Properties which are HMO licensed are required by law to meet particular standards provided in the Housing (Scotland) Act 2006. The Scottish Government have produced guidance for local authorities on the standards to be met.
Property owners must apply to their local authority for a HMO licence. As well as assessing the standard and suitability of the property for HMO licensing, the local authority must also be satisfied that the applicant is a “fit and proper person”. This is the same test that applies when local authorities consider applications for landlord registration and the same factors should be considered for both applications. An owner who is granted a HMO licence will be automatically placed on the landlord register.
An owner found to operate a HMO without a licence is guilty of a criminal offence and could be fined up to £50,000.
When is a HMO licence required?
A HMO licence is required for any living accommodation that meets the definition of a “house in multiple occupation”. The criteria being:
- three or more individuals (“qualifying persons”);
- from more than two families;
- reside in the property as their main residence; and
- share some facilities, for example a kitchen and/or a bathroom.
Payment of rent is not a prerequisite for a property to qualify as a HMO. Emergency accommodation, such as homeless units, can be classified as HMOs if the above criterion applies.
Owner occupiers
Owner occupiers do not count as “qualifying persons” for the purposes of calculating whether a licence is required. Accommodation occupied by the owner and two other unrelated persons won’t be considered a HMO and will not require a HMO licence. A property occupied by the owner and three other unrelated persons will require a licence.
Student lets
A common query is whether student accommodation counts as a HMO. The answer depends on whether the property is a student’s “main residence”.
While a person resides in a property during full-time or higher education it is considered the “main residence”. Many student lets could therefore fall within the definition of an HMO.
Joint-owners
Owner occupiers are exempt from the calculation of “qualifying persons” but it is unclear whether all of the owners of a property must live in it for the exemption to apply.
It is important to consider this when purchasing a property. Take, for example, the case of parents purchasing a flat for their son or daughter to reside in when at university. The son or daughter is to live in the flat with two friends who are not related. The parents consider granting their son or daughter a 1% share in the property. The parents will hold a 99% share in the property but neither will reside there. Is a HMO licence required?
It’s not clear. A HMO is exempt from the requirement to be licensed if “occupied only by the owners (our emphasis) of the HMO either alone or together with…”.
The 2006 Act does not define “owners”. If interpreted literally, “owners” would suggest that everyone named on the title deeds must reside in the property to make it exempt from licensing requirements.
The draft guidance initially made reference to “an owner”. However, the final legislation unhelpfully provides that a property will be exempt from the licensing requirement where it is occupied by “the owners”.
There appears to be no court decisions on the topic at the time of writing. Should this reach a court, it would come down to the judge’s own interpretation of “owners”.
Joint owners in the above situation will have to balance the cost and duties associated with HMO licensing against the risks of punitive action in the event a licence is not obtained. It is ultimately for local authorities to take action over unlicensed HMOs and we would recommend seeking the relevant local authority’s views on whether a licence is required. However, if there’s any doubt as to whether the exemption applies, we would always suggest obtaining a HMO licence given the potential criminal and civil sanctions that can apply.