HMO Licensing: Insurance Implications You Need to Know

What is an HMO?

A House in Multiple Occupation (HMO) is a property rented out by at least three people who are not from one "household" (e.g., a family) but share facilities like the bathroom and kitchen. It's sometimes called a "house share" or "bedsit."

The legal definition can be complex, but in simple terms, if you have three or more unrelated tenants sharing a property, you're likely operating an HMO. This classification has significant implications for both licensing and insurance.

Types of HMO Licensing

There are two main types of HMO licensing in England:

Mandatory Licensing

Since October 2018, mandatory licensing applies to HMOs with five or more people forming two or more separate households, regardless of the number of storeys. Previously, it only applied to properties of three or more storeys.

Additional Licensing

Local councils can introduce additional licensing schemes that require smaller HMOs to be licensed. These schemes vary by area, so you need to check with your local authority.

• Check if your property meets the HMO definition
• Determine if mandatory licensing applies
• Check for local additional licensing schemes
• Ensure you have the correct licence before letting
• Keep your licence up to date and displayed

Insurance Requirements for HMOs

HMOs have different risk profiles compared to standard buy-to-let properties. More occupants mean more wear and tear, higher fire risk, and increased liability exposure. Standard landlord insurancepolicies often exclude HMOs or have specific conditions.

Key insurance considerations for HMOs include:

• Buildings insurance: Must reflect the higher rebuild costs of HMO conversions
• Contents insurance: Cover for communal furniture and appliances
• Property owners' liability: Higher limits recommended due to more occupants
• Legal expenses: Important for tenant disputes and licensing issues
• Loss of rent: Consider the higher rental income at stake

What Insurers Need to Know

When applying for HMO insurance, you'll need to provide detailed information about your property. Insurers will typically ask about:

• Number of bedrooms and maximum occupancy
• Whether the property is licensed (and licence type)
• Fire safety measures (alarms, extinguishers, fire doors)
• Type of tenants (students, professionals, DSS)
• Letting arrangement (room-by-room or whole property)
• Any communal cooking facilities
• Property construction and age
• Claims history

Accurate disclosure is essential. If you provide incorrect information, your insurer could refuse to pay claims or cancel your policy entirely.

Common Insurance Issues with HMOs

Operating Without a Licence

If your HMO requires a licence but you don't have one, most insurers will refuse to cover you. Even if they do provide cover, they may exclude claims related to the unlicensed status.

Fire Safety Non-Compliance

HMOs must meet specific fire safety standards. If your property doesn't comply and there's a fire, your insurer may reject the claim. Ensure you have:

• Interlinked smoke alarms on each floor
• Fire doors to kitchens and bedrooms (where required)
• Fire extinguishers and fire blankets
• Clear escape routes
• Emergency lighting (for larger HMOs)

Tenant Type Restrictions

Some insurers won't cover certain tenant types, such as those receiving housing benefit or students. Always check the policy terms match your actual tenants.

Getting the Right HMO Cover

HMO insurance is a specialist product, and not all insurers offer it. Working with a broker who understands the HMO market can help you find appropriate cover at a terms suited to your needs.

When choosing HMO insurance, consider:

• Does the policy specifically cover HMOs?
• Is your licence type accepted?
• Are your tenant types covered?
• What fire safety requirements does the insurer have?
• Is there cover for malicious damage by tenants?
• What's the unoccupancy clause (important between tenancies)?
• Does the policy cover room-by-room letting?

Don't be tempted to manage costs by using standard landlord insurance for an HMO. For portfolio landlords, our property portfolio guide covers multi-property arrangements. If you need to claim, the insurer will investigate, and if they discover the property is an HMO, your claim will likely be rejected.