The Ultimate Guide to House of Multiple Occupation (HMO) Property in Scotland

Are you thinking about letting out an HMO property and wondering what exactly it all entails? Well, read on. You should find out everything you need to need in this guide but, if after reading it, you still have questions, then feel free to give the team here a call today.

What is an HMO?

The acronym HMO stands for House in Multiple Occupation. By ‘multiple’ we mean a property – house or flat – that is shared by at least three individuals who aren’t related or in a partnership. These individuals also share facilities such as a kitchen, bathroom and perhaps a sitting room too.

HMO Scotland: Type of Tenants

This perfectly describes typical rented student accommodation, but some upmarket. This type of property is plentiful in cities such as Glasgow where there are Universities and colleges.

There are also more upmarket HMO properties, designed for young professionals who are at the start of their career and can’t yet afford to buy a property – or simply don’t want to. Many upmarket HMO rentals come with en-suite bathrooms and modern kitchen appliances etc.

Other tenanted properties which could be described as an HMO include a house let out with individual bedsits, a halls of residence and a home for nurses.

HMO Scotland vs Buy to Let

One of the main differences between an HMO property and a standing buy to let investment is the amount of work involved in the former – especially if you decide to manage the property yourself.

There are more tenants in an HMO rental, for instance. That means more marketing when it comes to replacing someone who has just moved out. If it’s a student HMO then you’re probably looking at new tenants every year.

Getting in new tenants involves quite a bit of reference and credit checking as well as showing individuals round the property and carrying out end of tenancy checks. This can, of course, all be done by a letting agent – but at a cost (usually anything from 10 to 15 per cent of the monthly rental).

One of the main advantages of an HMO rental over a buy to let in Scotland is that because there are more tenants your rental income will be higher. Also, losing one tenant isn’t as bad as having an entire property empty (as you would with buy to let when the tenant moves out). That’s because you will still have rental income from the remaining tenants renting rooms.

HMO Scotland Licensing

All properties – regardless of whether they are HMO or standard buy to let – which are rented out in Scotland must be listed in a register for the particular local authority in which the property sits. That register will provide the landlord’s name and the property’s address. It will also have been inspected by the local authority and the landlord been classed a ‘fit and proper person’ to let out a property.

Private landlords who fail to register with their local authority could face a fine of up to £50,000 fine and have rent payments suspended.

A mandatory licence is needed by any landlord operating an HMO. This is mainly to ensure that the property meets the physical standards outlined by the licensing local authority (local council) under the Housing (Scotland) Act 2006, part 5.

The cost of the HMO licence varies, depending on where the property is located. Operating without an HMO licence is treated seriously, with a fine of up to £50,000. The private landlord may also have his or her licence revoked.

HMO Scotland Planning Permission

Planning authorities may provide guidance as to occupancy level(s) if it’s the case of a dwelling house becoming an HMO under a ‘change of use.’

Under the Private Rented Housing (Scotland) Act 2011 a council can refuse to grant an HMO property licence if they deem there are already too many in a particular area.

HMO Scotland Tenancy Agreements

All tenants in Scotland who began a new Agreement after December 2017 have a private residential tenancy agreement (this replaced the former assured and short assured tenancy agreements). In an HMO the Agreement may be one for the household and signed by all people renting there. Or, it could be individual Agreements – especially for those renting out rooms.

The new Agreements are open-ended, meaning there is no fixed date for the tenancy to end.

Amenity Standards

There are certain standards for heating, toilet provision, bathrooms, and kitchens etc in an HMO. This includes the ratio of bathrooms and toilets per number of tenants.

Minimum room standards are another statutory provision. Any HMO which fails to meet or uphold standards will fail to secure an HMO licence from the local authority.

In an HMO the landlord will pay the utility bills and the council tax. A portion of this will be passed on to each individual tenant.

HMO Scotland Fire Safety Regulations

Fire safety is a big issue in an HMO rental. Legislation is particularly stringent and includes regular fire checks, which must be documented. Smoke alarms should be fitted on every floor and in larger HMOs there must be a fire door. Carbon Monoxide Detectors should also be fitted in rooms where there is fossil fuel heating. Firefighting equipment must be available on each floor of the HMO, such as a fire extinguisher, fire safety blanket etc.

A designated fire escape route is a legal necessity, and windows must open and allow access (i.e. not have bars in front of them).

It may be that Fire and Rescue will schedule a visit to your HMO and the council can also visit to ensure standards – in all areas (not just fire safety) – are being maintained. There should be at least 24 hours’ notice before any visit.

HMO Scotland Mortgages

Finance for HMO properties is provided by a specialist lender. It’s highly unlikely you would ever receive funding from a standard high street bank or building society. As such, it’s best to go to a mortgage broker. First time landlords can find it difficult to get funding for an HMO, simply because lenders prefer to have an experienced pair of hands in charge.