Which HMO tenancy type should you use?

If you have a property in which more than 3 people live, forming more than 1 household and they share toilets, bathrooms or kitchen facilities with other tenants, then you have a House in Multiple Occupation (HMO). This is very common for student accommodation, where several students will have their own space and share facilities with other students. Given that the property potentially has people in it who aren’t related but all have some responsibility towards the upkeep of the property, what type of tenancy agreement is best?

In an HMO, there are essentially two types of agreement that can be used: A joint or sole agreement. Both are essentially assured shorthold tenancies but they are very different in terms of the legal responsibilities applied to the tenants.

Joint Tenancies

With joint tenancies, the tenants are jointly and severally liable for the actions or inactions of everyone else in the property. This means that should another tenant cause damage, for example, and then leave the property the other tenants are equally liable for that damage, the same applies for rent arrears. There tends to be only one contract that is signed by all tenants and they rent the property together. Each person’s name needs to be on the contract when being signed. Tenants can come and go under the agreements and suggest replacements, in which case a new joint tenancy needs to be signed by everyone who is staying. If a tenant moves out without a replacement being found, then the remaining tenants become liable for that share of the rent. Each tenant will still pay a contribution towards the deposit and each tenant is jointly liable for the bills in the property. Typically, a joint tenancy makes sense if the property is rented out in its entirety to tenants who know each other well, this can very often be the case with groups of students who want to live together.

Sole Tenancies

These are mostly used when rooms are rented out to people who don’t know each other and as such do not want to assume responsibility for the actions or inactions of the other tenants. In these cases, each tenant has their own agreement for their room, rent and responsibilities. Where possible, each room should have a unique utility meter associated with it. If that is not the case, often the landlord will need to assume the cost of the bills for the whole property and apportion this into the rent as best as possible. This does mean that a landlord can typically charge higher rents for HMOs with sole tenancy agreements. There is some complexity around the communal areas and the upkeep of the communal areas and with sole tenancies this really becomes the responsibility of the landlord. This is made easier, as the landlord has the automatic right to enter the communal areas, which in a joint tenancy they do not and need to seek permission from the tenants.

In all the choice of which agreement type to use depends on the dynamics of the property. If it is a student let, for example and is let out every year to groups of students who want to live together, joint tenancies would probably be the best option. If the letting strategy is more around transient tenants coming and going, then sole tenancies might be the better option.