is also responsible for providing waste storage facilities that comply with local refuse and recycling guidelines.

    Furniture and furnishings: If furnished, all furniture must comply with fire resistance regulations. Furnished rooms are often preferred by tenants.

    Suitable for human habitation: HMOs need to be safe and free of hazards that could negatively impact health or quality of life. The Housing Health and Safety Rating System (HHSRS) lists several hazards you need to fix as soon as possible if they're found in your HMO. These can include:

    • Carbon monoxide
    • A damp or mouldy environment
    • Asbestos
    • Overcrowding

    Does landlord insurance cover HMO properties?

    When it comes to insuring rental properties, it's important to note that standard landlord insurance policies may not always cover HMOs. Here are some reasons why:

    Risk profile: HMOs typically have a higher risk profile compared to standard rental properties. This is due to factors like a higher number of occupants, increased wear and tear, and the potential for more frequent tenant turnover.

    Specialised coverage: HMOs often require specialised insurance policies. These policies are designed to cover the specific challenges and liabilities that come with renting shared living spaces.

    Cost consideration: Due to the increased risk, HMO insurance can be more expensive than standard landlord insurance. However, it’s a necessary investment to protect against the risks associated with HMO properties.

    Customisable policies: Landlords should look for insurance providers that offer customisable HMO policies, allowing them to tailor their coverage to the specific needs of their property and tenants.

    What does HMO insurance cover?

    Insurance for HMO properties comes in various forms, each with different features and protections. Typically, HMO insurance includes:

    HMO building insurance: This covers the physical structure of your HMO, including permanent fixtures and fittings, against risks like fire, flood and theft.

    Contents insurance: It protects your furniture and appliances, especially in shared spaces like living rooms and kitchens.

    Liability insurance: This is crucial as it covers you if someone gets injured on your property, helping with legal costs and potential compensation.

    Unoccupied property insurance: Useful for times when the property is empty, such as during student holidays.

    Remember, each insurance provider has different terms and coverage limits, so it’s important to discuss your specific needs and understand the details of your policy. For all your landlord insurance requirements, whether HMO or standard property, Bluedrop Services are happy to advise.

    Want to find out more about Bluedrop's HMO Insurance?
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