This article is for general information only and does not constitute legal advice. Speak to a solicitor about your specific situation.
A mandatory HMO licence costs between £500 and £1,500, lasts five years, and applies to any property in England rented to five or more people from two or more households who share a kitchen or bathroom. Operating without one is a criminal offence carrying an unlimited fine. Your tenants can also apply for a rent repayment order covering up to 12 months' rent.
This guide covers the three licensing tiers, the conditions attached, minimum room sizes, the fit and proper person test, and the penalties for getting it wrong.
Mandatory licensing
Since October 2018, mandatory HMO licensing in England has been set by occupancy, not storeys. The three-storey rule was scrapped. According to GOV.UK, your property needs a mandatory licence if it meets all three of these conditions: it is rented to five or more people, those people form two or more separate households, and they share facilities like a kitchen or bathroom.
A "household" in this context means people who are related or living together as a couple. Two friends renting a flat together are two households. A couple sharing with two other individuals is three households.
You need a separate licence for each HMO you operate. The licence is granted to the person who manages the property or the person having control of it. If you use a managing agent, they can apply on your behalf, but the licence holder is responsible for compliance.
Cambridge City Council charges £1,133 for a mandatory HMO licence in 2026/27, reduced to £1,000 if you apply at least eight weeks before your current licence expires. Other councils are cheaper. The fee structure varies because local authorities set their own charges to cover administration and enforcement costs.
Additional licensing
Under Section 56 of the Housing Act 2004, local authorities can introduce additional licensing schemes covering smaller HMOs that fall below the mandatory threshold. These schemes typically capture properties with three or four occupants from two or more households.
Over 70 councils now operate additional licensing schemes, according to The HMO Mortgage Broker. Cities with active schemes include Nottingham, Bristol, Brighton and Hove, Newham, Southwark, Lewisham, Liverpool, Sheffield, and Oxford.
The burden falls on landlords to check whether their property sits within a designated area. The council does not write to you. If you are renting to three people from different households in a borough with an additional licensing scheme, you need a licence. Not knowing about the scheme is not a defence.
Fees for additional licences run from £500 to £1,200, again depending on the council. Schemes last five years and require renewal through a formal consultation process.
Selective licensing
Selective licensing goes further. Under Section 80 of the Housing Act 2004, councils can require licences for all privately rented properties within a designated area, not just HMOs.
According to Property Passport, over 60 local authorities operate selective licensing in parts of their area as of 2026. Liverpool, Nottingham, Salford, Waltham Forest, and Newham are among the largest schemes. Croydon launches a new selective licensing scheme from 1 September 2026 across selected wards.
Fees range from £350 to £900 per property for a five-year licence. If your property also qualifies as an HMO, you need both a selective licence and an HMO licence. Two fees, two sets of conditions.
For a full breakdown of selective licensing, including how to check if your area is affected, see our selective licensing guide.
Minimum room sizes
Mandatory HMO licences carry prescribed minimum room sizes set by the Licensing of Houses in Multiple Occupation (Mandatory Conditions of Licences) (England) Regulations 2018:
| Room use | Minimum floor area |
|---|---|
| Single occupancy (1 person aged 10+) | 6.51 sqm |
| Double occupancy (2 persons aged 10+) | 10.22 sqm |
| Child under 10 | 4.64 sqm |
Any room below 4.64 sqm cannot be used as sleeping accommodation. The local authority can include a condition on your licence specifying the maximum number of occupants per room.
These are minimums. Individual councils can set higher thresholds. Check your local authority's HMO standards before converting rooms.
Fire safety
HMO fire safety requirements are more demanding than for single-let properties. AgentHMO sets out the baseline:
Fire doors are required in all bedrooms, living rooms, and the kitchen. Escape routes must be clearly signed and unobstructed. Fire extinguishers or fire blankets must be provided. Carbon monoxide alarms are required in any room with a carbon-fuelled appliance. Smoke alarms must be fitted on every storey. Emergency lighting is required in communal areas and escape routes.
For HMOs with seven or more occupants (sui generis use class), the fire safety requirements increase further, and planning permission is required regardless of Article 4 status.
A fire risk assessment must be carried out and reviewed regularly. The Regulatory Reform (Fire Safety) Order 2005 places the duty on the "responsible person", which in an HMO is the landlord or managing agent.
