If I rent out three rooms in my house and live in one, do I still need an HMO license, or is it only for properties where the landlord doesn't live there? Trying to understand if I'm accidentally operating an unlicensed HMO.
Quick Answer
Renting out three rooms in your main residence means you're generally not operating a mandatory licensed HMO, but local council schemes might still require a license.
## Shared Property HMO Considerations
When renting out rooms within your own home while you reside there, properties are generally considered falling outside the scope of mandatory HMO licensing if they accommodate fewer than five occupants. The **Housing Act 2004** defines a mandatory licensable HMO as a property let to five or more occupants forming two or more separate households, where those occupants share essential facilities like a kitchen or bathroom. Since you are renting out three rooms and living in one, this totals four occupants (you plus three tenants), which is below the five-occupant threshold for mandatory licensing. This type of arrangement is often referred to as a 'resident landlord' situation, which typically has different legal considerations than a non-resident landlord HMO.
### Does living in an HMO mean I do not need a license?
Living in the property you rent rooms from typically means you are exempt from mandatory HMO licensing requirements, providing the property houses fewer than five occupants in total, including yourself. For example, if you rent out three rooms and reside in the fourth, this forms four occupants, which does not meet the five-person threshold for mandatory HMO licensing. However, local councils have the power to introduce **additional licensing schemes** (sometimes referred to as Article 4 Directions) for properties that would not ordinarily require a license. These schemes can cover smaller HMOs, including those with three or four occupants, whether the landlord is resident or not. Therefore, specific adherence depends entirely on the local authority's policy where your property is situated, and this is where many landlords make mistakes when calculating potential returns on investment (ROI).
### What are the financial implications for resident landlords?
While avoiding mandatory HMO licensing can prevent significant compliance costs, neglecting to check for additional licensing schemes can lead to penalties. An unlicensed HMO can result in unlimited fines, repayment of rent via a Rent Repayment Order, and difficulties securing or renewing mortgages. For instance, if your property is indeed subject to an additional licensing scheme that requires a license for a three-bedroom property, obtaining this could cost between £500 to £1,500 every five years, depending on the council. This cost, alongside required property improvements (such as fire safety measures or minimum room size compliance) could impact your **landlord profit margins** and **rental yield calculations**. For example, fire safety upgrades could cost £1,000-£3,000.
### Scenarios for resident landlords renting rooms:
1. **Resident landlord with 3 tenants**: You live in your property and rent three rooms. Total occupants: 4. This scenario does not require a mandatory HMO license in England, but you must check your local council for any additional licensing schemes. For example, some London boroughs license all HMOs with 3+ occupants, regardless of landlord residency.
2. **Resident landlord with 4 tenants**: You live in your property and rent four rooms. Total occupants: 5. This would still fall under mandatory HMO licensing requirements, as it meets the 5+ occupants from 2+ households criteria, making it a mandatory licensable HMO. You would need to apply for a license and ensure all **HMO licensing requirements** are met, including minimum room sizes (single bedroom 6.51m², double 10.22m²).
3. **Owner renting 2 rooms, then renting out entire property**: If you initially rented two rooms as a resident landlord, but then moved out and rented the entire property to 3 distinct households (e.g., three friends), it would become an HMO with 3 occupants from 3 households. This would likely fall under additional licensing, requiring a license. This changes the **BTL investment returns** significantly due to potential licensing fees and compliance costs.
Steven's Take
The rules for resident landlords can be a grey area, but the key is typically the occupant count in conjunction with local authority specifics. Don't assume that because you live there, you're exempt from all HMO rules. Always check both mandatory criteria and your local council's additional licensing policies. An assumption here can be a very expensive mistake, impacting cash flow and potentially leading to legal issues.
What You Can Do Next
Check your local council's website (e.g., search '[Your Council Name] HMO Licensing') for details on additional or selective licensing schemes that might apply to smaller HMOs or resident landlord situations.
Review the specific definition of an HMO and any exemptions on gov.uk/housing/hmo-licensing; this will confirm if your property needs a mandatory license.
Contact your local council's housing or environmental health department to directly enquire whether your specific renting arrangement requires a license, providing full details of your household and tenant numbers.
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