Houses in Multiple Occupation (HMOs) and Company Lets

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?

Company Lets

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.

How Pinney Talfourd can help

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.

Please do not hesitate to contact either Stephen Eccles on 01708 463202 or Oliver-James Topping on 01708 463227 should you wish to discuss anything further.