Rules for 3-Tenant HMOs: Do I Need an HMO Licence for 3 Tenants?

Landlords with smaller HMOs often ask, “Do I need an HMO licence for 3 tenants?” Three occupants are below the mandatory HMO licensing threshold, but some councils have their own rules for smaller HMOs. So, always check your local council’s licensing requirements before letting or managing a 3-tenant HMO. Find out how the Renters’ Rights reforms affect such properties and what if you don’t get the right licence.

Do I Need an HMO Licence for 3 Tenants? 

Being an HMO and needing an HMO licence are two different things. A property can be an HMO with three or more unrelated tenants sharing facilities. However, this does not always mean the landlord needs an HMO licence.

In England, mandatory HMO licensing generally applies to properties with five or more people from two or more households. With three or four people,  your property does not need a Mandatory HMO Licence. However,  IT MAY STILL NEED A LICENCE. Some councils have additional licensing schemes that cover smaller HMOs with three or four tenants. These schemes vary from Council to Council and even between different streets in a Council’s area.

So, a 3-tenant HMO may need a licence in one borough but not in another. Check your local council’s HMO licensing rules before letting the property

What Makes a 3-Tenant Property an HMO?

Under the Housing Act 2004, a property can be an HMO when three or more tenants live there. Those tenants:

• form more than one household
• share facilities such as a kitchen, bathroom or toilet.

A household can be one person, a family, or a couple living together. For example, a couple renting with one friend is not an HMO, because there are only two households. But three friends sharing a kitchen and bathroom, with no family link between them, is an HMO, because that is three separate households under one roof.

Real Estate Agents London Strategic Insights:

Many London landlords assume that a joint tenancy agreement changes the whole thing. But in fact the type of tenancy has nothing to do with it. Three tenants can sign one joint agreement or separate agreements. What matters is who is actually living in the property and how they share space.

Why 3 Tenants Rarely Need a Mandatory Licence

1. Even if all 3 tenants are not from the same household and share facilities, they do not meet the national five-person threshold for mandatory licensing.
2. Three friends living together normally form three separate households, so they meet the household part of the test. But the number of people keeps the property out of the mandatory licensing category.
3. The old three-storey rule was removed in October 2018. A 3-tenant HMO can be a house, flat or bungalow and still fall below the mandatory licensing threshold.
4. Some converted blocks of flats fall under mandatory licensing rules, but these rules apply to larger converted buildings rather than a three-bedroom house shared by three tenants.

Additional and Selective HMO Licensing

Your local council may have its own licensing scheme along national HMO rules. That means a 3-tenant property needs a licence even when mandatory HMO licensing does not apply.

• Additional licensing: Covers smaller HMOs that fall below the mandatory licensing threshold, including some 3-tenant HMOs. A council can require HMOs in the whole area or in specific wards to have a licence.
• Selective licensing: This works differently. Some councils require landlords in certain areas to get a licence, even if the property is not an HMO. A property needs a licence simply because it is located in a designated licensing area.

Several London boroughs operate one or both schemes. The areas covered can also change when councils introduce, renew or extend their licensing schemes. This is why checking only the national HMO rules is not enough. A landlord may meet the mandatory licensing rules but still need a licence under a local scheme.

HMO Licensing Rules by Location

Councils do not apply these schemes across the whole borough or city. Some cover specific wards, streets or other designated areas. Two properties with the same number of tenants can have different licensing requirements simply because they are in different areas.

Birmingham uses a ward-by-ward approach for licensing. Each ward covers less than 20% of the city’s housing stock, so the scheme did not need government approval. That shows licensing can apply to specific wards rather than the whole city.

How to Check Your Council’s HMO Rules

Before letting a property to three tenants, check your local council’s licensing rules. A 3 or 4-person HMO may need an additional Licence in your area, even though it does not require mandatory HMO licensing. You can check this in a few simple steps.

Check if a licensing scheme applies to your property

• Search for your council’s licensing page: Try “[your borough] council HMO licensing” or ‘[your borough] council additional licensing”. You can also check for selective licensing if the property is privately rented.
• See if there’s a postcode checker, licensing map or list of areas covered by the scheme. Additional and selective licensing schemes can apply to only one part or all of a council area.
• You may need the property postcode and number of tenants and households to check which rules apply. So, keep details ready beforehand.

Check if a specific property is already Licenced

Find your local council: search for the specific local authority where the property is located (e.g., Bristol City Council, Manchester City Council).

Search the public register: most councils provide an online Public HMO Register or licensing portal where you can type in the property address to see if it’s already Licenced.

