House in Multiple Occupation HMO – An In-depth Definition

A House in Multiple Occupation is defined as a property that is “occupied by persons who do not form a single household.” In general, this would be a residential house that has been converted into bedsits, flats or private rooms, with common parts like kitchens, entrances and exits. I have listed the different categories of HMOs and their associated definitions below.

Category A:

Houses occupied as individual rooms, bedsits, and flatlets, which are considered to have a number of rooms, for exclusive occupation, not necessarily behind one door, with some sharing of amenities, usually bathroom and/or toilet and maybe kitchen. In such a house, each occupancy would be separately rented.

Category B:

Houses occupied on a shared basis. These would normally be occupied by students where, for certain activities, the occupiers might live as a single household unit, but for others do not. Usually the house would be let to a defined group and not individuals.

Although most common amongst students it is increasingly found in groups of people coming together in a house who share certain amenities as they wish, but have certain individual facilities such as a bedroom.

Category C:

Houses described as “houses let in lodgings” i.e. catering for lodgers on a small scale, not living as part of the main household normally with a resident owner/occupier.

Category D:

Houses generally referred to as “hostels”,” guest houses”,” or “bed and breakfast accommodation”. They will provide accommodation for people with no other permanent place of residence. This category would include hotels, guest houses and bed and breakfast establishments used by local authorities to house homeless persons whose only financial support is State Benefit.

Category E:

Houses which are hostels and require registration under the Registered Homes Act 1984. The homes provide board and personal care for the persons in need of such care by reason of old age, disablement, past or present dependence on alcohol or drugs, past or present mental disorder.

Unlike Category D houses, these houses would provide permanent accommodation for people with nowhere else to go; this would be their only home and would include a level of support not normally present in Category D accommodation, which only provides a home on a temporary basis.

Category F:

Houses which by conversion contain dwellings that are self contained and behind one access door off a common area. There would be no sharing of amenities with occupiers of other dwellings. There is no clear boundary between each of these categories, and a house (or even part of a house) might move between categories over a period of time.

Currently investing in a house in multiple occupation is becoming more and more of a specialist area, and you need to weigh up the pros and cons very carefully before deciding to delve into this potentially lucrative area of the market.

In the last few years the regulations around HMO’s have changed, and as a result houses in multiple occupancy are more tightly governed than they had been previously.

On top of that each Local Authority tends to adopt differing policies over the control of HMO’s, so if you have HMOs in different parts of the country, you need to be aware of that particular local authority’s interpretations of the regulations and their specific policies.

This can prove to be a nightmare for landlords, and as a result many landlords have pulled out of the HMO market altogether.

However, if you can get your head around the regulations and manage your house in multiple occupation effectively, it can be the best property investment pound for pound by far for fantastic cash flow.

The things you might need to add to your property are things like smoke alarms, ladders, escape routes and extra fire doors. You also need to bear in mind that many letting agents don’t like managing HMOs, and those that do will probably charge you more commission than on their standard properties.

You will also find that you are more restricted when searching for lenders willing to provide mortgages on a house in multiple occupation. This is why some investors are specialist HMO investors, they have a lot of experience in this field and manage their properties themselves.

As of 6th April 2006 mandatory house in multiple occupation licensing came into force across England. If you are considering going down the HMO route as an investor, it is best to speak to your local authority regarding their policies as to whether you will need a license and exactly what it entails for you to get one.

**Nothing on this website should be confused with financial or legal advice. If you need this, or any other type of advice, please seek the help of a competent professional. In addition, because real estate laws change all the time and differ from state to state, and even city to city in the same state, everything in these pages should be considered general marketing advice and ideas. Please see link to full Disclaimer at the bottom of this page.

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