The Renters' Rights Act 2026: What It Means for Your HMO Licence

The Act most landlords are searching for under the name "Renters' Rights Act 2026" is, technically, the Renters' Rights Act 2025 — it received Royal Assent on 27 October 2025. The "2026" people attach to it comes from when its landlord-facing provisions actually took effect: 1 May 2026, via a single "big bang" commencement rather than a staggered rollout. For HMO landlords, that date is what matters in practice, and two changes from it matter far more than any other: the civil penalty structure for operating unlicensed has changed, and the amount tenants can claw back has doubled.

What changed on 1 May 2026

The Renters' Rights Act 2025 is the most significant change to the private rented sector in a generation, but its provisions didn't take effect gradually, as royal assent, commencement regulations, and implementation dates are often spread over months or years. Instead, the government commenced the core landlord-facing measures — Section 21 abolition, the new penalty structure, and the Rent Repayment Order changes — on a single date. If you're checking whether a rule applies to your property today, the question is simply whether it's after 1 May 2026, not which stage of a phased rollout you're in.

The penalty structure is now tiered

Before the Act, councils could impose a civil penalty of up to £30,000 for operating an unlicensed HMO, applied as a single ceiling regardless of how serious or persistent the breach was. From 1 May 2026, that flat ceiling has been replaced with a tiered structure. Minor or initial non-compliance now attracts a civil penalty of up to £7,000, while serious, persistent, or repeat non-compliance can attract a penalty of up to £40,000, with criminal prosecution available as an alternative route for the most serious cases.

The practical effect is that a first, relatively minor lapse is not automatically treated the same as deliberate, repeated unlicensed operation — but the ceiling for the worst cases has still risen well above the old £30,000 figure. Where a property has multiple simultaneous breaches — for example, unlicensed operation alongside overcrowding or fire safety failures — councils can and do impose separate penalties for each, meaning the real exposure for a non-compliant landlord is often a multiple of whichever tier applies.

Rent Repayment Orders have doubled

This is the change we think landlords underestimate most. Previously, a tenant or council could apply to the First-tier Tribunal for a Rent Repayment Order covering up to twelve months of rent paid while a property was unlicensed, and the claim had to be brought within twelve months of the relevant period. Under the Renters' Rights Act 2025, both figures have doubled: the cap is now 24 months' rent (or the rent actually paid, if lower), and the window during which a claim can be brought has extended to 24 months after the relevant period.

Tenant awareness or satisfaction with the property is irrelevant to eligibility — a tenant who was perfectly happy living in an unlicensed HMO can still bring a claim, and so can the council on tenants' behalf. In practice, this means an HMO with five tenants paying £700 a month each that operated unlicensed for two years could face an RRO claim well into six figures, calculated independently of the separate civil penalty above.

Section 21 abolished

The Act also abolishes Section 21 "no-fault" evictions entirely. All assured shorthold tenancies become periodic tenancies with no fixed end date, and landlords must rely on specific statutory grounds to regain possession. This interacts directly with HMO management — licence conditions around tenant turnover, room reallocation, and management standards now need to account for tenancies that no longer have a natural expiry point to plan around.

For HMO landlords specifically, this means the informal practice of not renewing a problematic tenant's fixed term is no longer available. Ending a tenancy now requires an applicable ground, which makes getting management arrangements right at the licensing stage more important, not less — a licence holder judged unsuitable at the fit and proper person stage doesn't have the fallback of simply letting a tenancy lapse.

Does this apply to licences already in place

The changes affect the consequences of operating without a licence — they don't reopen or invalidate licences already granted. A property with a valid mandatory, additional, or selective licence granted before 1 May 2026 continues on its original terms until it expires or is renewed; nothing about the commencement date requires an existing licence holder to reapply early. What the commencement date changes is the exposure for any period of unlicensed operation that continues on or after it, regardless of when that period began.

Banning orders raise the stakes further

Beyond civil penalties and Rent Repayment Orders, councils can seek a banning order against a landlord following certain housing offences, including unlicensed HMO operation. A banning order prohibits the person from letting or managing residential property in England at all, and effectively forces them to sell or transfer their rental properties. It sits above the financial penalties as the most severe consequence available, reserved for the most serious or repeat offenders.

How enforcement typically starts

Councils don't need to wait for a landlord to come forward. Unlicensed HMOs are typically identified through a tenant complaint, a referral from another council department such as environmental health, or a proactive inspection sweep — particularly common once a new additional or selective licensing scheme is introduced in an area. Once identified, the council can proceed to a civil penalty at the appropriate tier without the landlord needing to have been convicted of anything first, and a tenant can bring a Rent Repayment Order claim independently of whatever action the council takes.

What landlords should check now

If you're unsure whether your current arrangement is covered, the questions worth answering are straightforward: does the property currently hold a valid licence for its correct category — mandatory, additional, or selective; is that licence still within its term rather than approaching expiry; and if there has been any gap in licensing at any point, how long that gap has run for. Each of those answers changes your exposure under the new penalty tiers and the doubled Rent Repayment Order window, so they're worth confirming now rather than after a council inquiry begins.

What this means for your licence

None of this changes what an HMO licence application requires. It changes the cost of not having one. A licence application through us costs £300 to £500+VAT depending on whether it's an additional or mandatory licence. Operating without one now risks a penalty of up to £40,000 for serious or repeat non-compliance, plus up to 24 months of Rent Repayment Order exposure on a claim window that has also doubled — and, in the worst cases, a banning order that ends your ability to let property altogether.

If your property doesn't currently hold a valid licence — mandatory, additional, or selective — get in touch today. We will confirm exactly what your property needs and handle the entire application on your behalf, before the gap between an expired or missing licence and enforcement becomes expensive.