If you have your sights set on a HMO (House of Multiple Occupation), then why not turn to the experts for the latest and most accurate property investment advice? At Mistoria Estate Agents Bolton, we have decades of combined experience to make sourcing, letting and managing HMOs a smooth, profitable and hassle-free process.
Below, we explore which tenancy is best for a HMO as well as the various elements that should always be included in a HMO tenancy agreement. Regardless of whether you want to outline the tenant’s array of responsibilities while living at your property or make sure you’re using the right type of tenancy agreement for a HMO property, you can find all the answers you (as a property investor or landlord) need here.
What is a HMO tenancy agreement?
Put simply, a HMO tenancy agreement is a legally binding contractual agreement made between a landlord and the tenant/s that sets out the rights and responsibilities of all involved parties. It will often stipulate which areas are communal and which are private to the tenants. The use of any shared facilities found in communal areas like the kitchen and bathroom will also be set out in this agreement.
Can you use an AST for a HMO?
Wondering whether you can use an AST (Assured Shorthold Tenancy) for a HMO? First, we need to clarify what an ATS actually is. In short, an Assured Shorthold Tenancy is the most common type of tenancy agreement typically used by private landlords and letting agents. Subsequently, using an AST for a HMO is not only common practice but often ideal for this type of letting.
According to UK Government private renting guidance, for a tenancy to be an AST, it must meet the following criteria: it should be private, started on or after January 15th 1989 and the tenant’s main accommodation. Moreover, the landlord must not be living at the property. It’s also worth bearing in mind that an AST should not be used if the annual rent exceeds £100,000, there is no rent payable, or the property is a holiday home.
What tenancy agreement do I need for a HMO?
Ultimately, the right tenancy will depend on a number of factors, but an AST is the most common choice for HMO investors and landlords. Other types of tenancies include excluded tenancies, assured tenancies and regulated tenancies. Extended tenancies are generally used by live-in landlords, while assured and regulated tenancies offer tenants greater protection from eviction.
What do you need to include in a HMO tenancy agreement?
This might seem obvious, but it’s always important to mention because it’s such a crucial element of any legally binding contract. HMO tenancy agreements can involve a group of people (like students) that require the signatures of all parties. Ensuring every tenant has signed in the relevant places is therefore paramount to enforcing the terms of the agreement.
Another important component of any tenancy agreement is to clearly and accurately state the property address. This will ensure that there is no confusion over the property’s location.
In order to ensure that you receive the correct rental amount for the HMO every month, you’ll need to clearly set out the rental amount as well as when and how this amount should be paid (often Direct Debit or Standing Order). The start or end of the month tends to be the most common rent payment date to align with monthly paydays. You should also mention when and how the rent will be reviewed here.
While the tenants will have a responsibility to keep the property in good condition and pay certain associated bills, landlords will also have a set of obligations to fulfil. From carrying out property maintenance and repairs to ensuring health and safety standards are met throughout the accommodation, landlords have a wide range of responsibilities that should be stipulated in the agreement.
Start and end date of the tenancy
Most tenancies will often commence at the beginning or end of any given month to coincide with payday. It should state both the start and end date of the tenancy to help avoid costly disagreements and evictions. Many student HMO tenancy agreements often run following term dates, so it’s important to understand your target tenant’s housing requirements when choosing these dates. Minimum tenancy periods are typically six to 12 months.
Unlike standard buy-to-let properties where the tenants are typically responsible for paying household bills (including utilities and council tax), a HMO will often cover these costs in exchange for higher monthly rent. It’s therefore important to outline any and all bills that you expect the tenants to cover in a HMO property. In some cases where a group of tenants sign one contract, it can be easier to designate the tenants’ shared bills.
The deposit amount and how it will be protected should also be included in every HMO tenancy agreement. This is because any HMO property with an AST must be protected by some form of tenancy deposit scheme by law. According to Government advice, if the property was leased using an AST after April 6th 2007, the tenants’ deposit must be placed in a tenancy deposit protection scheme.
There are several deposit protection schemes, including Deposit Protection Service, MyDeposits and Tenancy Deposit Scheme. As long as the tenants pay the rent (and any bills they’re liable for), don’t damage the property and meet the terms of the agreement, these government-backed schemes will ensure they receive their deposit at the end of the tenancy.
Deposit information in a HMO tenancy agreement should also include details of when the deposit can be withheld – either fully or partly. In some cases, the landlord might list the cost of common repairs to provide the tenants with an idea of how much they can realistically expect to be taken from their deposit.
For more information regarding what should be included in a HMO tenancy agreement, we recommend getting up to date with the latest private renting Government guidance.
HMO property management at Mistoria Estate Agents Bolton
Eager to create your own HMO tenancy agreement for your next property venture? To find out how the experienced and professional HMO property management team at Mistoria Estate Agents Bolton can support your property investment, please get in touch today! We offer a wide variety of HMO property services, including bespoke support, guidance and management. To discuss your requirements with a member of our team, you can either call us on 01204 800 766, email us at email@example.com or use our online contact form to submit your enquiry.