Quick Guide: HMOs and MUBs

Quick guide image

Quick guide image

This guide applies to Landlords who own properties in England.

If you're a landlord then it's important to know what an HMO and a MUB are. This not only helps to ensure you apply for the right mortgage, but because regulations for HMOs will be changing from 1 October 2018 and you need to be aware in case you're affected.

 
 
 

HMO

Any property you let can be an HMO, or House in Multiple Occupation. This is determined by the manner in which you rent it out. It is currently defined by the Housing Act 2004. If you rent your property to three or more tenants who are not all part of the same household, and they share bathroom and kitchen facilities, your property is an HMO. This is typically referred to as not being self-contained because the tenants share facilities.

If you rent your property to five or more tenants who are not all part of the same household, and the property is at least three storeys, then it is a large HMO.

It is a legal requirement to have a licence for a large HMO, and it must meet certain minimum standards. This is called Mandatory Licensing. Local Authorities have the power to impose licensing on any class of HMO, and this is known as Additional Licensing.

A household is a single person or members of the same family who live together. A family includes people who are married, in a civil partnership or living together, relatives or half-relatives, step-parents and step-children.

MUB

A MUB, or Multi-Unit Block, typically consists of self-contained units. This means that you rent a unit, usually a flat, which has its own toilet, washing facilities and kitchen to a single household for their exclusive use.

A MUB can still be classed as an HMO. If your property has a mixture of self-contained units and rooms with shared bathroom and kitchen facilities, then the HMO rules apply.

Even more complicated is if your property was converted to flats but doesn't meet applicable building standards. If this is the case then it will be an HMO even though the units are self-contained.

On a final note you can have a MUB of HMOs! If you own a very large property which is split into self-contained flats and you rent a flat to three or more tenants from more than one household, then that flat is an HMO. Each flat is a property and may be an HMO within the whole building which is a MUB.

Mandatory and Additional Licensing

If you have a large HMO, or an HMO in an area where Additional Licensing applies then you must apply to the local authority for an HMO licence. A licence will normally apply for five years and there will be a fee to apply. When assessing an application, the local authority will not only assess the suitability of the property for the number of occupants and the available facilities, but also the suitability of you as a landlord.

An HMO licence, if granted, will usually contain conditions and you must ensure you comply with these at all times. Failing to apply for a licence where one is required could result in you being fined up to £20,000. If you breach any of the conditions of your licence then you could face a fine of up to £5,000 and lose your licence.

You can read more at https://www.gov.uk/government/publications/licensing-of-houses-in-multiple-occupation-in-england-a-guide-for-landlords-and-managers*.

Why is HMO or MUB status important?

From a lending perspective, the manner in which a property is let affects the risk profile and the way in which the value and income are assessed. Incorrectly declaring your property type on a mortgage application, whether intentionally or not, is mortgage fraud. The way in which HMOs and MUBs are valued is different to a standard residential property and can often generate a higher valuation. So, incorrectly identifying your property type may affect your borrowing ability.

Changes from 1 October 2018

The Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018 and The Licensing of Houses in Multiple Occupation (Mandatory Conditions of Licences) (England) Regulations 2018 come into force on 1 October 2018.

The Order changes the definition of a large HMO, and brings many more properties into the Mandatory Licensing regime. The requirement for a property to be at least three storeys no longer applies. Therefore, any property let to five or more tenants forming two or more households will be a large HMO and require a Mandatory Licence.

If you own any property which meets the new definition then you should contact your local authority to enquire about applying for a licence.

The Regulations introduce new minimum requirements that must be contained in any HMO licence. Most notable are new minimum room sizes, defined by floor area.

This guide is provided based on our interpretation of the current and new legislation. It is not a substitute for seeking appropriate professional advice and should not be relied upon.

If you own an HMO, MUB or any other rental property and need help finding the right mortgage then we'd be happy to help. Get in touch via email to info@maxwellmoore.co.uk or give us a call on 0330 122 7887.

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