What Landlords Must Know About HMO Mandatory Licensing

The mandatory HMO licensing regime has applied across England since 2006, but the October 2018 changes caught a large number of landlords off guard, and the penalty regime around it has changed again since. Here is the current position every London landlord letting to multiple households needs to understand.

The October 2018 change that widened the net

Before October 2018, mandatory HMO licensing only applied to properties of three or more storeys. Many larger properties let to five or more tenants sat outside the regime purely because they were built over one or two floors, and were entirely lawful without a licence. The Licensing of Houses in Multiple Occupation (Mandatory Conditions of Licences) (England) Regulations 2018 removed the storey requirement outright. From October 2018, any property let to five or more people from two or more households sharing amenities such as a kitchen or bathroom requires a mandatory HMO licence, regardless of how many floors it has. The change is estimated to have brought around 160,000 additional properties across England into the mandatory licensing regime overnight.

For landlords who had operated for years believing their property was outside licensing altogether, the change required urgent action — applying for a licence retrospectively, often while continuing to let the property, and in some cases discovering conditions attached to the licence that required remedial building work. Councils generally allowed a grace period for genuinely unaware landlords to apply, but continuing to operate unlicensed after the change took effect carried the same enforcement risk as any other unlicensed HMO.

How the current mandatory threshold works

The test has two parts, and both need to be met. First, occupancy: five or more people living in the property. Second, household composition: those people must come from at least two separate households. A property with five people from a single household — an extended family, for instance — does not meet the mandatory threshold on numbers alone. It is entirely possible for a landlord to be several tenants below the equivalent additional licensing threshold in a borough scheme and still find themselves squarely inside mandatory licensing once a fifth unrelated tenant moves in.

The threshold is assessed on actual occupation rather than what a tenancy agreement states. A property let on paper to four people that in practice houses five, whether through a lodger, a partner moving in, or a room being sublet, can cross into mandatory licensing without any new paperwork being signed at all.

Who counts as a household

A household means a single person, or people who are members of the same family living together — married or cohabiting couples, their children, and other relatives such as siblings, parents or grandparents living as part of the same family unit. Five unrelated university students sharing a house are five separate households and clearly meet the mandatory test. A family of five living together, however many people that involves, is a single household and does not trigger mandatory licensing on headcount alone.

A live-in partner who moves in with one of several unrelated sharers typically joins that person's household rather than creating a new one, so the total household count does not necessarily rise in step with the number of people living in the property. This distinction has tripped up landlords trying to calculate their position from headcount alone.

Converted blocks of flats — Section 257 HMOs

A less well-known route into mandatory licensing applies to buildings converted into self-contained flats. Under Section 257 of the Housing Act 2004, where a block was converted before the June 1992 Building Regulations standard applied and fewer than two-thirds of the flats are owner-occupied, the whole building can be treated as an HMO requiring a licence, even though each flat looks like an ordinary self-contained unit from the inside.

Because the 1992 threshold depends on the original conversion date rather than when a landlord bought into the building, two flats in the same converted block can have different histories if extensions or later conversions were carried out at different times. It is worth obtaining the conversion history from the freeholder or local land registry records rather than assuming a modern-looking interior means a modern conversion.

The fit and proper person test

Every mandatory licence application is assessed against whether the licence holder, and any manager named on the application, is a fit and proper person. Councils look at unspent convictions for fraud, dishonesty, violence, drugs or sexual offences, any history of illegal eviction or harassment of occupiers, previous licence revocations, and evidence of unlawful discrimination. Where the applicant is a company, the test extends to its directors.

Where the test is genuinely marginal — an old and minor conviction, for instance — councils are not required to refuse the licence outright. They can instead grant it subject to conditions, or grant it to a suitable alternative person named as manager, which is one reason many landlords with a relevant history choose to appoint a managing agent as the named manager rather than applying in their own name.

Ongoing duties that sit alongside the licence

A licence is not the end of a landlord's obligations. The mandatory conditions attached to every licence under the 2018 regulations require an annual gas safety certificate, electrical installations inspected and tested at intervals not exceeding five years, smoke alarms on every storey used as living accommodation plus carbon monoxide alarms in any room with a solid fuel appliance, furniture that meets the Furniture and Furnishings (Fire)(Safety) Regulations, compliance with the minimum room sizes, and compliance with the council's waste storage and disposal scheme. Separately, the Management of Houses in Multiple Occupation (England) Regulations 2006 impose ongoing duties around structural repair, water and drainage, and notifying occupiers of the manager's name and contact details, which apply regardless of licence status.

These duties exist independently of the licence's validity, meaning a landlord cannot treat licence renewal as the only compliance checkpoint in a five-year cycle. Gas safety certificates in particular fall due annually, and a lapsed certificate is a breach in its own right, separate from and in addition to any issue with the licence itself.

Penalties — the position has changed

Historically, non-compliance with mandatory HMO licensing exposed a landlord to civil penalties of up to £30,000 per offence, a Rent Repayment Order capped at 12 months' rent with a 12-month window to claim, and in serious cases criminal prosecution carrying an unlimited fine and the possibility of a banning order. That position changed with the Renters' Rights Act 2025, which received Royal Assent on 27 October 2025 and brought its landlord-facing provisions into force from 1 May 2026. The civil penalty structure is now tiered: up to £7,000 for minor or initial non-compliance, and up to £40,000 for serious, persistent or repeat non-compliance, with criminal prosecution still available as an alternative route in the most serious cases. Operating unlicensed HMOs remains one of the offences that can trigger these penalties, and multiple simultaneous breaches at a single property — unlicensed operation and overcrowding, for example — can each attract a separate penalty.

Rent Repayment Orders since May 2026

Rent Repayment Orders, available under sections 40 to 45 of the Housing and Planning Act 2016, let a tenant or a local authority apply to the First-tier Tribunal to recover rent paid while a property was operating as an unlicensed HMO. Before 1 May 2026 the cap was 12 months' rent with a 12-month window to bring a claim. Since the Renters' Rights Act 2025 provisions commenced, the cap has doubled to 24 months' rent — or the rent actually paid if that figure is lower — and the window to bring a claim has extended to 24 months after the relevant period. Whether the tenant knew the property was unlicensed, or was satisfied with the property, makes no difference to eligibility.

Because several tenants in the same unlicensed HMO can each bring their own claim, or a local authority can apply on their behalf, the total rent repayment exposure at a single five-bedroom property operating unlicensed for an extended period can run into a very substantial sum well before any civil penalty is added on top.

What to do if you are unsure

Given how much can turn on occupancy numbers, household composition and conversion history, the safest approach is to check a specific property's position before letting to a fifth tenant, before buying a converted block of flats, and before assuming an older HMO's paperwork is still current. The consequences of getting this wrong have only become more expensive.

We handle mandatory HMO licence applications for London landlords for a fixed fee of £500+VAT, including a review of occupancy, household status and the fit and proper person requirements before submission. Contact us for a free assessment of whether your property needs a mandatory licence.