If you are a landlord who owns a property which accommodates more than two people, it is very possible you will need a House in Multiple Occupation (HMO) licence. HMO licensing has been with us for many years now. It started life in the Civic Government legislation which also deals with licensing matters such as taxis and tattoo artists. It then moved to the Housing (Scotland) Act 2006. Although it remains a licensing matter, it is firmly within the landlord/tenant relationship.
HMO Licences are subject to a large number of regulations and it is very important to have a team who understands these regulations and can help you follow them. At Gilson Gray we have a lettings team and a legal team, both experienced in dealing with HMO licensing. We can recommend architects who are able to assist with plans and layouts for HMO premises. We deal with HMO’s from new build through to acquisition, and there are regulations in every case.
An HMO can be a single premise, a small number of flats in a block, or something as large as student accommodation. There are exemptions to HMO licensing such as hospitals and prisons, however, the general rule is that if more than two unrelated people are going to live in a property, an HMO licence will be required. Guidance on space requirements and technical standards can be found in the Scottish Government guidance document available from their website and also in the technical standards handbook which governs domestic buildings.
An HMO licence is granted by the Council in which the HMO property is located. Be wary of Council boundaries as sometimes these can be confusing and even surprising. Each Council area has its own interpretation of the guidance and technical standards. Each may also impose local conditions or specific requirements to HMO Licences which will not be countrywide. It is important to get assistance when lodging or renewing an HMO licence as some regulations and Council policies can apply retrospectively.
When applying for a new HMO licence it is very important to consider your timescale as this can be much longer than applicants anticipate. If there are no issues with the application, it should not require to call at a licensing committee. Even if there are no objections or adverse comments in relation to the application, the HMO and/or licensing sections in the relevant Council can still insist the matter is heard if they want clarification or further information. If applications require to be heard this can delay consideration as they have to be accommodated on a committee hearing agenda. Timing is very important overall.
The Scottish and English HMO systems differ. In England it is possible to allow tenants to accommodate the HMO property before the licence is granted, during the period the licence is applied for. That is not the case in Scotland.
In Scotland only two unrelated tenants can be accommodated in an HMO property which does not have an HMO licence in place, regardless of the capacity of the property. As long as the property has sign-off from other council departments such as public safety and building control, two unrelated students could occupy until such time as the HMO licence was granted and any appeal period had expired.
If there are objections to an application and it has to be considered, there is likely to be a delay after the hearing before the licences can be issued. As long as those objections are accepted by the Council’s licensing section as competent, there is a 28 day period after consideration of the application where objectors can appeal. This 28 day period does not necessarily start on the hearing date – it would start on the date the objectors received intimation from the Council’s licensing department that the application had been granted. This is an additional delay which landlords often do not take into account.
There are restrictions on who can hold an HMO licence which need to be taken into account when considering who is buying the property and structure of the business operating the property. If a property will be the subject of an HMO application is purchased, and that property already has an HMO licence, there are very strict timescales on the period of time between purchasing the property and lodging the new licence application to take advantage of the existing HMO licence. HMO Licences cannot be transferred, therefore, the new purchaser must lodge a new application. As long as this is done so within the required timescale, and the previous licence remains in force, the new application can be considered and the premises will continue to benefit from the HMO consent.
That is important for a number of reasons, not just to allow the landlord/owner to continue operating the property as an HMO. Current HMO technical standards are more onerous than they were, for example, in 2006 when the Housing Act referred to above came into force. The last review of the HMO standards was around 2012. The HMO technical standards and policies which an HMO licensed property must comply with are those which were in place when the property was granted an HMO licence. Although there may be a handful of standards, regulations and policies which will apply retrospectively to the HMO licence, there are not many of these. It is an advantage to landlords to ensure an existing HMO licence attached to a property continues when that property is purchased and ensure renewals are lodged on time. Failure to do so can result in the HMO being regarded as a completely new application which, practically speaking, means a requirement to comply with all current technical standards and regulations. For some properties that is just not possible due to physical size requirements or layout. For example, a property granted an HMO licence in 2006 would not require to have natural light and ventilation in the living area. This resulted in some large HMO properties having bedrooms around the edge the property and the living area in the middle of the property. Such a property could hold a historic HMO licence, but, if it failed to renew on time or did not lodge a new application within the timescale after purchasing an existing licence to HMO property, it would be impossible for that property to comply with the current regulations without significant restructuring. That could mean cost to the landlord and most likely the loss of bedroom numbers resulting in a loss of income over and above the additional costs.
Council licensing departments are busy and more so at present with a backlog and, in some cases, an adverse effect on staff numbers caused by the pandemic. This means they are not always able to process applications immediately. If an application is not lodged properly or if documentation is missing, the licensing department are entitled to decline to accept the application until everything is in order. A fee also has to be paid and if that fee is late that affects the time scale of the application. If the application is not accepted by the licensing section as competent and fully lodged prior to the renewal date, the renewal could be refused and a new licence application would be required and the property would have to try to comply with current standards and requirements.
Landlords, property investors and letting agents will see from the above there is a huge amount of information to consider as well as a significant number of regulations. Timescales must be complied with or there could be issues with the renewal or continuation of current permissions. This need not put you off buying or investing in an HMO, but you should ensure you take legal, architect and letting agent advice on HMO properties to ensure their licences are applied for correctly and that they are managed properly to avoid any unnecessary costs or delays.
For further information on HMO Licences please contact Jo Millar, solicitor in our licensing department or on 0141 370 8116 or firstname.lastname@example.org.
For HMO lettings please contact Elaine Wallace in our Gilson Gray lettings team on 01382 549321 or at email@example.com.
For further information from our Lettings department please contact Marcus Di Rollo on 0131 285 7859 or at firstname.lastname@example.org