Evictions an unintended consequence of HMO enforcement

In the last two months, Housing Rights has seen a real spike in calls from private tenants who have been asked to leave their rented homes. It appears that an unintended consequence of the new Houses in Multiple Occupation regime is the attempted eviction of tenants who have legally binding tenancy agreements. 

A House in Multiple Occupation or HMO is a property in which at least 3 people from 3 different household share essential facilities. From April 1 2019 any such property in Northern Ireland must be licensed. The licensing application is rigorous and many first-time applicants may not fully appreciate the amount of preparatory work that is required in order to complete a successful application. 

Licensing requirements

Landlords who had HMO properties registered under the old system may be leaving it much too late to apply for a new HMO license. It takes up to three months for the council to approve a HMO license application and that timeframe only begins once all the necessary application steps have been completed and the relevant supporting documentation has been provided to the council. Belfast City Council's HMO unit has had to reject many applications for failing to comply with the legal requirements or failing to submit acceptable supporting evidence. The outcome of this is that the landlord can end up facing a substantial fixed penalty notice if the existing registration lapses before the new license has been approved. 

We were recently contacted by a student who stated that her agent had advised them that the landlord did not intend to apply under the new scheme and, as a result, would not be renting out the property as a HMO. The agent then agreed that the landlord would apply to be licensed on the condition that the tenants increased the rent payable for the property by £100 per month as this additional charge would help somewhat towards the cost of licensing. However, six months into the 12 month contract, the tenants received a notice advising that they needed to vacate in four days because the landlord had not applied for a license in time and the council was now taking enforcement action unless the property ceased to be a HMO. On querying this, the tenant was told that she would be held personally liable for the landlord's legal costs and fixed penalty notice if she did not comply with this notice. 

The legal position

It is an offence to run an unlicensed HMO. The council can issue the landlord, and any agent involved in managing the property, with a fixed penalty notice for £5,000 if such a property is unlicensed. Section 15 of the Houses in Multiple Occupation (Northern Ireland) Act 2016 allows a landlord to apply for a temporary exemption notice, which gives him or her a three month grace period from the requirement to be licensed if the landlord applies to the council and shows that he or she intends to take specific steps to ensure that the property will cease to be a HMO.  This three month period can be extended, but only if the council beleives it is appropriate to do so and if there are special circumstances justifying the extension. 

The fact that a landlord has failed to apply for a HMO license does not give the landlord unfettered rights to end a binding tenancy agreement. A tenant agreement, as with any other consumer contract, can only be ended before its natural expiry by enacting a mutual break clause or with the mutual consent of both parties. Where the tenant does not voulntarily agree to leave, the landlord must apply to court for a possession order and it is unlikely that the court will grant this order if the tenant has been entirely blameless and has complied with all of his or her contractual obligations. 

This leaves the landlord at something of an impasse. If the property does not cease to become a HMO the landlord faces serious financial penalties and the prospect of prosecution, which could impact on his or her ability to meet the Fit and Proper person test and manage HMO properties in the future. On the other hand, the landlord cannot force the tenant to leave the property without followind the correct legal process and this process is not likely to end in a possession order where a tenancy agreement is in place and there has been no significant breach of the terms by the tenant. 

Resolving the impasse

Negotiation will be key to resolving these disputes. The tenant is being made homeless and should be compensated accordingly. A landlord with a large portfolio of properties may be able to offer the tenants suitable alternative accommodation on the same terms at another of his or her dwellings. If this isn't an option, the landlord may need to incentivise the tenants to agree to leave by, for example, agreeing to pay the tenants' moving costs and to return the tenants' deposit immediately in order to help them to move more quickly. The landlord should also ensure that the tenant is properly compensated for any losses he or she has incurred as a result of the landlord's failure to ensure the HMO was licensed. In one recent case, a tenant had filled the property's oil tank with £500 worth of heating oil four days before being told she had to leave the property because it was no longer a licensed HMO. 

It is also possible that a tenant may have a right to a discount on the rent that has already been paid under the contract, if the tenant can show that the landlord or agent engaged in misleading practices by asserting that the property was a licensed HMO. Part 4A of the Consumer Protection from Unfair Trading Regulations 2008, as amended, affords consumers rights to redress, including a percentage discount on any monies paid under the contract, if the trader engaged in a prohibited practice and this practice was a significant factor in the consumer's decision to enter into the contract.

Where the tenant or landlord cannot agree acceptable terms, a mediation service may be the best way to resolve this impasse. Tenants can contact Housing Rights on 028 9024 5640 if they are in this situation for advice on their options and to find out more about our mediation service. 

Registered landlords can contact Landlord Advice to speak to an adviser about HMO licensing and to find out more about mediation services to resolve disputes with tenants. 

HMO training

Housing Rights will be providing training on Houses in Multiple Occupation in February 2020.