Houses in multiple occupation (HMO): consultation on adding new categories to the definition of an HMO

Background

The private rented sector (PRS), has grown substantially in the last 10 years and accounts for 15% of all households in Scotland, with over 770,000 people now calling the sector home.

Improving the management and condition of privately rented properties has been a key focus for this Government and in 2013, we published the private rented housing strategy 'A Place to Stay, A Place to Call Home' with the aim of improving management standards and quality of service for tenants and prospective tenants, as well as enabling growth and investment in the sector.

To support work towards an improved sector, various legislative requirements have been introduced over recent years, including:

• Private Landlord Registration: private landlords must register themselves and the properties they let with the relevant local authority. The local authority must be satisfied that the landlord is a fit and proper person before they can be entered on the register;

• Repairing Standard: Landlords must make sure the property they rent reaches a standard level of repair called the 'repairing standard'. This includes ensuring the property is wind and watertight; and that the property has a satisfactory way of detecting fires and for giving warning in the event of a fire or suspected fire;

• Tenancy Deposits: Landlords who receive a tenancy deposit are required to pay the deposit into an approved tenancy deposit scheme and to provide the tenant with key information about the tenancy and deposit;

• Private Residential Tenancy: The Private Housing (Tenancies) (Scotland) Act 2016 (the Act) is the most significant change in private renting in Scotland for almost 30 years. It commenced on 1 December 2017 and introduced the new Private Residential Tenancy (PRT), which replaces the Short Assured and Assured Tenancies. The underlying principle of the new PRT is that when a landlord rents out their property to a tenant it becomes the tenant's home, over which they must have security. Its purpose is to improve security, stability and predictability for tenants, balanced with safeguards for landlords, lenders and investors;

• Regulation of letting agents: Regulation of letting agents commenced on the 31 January 2018 and includes compulsory registration; a statutory Code of Practice with a means of redress; and powers for effective enforcement. These measures will give landlords and tenants confidence in the standard of service they should expect; help increase the overall standards of service and professionalism within the letting industry; and provide landlords and tenants with an effective way to challenge poor practice.

Houses in Multiple Occupation

Introduced in Scotland from October 2000, the licensing of houses in multiple occupation (HMO) is a crucial element within the private rented sector regulatory framework, helping to improve both physical accommodation standards and the management of tenancy issues. HMOs provide an important supply of housing, particularly for groups of people such as students, transient workers, and those who need extra support in their daily lives.

Mandatory HMO licensing applies to houses occupied by three or more persons, from three or more families, as their only or main residence.

All HMOs must meet physical standards set by the licensing local authority under Part 5 of the Housing (Scotland) Act 2006. Mandatory licensing applies to houses or flats occupied by three or more unrelated people, who share bathroom or kitchen facilities. The owner of an HMO must have a licence from the local authority where the property is situated. Licensing helps ensure that accommodation is safe, well managed and of good quality. HMOs are also covered by fire safety legislation.

Before granting a licence, the local authority must be satisfied that:

• the owner and any manager of the property is 'fit and proper' to hold a licence;
• the property meets required physical standards; and
• the property is suitable for use as an HMO (or could be made so by including conditions on the licence).

The local authority sets the standards required and also sets the fees charged for a licence application. Scottish Ministers have issued guidance to local authorities on the licensing of Houses in Multiple Occupation.

It is a criminal offence to operate an HMO without a licence and the maximum fine for doing so is £50,000. Local authorities have a range of other enforcement options, including the power to vary the terms of a licence or revoke it. An HMO licence can also be revoked if the owner or agent, or the living accommodation, is no longer suitable.