HMO Licences vs Tenancy Agreements: Key Differences Explained

You must have often come across the terms HMO licences and HMO tenancy agreements in the world of house of multiple occupancy (HMO). But do you know what these terms mean and what are the differences between them? If not, then we are here to walk you through the differences between HMO tenancy agreement and HMO licences in this blog. So, let’s dive right in!

What is House of Multiple Occupancy (HMO)?

So what is an HMO property? An HMO is a house or apartment that is rented out by three or more people. They share all the available amenities, such as a kitchen, common area, and bathroom facilities offered by the property. It is sometimes also referred to as ‘house share.’ HMOs can include converted buildings that consist of non-self-contained flats, self-contained flats, purpose-built flats, and other properties that might not have basic facilities. You can read more in detail about types of houses in multiple occupation in our blog.

What are HMO Licences and HMO Agreements?

If you’re a student renting a room in a shared house, it’s essential for you to know that landlords must have an HMO licence. HMO licences ensure that they are providing accommodations that are compliant with all the safety and health rules and regulations, providing a secure living environment for occupants. HMO licencing ensures the property’s authenticity and offers safety assurance to the occupants. 

On the other hand, HMO tenancy agreement is an agreement between a landlord and a tenant that grants occupants permission to possess a room in a shared house and use the shared amenities and facilities available in the property. It’s like making a deal with the landlord. The agreement includes information about HMO tenancy rights, deposit amount, duration of stay, and penalties if terms and conditions are not met. 

Differences Between HMO Licences and HMO Tenancy Agreement

Clearly, HMO licences and HMO tenancy agreements are very different from each other. Where HMO licences offer compliance with safety and health requirements to ensure that the HMO accommodation is in good condition and proper facilities, an HMO tenancy agreement is a contract that is signed between the house owner and the tenant who is entitled to live in the accommodation and its facilities after signing the agreement. In this blog, we will explore the key differences between houses of multiple occupancy licence and a HMO assured shorthold tenancy agreement. 

Types of HMO Licences and HMO Tenancy Agreements

HMO Licences

HMO licences are of three types: Mandatory licensing, additional licencing, and selective licencing. Let’s look into all three in more detail.

1. Mandatory Licensing

This HMO licensing is used for larger HMOs, where five or more occupants from two or more households occupy a property. Coming into effect in 2006, this mandatory HMO licence applies nationwide. The mandatory HMO licencing does not apply to purpose-built flats of three or more self-contained flats. Mandatory licencing ensures that properties meet certain standards in terms of the number of occupants, room sizes offered, the number and variety of amenities available, and fire safety measures.

2. Additional Licencing

Additional HMO licencing applies to smaller private rented houses in HMOs, where the housing is occupied by three or more tenants from two or more households. Accommodations that are not covered by the mandatory HMO licencing and are managed poorly can get additional licencing. Also, converted buildings which don’t comply with the Building Regulations 1991 section 257 Housing Act 2004 must also get additional licencing.

3. Selective Licencing

Introduced within the Housing Act 2004 under Part 3, Section 80, Selective licencing is for private landlords operating within a designated area. They can licence their private properties within that particular area. The licencing ensures the accommodations are safe and meet basic standards. 

HMO Tenancy

HMO tenancy agreement is of two types: Joint tenancy and sole tenancy. We will explore both in more detail.

1. Joint Tenancy

When you share your accommodation with other people, it’s called joint tenancy. A joint tenancy agreement is when all the tenants sharing the house sign the contract and agree to be equally responsible for taking care of the property. All tenants are responsible for using the property amenities, sharing the rent, and bearing any damage they cause to the accommodation.

2. Sole Tenancy

Sole tenancy is for people who sign the contract separately for only themselves and are responsible for only their rent and actions. They are not responsible for other tenants that they share the property with. 

Legal Requirements for HMO Licences and HMO Tenancy Agreements

There are certain requirements for both HMO licences and HMO tenancy agreements. And the requirements for both differ from each other. We will walk you through the legal requirements for both.

For HMO licences, property owners must fulfil the following requirements:

1. Property owners must get licencing for each HMO separately.
2. Landlords must meet safety requirements, ensure the accommodation is suitable for tenants, and have no criminal record. 
3. Send the gas safety certificate to the council every year.
4. Ensure installation and maintenance of smoke detectors.
5. Provide safety certificates for electrical appliances.
6. If needed, property owners might need to upgrade their property to improve the standard of living.

An HMO tenancy agreement, on the other hand, is a contract signed by the property owner and the tenants. The agreement should contain the following things:

1. Name of the tenants
2. Responsibilities of the tenants
3. Property address
4. All obligations of the property owner 
5. Start and end date of the tenancy 
6. All bills that occupants need to pay
7. Information about the deposit amount

Applying for HMO Licences and HMO Tenancy Agreements?

To apply for HMO licences, property owners can get a licence application form from their local council. Landlords will have to gather certain documents, including an HMO tenancy agreement, a gas safety certificate, safety certificates for electrical appliances, fire alarm and maintenance records, and payment card details. Then, the property owners will have to send the HMO licence application form, along with the documents and application fee, to the council. After this, the council may inspect your property, and you will get the HMO licence that will be valid for five years. 

On the other hand, property owners can get an HMO Tenancy Agreement created by their local council.

Can an HMO licence and HMO Tenancy Agreement be Refused?

Talking about an HMO licence, it can be refused if the property owner fails to meet the requirements to get a licence. In case of refusal, landlords can make an appeal to change the council’s decision within a month. Landlords can also choose to go to a different licence holder to get a house of multiple occupancy licence. 

As for an HMO tenancy agreement, the property needs to ensure that all necessary information such as deposit amount, HMO house rules for tenants, and tenancy rights are mentioned in the contract and that all parties (property owner and tenants) sign the contract, agreeing to the terms and conditions. 

By now, you might have a good understanding of what HMO licences and HMO tenancy agreements are. While HMO licences are a legal requirement imposed by local authorities to ensure that the accommodations offered by property owners are safe and compliant with all the rules and regulations, a tenancy agreement is a contract between a landlord and a tenant. It lays down the specific terms and conditions of the shared living space that the landlord rents to the tenants.