Failure to Obtain License
Operating a licensable House in Multiple Occupation (HMO) without a licence is a criminal offence under the Housing Act 2004. This applies to both mandatory licensing and additional licensing schemes [1]. However, there are specific defences and alternative sanctions available to landlords, as well as restrictions on evictions under Section 21 of the Housing Act 1988.
Offences Relating to HMO Licensing
A landlord or person in control of an HMO may commit an offence if they:
- Operate a licensable HMO without a valid licence.
- Permit occupancy that results in more households or individuals than the licence allows.
- Breach any conditions of the licence [3].
However, no offence is committed if:
- An application for a licence or a temporary exemption notice has been submitted.
- The landlord or person in control has a valid defence of reasonable excuse [2][4].
Defences Against HMO Licensing Offences
Landlords may have valid defences in specific situations:
- Reasonable Steps to Comply: If an HMO becomes licensed for the first time and there are more occupants than permitted under the licence, the licence holder can defend against action if they are taking reasonable steps to reduce the number of occupants [5].
- Registration Schemes: Where an HMO was registered under a control scheme before licensing provisions commenced, it is deemed licensed until the registration period expires [6][7].
Sanctions for HMO Licensing Offences
Failure to comply with HMO licensing laws can result in significant penalties:
- Fines: Offences may be punished by fines upon conviction [8].
- Civil Penalties: Local authorities can impose civil penalties of up to £30,000 as an alternative to prosecution [12].
- Rent Repayment Orders: Landlords can be ordered to repay up to 12 months’ rent to tenants or the local authority for unlicensed HMOs (effective since 6 April 2017).
- Banning Orders: Landlords who fail to comply with licensing requirements or breach licence conditions may face a banning order (effective since 6 April 2018).
Proceeds of Crime and Licensing Offences
The relationship between licensing offences and rental income has been addressed in legal cases:
- In Sumal & Sons (Properties) Ltd v Newham LBC [2012], the Court of Appeal ruled that confiscation orders under the Proceeds of Crime Act 2002 could not be applied to rental income derived from unlicensed HMOs. The rent was deemed a benefit received despite the offence, not because of it [10].
- In a Crown Court case (Brent LBC v Shah and Others), confiscation orders were successfully argued for where rental income could only have been generated by breaching licence conditions [11].
Section 21 Restrictions for Unlicensed HMOs
Landlords of unlicensed HMOs are restricted from using the Section 21 eviction process to gain possession of their properties [13].
-
Exceptions: Restrictions do not apply if the landlord has:
- Submitted an application for a licence or temporary exemption notice.
- The application has not been withdrawn, and:
- The local authority has not yet made a decision.
- An appeal has been lodged, or the appeal period has not expired [14].
-
Flat-Specific Restrictions: If a landlord controls both an HMO and a self-contained flat within the HMO, Section 21 restrictions apply to the flat while the HMO remains unlicensed [15].
-
Energy Performance Certificate (EPC): It is arguable that failing to provide an EPC to tenants in a licensed HMO could also invalidate a Section 21 notice, though this has not yet been tested in court.
Key Considerations for Landlords
- Act Promptly: Ensure that all licensable HMOs are appropriately licensed or apply for temporary exemptions to avoid penalties.
- Maintain Compliance: Adhere to all licence conditions to prevent breaches that may result in fines, penalties, or banning orders.
- Understand Defences: If you find yourself in violation of licensing requirements, take reasonable steps to mitigate breaches and rely on valid defences where applicable.
- Eviction Procedures: Be aware that Section 21 restrictions apply to unlicensed HMOs and may affect your ability to regain possession of your property.
Conclusion
Failing to obtain a licence for a licensable HMO can result in severe penalties, including fines, rent repayment orders, and restrictions on eviction rights. Landlords should act swiftly to ensure compliance and avoid unnecessary legal risks. By understanding their obligations under the Housing Act 2004, landlords can safeguard their operations and maintain positive tenant relationships.
[1] s.72(1) Housing Act 2004.
[2] ss.72(4) and 72(8) Housing Act 2004.
[3] s.72(2) Housing Act 2004.
[4] s.72(5) Housing Act 2004.
[5] s.76 Housing Act 2004.
[6] ss.347 and 348B Housing Act 1985.
[7] s.76(6) Housing Act 2004.
[8] s.72(6) and (7) Housing Act 2004.
[9] s.73(3) Housing Act 2004.
[10] Sumal & Sons (Properties) Ltd v Newham LBC [2012] EWCA Crim 1840.
[11] Brent LBC v Shah and Others, 29 January 2018, Harrow Crown Court.
[12] ss.72, 72(7A) and s.249A Housing Act 2004 as amended by s.126 and Sch.9 Housing and Planning Act 2016.
[13] s.75 Housing Act 2004.
[14] ss.75(2) and 73(1) Housing Act 2004; ss72(4) and 72(8) Housing Act 2004.
[15] reg 8 Houses in Multiple Occupation (Certain Converted Blocks of Flats)(Modifications to the Housing Act 2004 and Transitional Provisions for section 257 HMOs) (England) Regulations 2007 SI 2007/1904.


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