HMO licensing is difficult to understand. Having searched for Acts of Parliament and various explanations, I found the information neither clear nor definitive. The following is drawn from the vast amount of information spread over numerous pages of the 2004 Housing Act which is provided here on a single page for simplicity… well ‘simplicity’.

The various terminology associated with HMO licensing is established. HMOs large or small; properties in one, two or three or more stores – all in plain language. Mandatory, Additional or Selective – Licensing is described as a complex issue – it is!

I hope to make it more clear if not clear.

Do you have trouble understanding what a license is, what it is for, who it affects, what the purpose is and how much it will cost?:

There are two types of HMO licenses:

Compulsory and Discretionary Licenses.

• required (Parliament insists that all such properties are licensed
• The second part of the Housing Act 2004 (HA 2004) covers compulsory licenses under s55.
• This states that a large HMO includes:
  • 5 or more tenants,
  • living in 3 or more stores and
  • form two or more households
• Properties within these criteria must be licensed anywhere in England and Wales. This part of the law was implemented in Canterbury in 2007; most Canterbury student landlords are familiar with this.
• Discretionary licenses (Parliament allows LAs to designate areas subject to licence) Don’t be fooled by the term discretion: this does not mean that owners can opt out! Only LA can opt out if they so choose. If you opt for the rest, we must accept it with minimum grounds for appeal:
• There are two discretionary licenses:
  • Additional and Selective Licenses:
  • “Additional licenses”
    • found in part 2 and s.56 HA 2004.
    • more likely to be used to control student-occupied houses
  • “Selective Licensing”
  • more likely to be used to control homes occupied by benefit recipients
• it is located in part 3 under s. 80 HA 2004

Both Additional and Selective Licenses require Owners to license properties in different situations but with the same result: high fees resulting in higher rents and a lot of paperwork.

• The Additional License provides that small HMOs, that is,
  • 3 or more tenants
  • forming two or more households,
  • Live in any number of stores,
  • must be licensed in “designated” areas.
• This part of the law is currently the controversial subject of consultation with a possible implementation hearing in Canterbury in 2013.
• Three shared blood brothers classify as a household
  • this is not an HMO, so it is not licensable,
• Two brothers and a friend are two homes.
  • this is an HMO and potentially licensable
• Selective licenses allow “local housing authorities to review housing conditions in their districts” and
• requires small HMOs with
  • 3 or more tenants living in
  • any number of stores
• obtain a license if an area falls within certain negative criteria –
  • mainly deteriorated houses with
  • severe antisocial behavior
  • related to the properties in question.
• At Oxford, the cost of Additional Licenses is significantly higher than that of Compulsory Licenses. In fact, Compulsory Licensed properties are now experiencing higher costs in line with more expensive Additional Licenses. This is taking the word ‘additional’ to an extreme not intended by parliament. Generally speaking, a compulsory fee of £460 in Canterbury for five years could, after the Additional License, continue to Oxford at a similar starting cost of £470. But in addition this would also require an additional annual quota from £172.
• The real cost is in completing the paperwork and undergoing the inspections plus any work required to comply with the recommendations.
• There is a glimmer of a silver lining: this process could weed out minority rogue landlords, creating a more level playing field for the remaining good landlords.
• Nobody seems sure what will happen at the end of the maximum five-year period, the time allowed by the 2004 Act to correct the problems the License is designed to remedy. Will they follow new laws?
• I estimate that the exercise will cost this owner £57,000 in fees at the end of 5 years. How ironic when 90% of our properties do not require a discretionary license, yet already voluntarily comply with the Compulsory License standards. What a waste!