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New HMO rules: have you got the right finance in place?

It is estimated that around 160,000 properties will be affected by the new rules governing Houses in Multiple Occupation (HMO), which came into force this week.

Up until Monday, if you were renting a property to five or more tenants from separate households you only needed to get an HMO licence if the property had three or more floors. But under the new rules, introduced on October 1, the number of floors is irrelevant – any properties that have five or more people from two or more separate households have to have an HMO licence.

The new rules also affect the size of the rooms in your tenant property; HMOs must now have bedrooms of at least 4.64 square metres for children aged ten or under, at 6.51 square metres for single rooms and a minimum of 10.22 square metres for two adults sharing.


Many landlords will not be affected by the minimum room rule – the idea of it is to clampdown on those landlords who are crowding too many people into small rooms, are housing illegal Immigrants and are not meeting health and safety standards.

However, if you think you might be affected by the new rules you need to do something about it now if you haven't already, as letting a licensable HMO without a licence is an offence and can result in a major fine. 

Even if you have already got your new HMO licence in place, it is still a good idea to speak to your mortgage broker, because they will be able to help you understand the consequences of becoming an HMO landlord under the new rules, which includes any financial consequence of the changes.

Ultimately, you need to ensure that you can still secure finance on your portfolio if one or more of your properties become HMOs under the new rules. 

It may seem like securing finance on a property that had become an HMO should be straightforward, but if you have a property or properties that are affected by the changes, as the risk changes, it will probably affect lending to the whole portfolio, not just the new HMOs.

You may be lucky and your current lender may change their criteria to accommodate the changes and continue to provide you with finance, but in many cases you will probably need to look elsewhere.

There is not a huge amount of choice when it comes to finding buy-to-let mortgages for HMO properties, so it is in your interest to speak to a broker, especially if you have not needed the services of a specialist HMO mortgage lender before. They will be able to help you find finance to suit your new situation.

This may mean using a commercial lender for the first time. This is good news in terms of the fact that they are more used to lending on HMOs, but they will be expecting everything to be up together, so will probably not consider lending to you if you haven't got the correct HMO licencing in place, or can prove your properties meet the new minimum bedroom size guidelines.

Obviously is it ultimately your responsibility, as the landlord, to ensure you are compliant with the new rules,  but if you are not sure about how the changes might affect you, speak to a broker.

They will be able to help you through the process, and ensure you have the funding in place to support your portfolio under the new rules.

Liz Syms is the CEO at Connect Brokers

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