HMO Shorthold Tenancy Agreement Contract Guide

Page contents

• Introduction to HMO Shorthold Tenancy Agreements
• You probably won’t have an AST if…
• HMO tenants and utility bills
• HMO tenancies can be Joint or Sole
• HMO Tenancy Agreement Contracts/Forms

Introduction to HMO Shorthold Tenancy Agreements

I’ve already discussed tenancy agreements for private residential single lets in depth, and the same best practices, rules, and legislation governed by the relevant Housing Acts will generally apply to HMO tenancy agreements, including:

• Following the introduction of the Renters’ Rights Act, most tenancies should now be Assured Periodic Tenancies (APTs), meaning they operate as rolling weekly or monthly contracts, depending on how rent is paid.
• Any tenancy deposit taken must be protected in a government-approved tenancy deposit scheme.
• A Section 8 notice should be used to evict tenants where valid grounds for possession exist.
• The tenancy agreement should clearly state who is responsible for paying bills such as electricity, gas, water, and council tax.
• Landlords must provide at least 24 hours’ written notice before carrying out property inspections or entering the property for reasons such as repairs or maintenance.

However, while I’ve already covered many of the general details, there are a few HMO-specific points I want to highlight when creating tenancy agreements for HMOs, as they are not usually as relevant in standard single-let situations.

You Probably Won’t Have an APT If…

• You share the accommodation with your tenants. In this case, your tenants are more likely to be lodgers, meaning you should not use an assured tenancy agreement, as lodger arrangements are governed by a different and generally more lenient set of rules.
• You charge more than £100,000 per year in rent. While this is unlikely for most landlords, some larger HMOs may exceed the threshold.

If you are unsure what type of tenancy arrangement you have, you can use Shelter’s tenancy rights checker.

HMO Tenants and Utility Bills

As mentioned, the tenancy agreement should clearly state who is responsible for paying bills such as electricity, gas, water, internet, and council tax. Generally speaking, in shared accommodation, landlords tend to include all bills within the rent and manage the accounts themselves. In my experience, this is the preferred option for both landlords and tenants because it is the simplest and most straightforward arrangement.

I also recommend using an energy auto-switch service, which can help ensure you are always on competitive tariffs, keeping energy costs as low as possible.

Alternatively, it is possible to assign one responsible tenant to manage the household bills. In this arrangement, that tenant collects money from the other occupants and pays the suppliers directly. However, this approach is generally less desirable for several reasons:

• If the responsible tenant moves out, another tenant will need to take over the accounts, which can create complications.
• It can become a source of tension between housemates, particularly:
  • if one tenant refuses to pay or regularly pays late;
  • or if tenants feel the bill split is unfair because some use significantly more utilities than others.
• Many landlords include a margin within “bills included” rent, meaning they can often generate a little extra profit while keeping the arrangement convenient for tenants.

HMO Tenancies: Joint or Sole/Separate Agreements

There are generally two common ways of structuring tenancy agreements in an HMO property: using individual contracts for each tenant, or using a single “joint and several liability” agreement.

The tenancy agreement should clearly state whether the arrangement is a sole or joint tenancy:

• Joint tenancies: This is a common arrangement for student properties, or HMOs where friends move in together. It tends to work best where tenants already know each other and are likely to move in and leave at the same time.

  In this setup, tenants are jointly liable for the rent and the condition of the property, meaning responsibilities are shared (similar to a single-let arrangement where all named tenants are collectively responsible under the agreement). For example, if one tenant fails to pay rent, the others may be required to cover the shortfall. In addition, the remaining tenants are often responsible for finding a replacement if a room becomes vacant.

  A joint tenancy also involves less administration, as there is one overall agreement, one rent payment, and typically one deposit to protect (if a deposit is taken).

  All tenants’ names should be included on a single tenancy agreement.

• Sole/Separate tenancies: HMOs occupied by unrelated adults who do not know each other, and do not want to take responsibility for other tenants, are usually let on separate (sole) ASTs for each room.

  Each tenant is responsible only for their own rent and conduct, and the actions of other tenants do not affect their tenancy. For example, if one tenant falls into arrears, the remaining tenants are not liable to cover the shortfall.

  This approach requires more administration, as each room has its own tenancy agreement and each deposit (where taken) must be protected individually.

  As noted in the utility bills section, where separate ASTs are used per room, the landlord will usually be responsible for council tax and utility bills, as this is generally the most practical arrangement.

HMO Tenancy Agreement Contracts

There is certainly no shortage of tenancy agreement templates available online (a Google search will confirm that pronto), including many that can be downloaded for free, which can be an appealing option.

My first word of warning is to ensure you use a reliable source and to make sure you are using the correct contract that is specifically designed for HMOs and suitable for your particular setup. While HMO tenants are, in most cases, granted an assured periodic tenancy (APT), many standard APT templates available from stationers and online are intended for single-let properties or assured shorthold tenancies (AST). Private residential landlords in England should not generally use either in most cases.

My second word of warning is to avoid modifying existing tenancy agreements by adding or altering clauses to suit your circumstances. This is something many landlords have done and later regretted. You could find yourself in legal difficulty if any additional clauses are challenged or deemed unenforceable.

If you would like to add your own custom terms to the tenancy, the safest approach is to instruct a specialist landlord and tenant solicitor to draft a contract tailored specifically to your HMO. While this may cost a few hundred pounds, it is generally a worthwhile investment if you are serious about managing HMOs properly.

Landlord out xo