HMO Licensing requirements are both onerous and significant given the consequences of non-compliance. A person “having control of or managing an unlicensed HMO” can be fined up to £30,000. An unlicensed HMO can give rise to an application for a Rent Repayment Order requiring a landlord to repay to the tenants most of the rent for the period during the unlicensed period. The legislation is contained under Part 1 of the Housing Act 2004.
The question arises, who is required to make application for a License where there is a company let in place?
Increasingly, we are seeing that residential properties are being let to limited companies and that those limited companies are then renting them out to tenants in such a way that the definition of an HMO is satisfied. Effectively, renting out bed/living rooms with shared use of kitchens and bathrooms. If there is no relevant license, the question arises who is liable, the company which is letting to the tenants, or the freeholder who has let to the company? Section 263 of the 2004 Act defines the offender as the landlord who receives the rent from the residents. This matter went all the way to the Supreme Court in the case of Rakusen v Jepson. In that case, the superior landlord (who had let to a company who was in turn letting to the tenants) was found not to be the landlord for the purposes of a Rent Repayment Order. There is a little uncertainty here however, and of course the consequences of an HMO being unlicensed are sufficiently severe to make it prudent for the superior landlord to ensure compliance.
A superior landlord when granting a tenancy to a company which subsequently let out the rooms to individual tenants could well consider including in the company let provisions that the company will comply with The Housing Act 2004 and be responsible for any license and hold the superior landlord indemnified.
Pinney Talfourd are experts in commercial and residential property litigation and can advise you on changes to the law so you are given up to date advice.
The above is meant to be only advice and is correct as of the time of posting. This article was written by Stephen Eccles, Partner in the Property Litigation Team at Pinney Talfourd LLP Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of May 2023.