Contact the council if you are still not sure

If the online information is unclear, contact the council’s private housing or property licensing team. It is better to confirm the position than assume a licence is not needed.

What If I Do Not Get the Right HMO Licence

Running an unlicenced HMO in England is a criminal offence under the Housing Act 2004. Following the Renters’ Rights Act 2025, the maximum civil penalty for this kind of offence rose from £30,000 to £40,000, under statutory guidance published by the Ministry of Housing, Communities and Local Government.

• Starting point for a civil penalty if doesn’t obtain an HMO licence under Section 72(1) = £17,000
• Statutory maximum civil penalty for an offence = Up to £40,000

The financial risk does not stop there. In some cases, tenants can apply for a Rent Repayment Order to recover up to 12 months’ rent from the landlord.  Besides that, mortgage renewal and HMO sale become difficult because buyers’ solicitors now routinely ask for licensing evidence.

Unicenced HMO → Civil penalty → Rent Repayment Order → Problems when selling or remortgaging

On above of all that, Scottish rules are tougher as well. Shelter Scotland lists a maximum fine of £50,000 for an unlicenced HMO, and it is a criminal offence, not a civil matter.

HMO Licensing Exemptions: When 3-Tenant Shared Houses Don’t Need a Licence

Some 3-tenant properties may not need an HMO licence, depending on who lives there and how the property is managed.

• If the landlord also lives in the property and shares facilities with the tenants, different rules can apply.
• If the tenants are all part of the same family, such as siblings or a parent and adult children, they count as one household.
• The building is run and managed by a local authority, health body or registered social landlord.
• Some supported or specialist accommodation is regulated under separate legislation and may be exempt from HMO licensing.

Exemptions do not remove every duty. Being exempt from licensing does not exempt your property from HMO management regulations or fire safety duties. As an HMO Landlord, understand your HMO fire risk assessment requirements.

Room-by-room vs. whole-property rentals: Which requires an HMO Licence?

HMO status depends on who lives in the property, not how it is let. Each tenant has their own room agreement, or they’ve all signed one joint tenancy; if  3 unrelated people share facilities, they make the property an HMO.

So, the difference between room-by-room and whole-property letting is mainly about how the landlord chooses to let and manage the property (business model), rather than an automatic exemption from HMO licensing. If mostly landlords choose room-by-room lets as a common way, that means groups of friends might have fewer licenced whole properties to rent when they want to share the cost.

What to Check Before Letting HMOs to 3 Tenants

Check a few things before a tenant move-in:

Mortgage type: A standard buy-to-let mortgage may not allow you to let to unrelated sharers. So ask your lender if an HMO mortgage is needed.

Insurance: Some standard landlord policies do not cover HMO properties, so check that your insurance is suitable for the type of letting.

Fire safety: Even if an HMO licence is not required, the property must have smoke alarms, fire safety equipment and clear escape routes.

Tenancy agreement: Decide the structure; your tenants will sign 1 joint tenancy or separate agreements. This affects how rent, deposits and notices are handled.

Tenant checks: Carry out referencing and Right to Rent checks for each tenant, rather than treating the group as one applicant. It can take more time than a standard single let.

At this point, decide are you going to manage the let yourself or hand the referencing and day-to-day management to an agent that already deals with HMOs regularly.

How the Renters’ Rights Act Affects 3-Tenant HMOs

The Renters’ Rights Act 2025 brings major changes to private renting in England. The main tenancy reforms came into force on 1 May 2026. For landlords running a 3-tenant HMO, some of the most important changes are:

Fixed term tenancies ended

Assured shorthold tenancies are replaced by periodic tenancies. This applies to new lets and existing ASTs that automatically became rolling tenancies from 1 May 2026. This can change how notice periods work, especially for room-by-room arrangements.

Section 21 (no-fault eviction) removed

From now on, landlords cannot use Section 21 to evict tenants without giving a specific reason. If need to regain possession, rely on one of the legal grounds under Section 8 and follow the correct process.

Notice periods changed

Tenants can generally end an assured periodic tenancy by giving up to two months’ notice. In case of room-by-room HMOs, each tenancy agreement and notice process also need to operate according to these new rules.

Stronger enforcement

Local councils now have power to investigate breaches and issue financial penalties. The updated civil penalty guidance sets a starting level of £17,000 for an unlicenced mandatory or additional HMO. 

The Act also introduces other changes, including new rules around rent increases, rental bidding, pets and tenant protections. As these rules are still new, check the latest GOV.UK guidance before serving notices, changing tenancy agreements or making decisions about an HMO.

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