The fit and proper person test
The local authority assesses whether the proposed licence holder (and the proposed manager, if different) is a "fit and proper person" under Section 66 of the Housing Act 2004.
The test considers criminal convictions (particularly fraud, violence, drugs, or sexual offences), previous breaches of housing or landlord and tenant law, whether you have been refused an HMO licence before, and whether the proposed management arrangements are satisfactory.
A spent conviction does not automatically disqualify you, but certain offences carry more weight. Banning orders under the Housing and Planning Act 2016 also affect eligibility.
Article 4 directions and planning
In many university towns and urban areas, councils have removed permitted development rights for converting a dwelling (C3) to a small HMO (C4, 3-6 occupants) through Article 4 directions. If your area has an Article 4 direction, you need planning permission to use a property as an HMO of any size.
Properties housing seven or more occupants fall into sui generis use and always require planning permission, Article 4 or not.
Before purchasing a property to convert to an HMO, check the local plan and any Article 4 directions. Converting without planning permission is an enforcement matter, and the council can require you to revert the property to its original use class.
Penalties for non-compliance
Operating an unlicensed HMO is a criminal offence under the Housing Act 2004. The penalties are:
An unlimited fine on prosecution. A rent repayment order (RRO) of up to 12 months' rent, which tenants or the local authority can apply for. A civil penalty of up to £30,000 per offence (rising to £40,000 under the Renters' Rights Act 2025 from 1 May 2026).
Breaching licence conditions is a separate offence. Overcrowding a licensed HMO (exceeding the occupancy number on the licence) also carries penalties.
The practical risk extends beyond fines. If your property is found to be unlicensed, the local authority can apply for an interim management order, removing control of the property from you and appointing a manager.
Renters' Rights Act 2025 changes
The Renters' Rights Act 2025 came into force on 1 May 2026. While the core HMO licensing framework under the Housing Act 2004 is unchanged, several provisions affect HMO landlords:
Maximum civil penalties for housing offences rose from £30,000 to £40,000. Section 21 no-fault evictions are abolished, so all existing ASTs in your HMOs have converted to periodic tenancies. New tenancies cannot include fixed terms. Rent can only be increased once per year through the Section 13 procedure.
For HMO operators with multiple tenants on separate agreements, the periodic tenancy conversion means any tenant can leave with two months' notice at any time. Factor higher turnover risk into your yield calculations.
Costs to budget for
Annual HMO compliance costs beyond the licence fee include:
| Cost | Typical range | Frequency |
|---|---|---|
| Gas safety certificate | £75 to £100 + VAT | Annual |
| EICR | £150 to £300 | Every 5 years |
| Fire risk assessment | £150 to £300 | Review annually |
| Fire door maintenance | £100 to £250 | As needed |
| Communal area cleaning | £50 to £150/month | Monthly |
| Council tax (where landlord liable) | Varies | Annual |
| Landlord insurance (HMO policy) | £300 to £800 | Annual |
HMOs generate higher gross yields (typically 9% to 15%, according to FD Commercial) than single lets, but the compliance overhead is significant. Run the numbers with all costs included before committing to this strategy.
Sources
- GOV.UK, "House in multiple occupation licence". https://www.gov.uk/find-licences/house-in-multiple-occupation-licence [Accessed 6 May 2026]
- Property Passport, "HMO licensing requirements in England 2026". https://www.propertypassport.uk/guides/hmo-licensing-requirements-england-2026 [Accessed 6 May 2026]
- AgentHMO, "HMO licensing guide UK 2026". https://www.agenthmo.co.uk/hmo-licensing [Accessed 6 May 2026]
- The HMO Mortgage Broker, "HMO licensing changes 2026". https://www.thehmomortgagebroker.co.uk/hmo-licensing-changes/ [Accessed 6 May 2026]
- Housing Act 2004, legislation.gov.uk. https://www.legislation.gov.uk/ukpga/2004/34/contents [Accessed 6 May 2026]
- Cambridge City Council, "Licensing of houses in multiple occupation". https://www.cambridge.gov.uk/licensing-of-houses-in-multiple-occupation [Accessed 6 May 2026]