HMO vs Selective Licensing: Understanding the Key Differences

Last Updated: December 2024
Reading Time: 9 minutes

Confusing HMO licensing with selective licensing is one of the most expensive mistakes a letting agent can make. Get it wrong, and you're looking at a £30,000 civil penalty for an unlicensed property—regardless of which licence type you missed.

Yet the distinction confuses even experienced property professionals. Both involve councils, both require applications and fees, and both carry identical maximum penalties. So what's the difference?

This guide breaks down exactly when each licence type applies, how they differ, and—crucially—when a property needs both.

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Quick Comparison: HMO vs Selective Licensing

Key takeaway: HMO licensing is based on who lives in the property, while selective licensing is based on where the property is located.

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What Is HMO Licensing?

An HMO (House in Multiple Occupation) is a property rented to three or more people from two or more separate households who share facilities like kitchens or bathrooms.

HMO licensing exists to ensure shared housing meets minimum safety and management standards. Because multiple unrelated households share spaces, the risks—fire, overcrowding, poor management—are higher than standard rentals.

When Is HMO Licensing Required?

Mandatory HMO Licensing applies nationally to any property that is:

• Occupied by five or more people
• From two or more separate households
• Where occupants share facilities (kitchen, bathroom, toilet)

This is set by national legislation under the Housing Act 2004. Every council in England must enforce it—there's no discretion involved.

Additional HMO Licensing is a separate scheme that councils can choose to implement. It covers smaller HMOs that don't meet the mandatory threshold:

• Typically 3-4 people from 2+ households
• Council designates specific areas or property types
• Not all councils have additional licensing schemes

HMO Classification Examples

HMO Licence Conditions

HMO licences come with strict conditions covering:

• Fire safety: Fire doors, smoke alarms, escape routes
• Room sizes: Minimum 6.51m² for one person, 10.22m² for two
• Facilities: Adequate kitchens, bathrooms, toilets per occupant
• Management: Regular safety checks, tenant referencing
• Occupancy limits: Maximum number of occupants specified

Breaching these conditions can result in civil penalties up to £30,000—separate from any penalty for being unlicensed.

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What Is Selective Licensing?

Selective licensing allows councils to require all privately rented properties in a designated area to be licensed—regardless of property type or tenant configuration.

Unlike HMO licensing, selective licensing isn't about who lives in the property. It's about where the property is located and broader area-based concerns.

When Is Selective Licensing Required?

Selective licensing applies when:

• A council designates a specific area for licensing
• Your property is a privately rented property within that area
• The property is not already covered by mandatory HMO licensing

Councils can only implement selective licensing if an area meets certain criteria:

• Low housing demand
• Significant anti-social behaviour
• Poor property conditions
• High levels of migration
• High deprivation
• High crime rates

Geographic Coverage

Selective licensing is area-based. A property just inside the boundary requires a licence; an identical property just outside doesn't.

Important change (December 2024): The government removed the 20% cap on selective licensing coverage. Councils can now designate entire borough-wide schemes without Secretary of State approval.

Selective Licence Conditions

Selective licence conditions are generally less stringent than HMO conditions, focusing on:

• Basic safety: Gas safety certificates, smoke alarms, EPC
• Tenancy management: Proper agreements, deposit protection
• Property condition: Maintaining reasonable standards
• Anti-social behaviour: Addressing tenant issues
• References: Tenant referencing requirements

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Key Differences Explained

Understanding these distinctions prevents costly misclassification.

1. Trigger Mechanism

HMO Licensing: Triggered by the property's occupancy arrangement. If five or more people from two or more households share facilities, mandatory licensing applies—anywhere in England.

Selective Licensing: Triggered by geographic location. If the property sits within a designated area, it needs licensing—regardless of who lives there.

2. National vs Local

HMO Licensing: Mandatory HMO licensing is national law. Every council must enforce it. The criteria are the same whether your property is in London or Leeds.

Selective Licensing: Entirely discretionary. A council chooses whether to implement a scheme, which areas to cover, and the fee structure. Many councils have no selective licensing at all.

3. Property Type Focus

HMO Licensing: Targets specific property arrangements where shared living creates higher risks. A three-bedroom family home with standard tenants doesn't require an HMO licence.

Selective Licensing: Covers any privately rented property in the designated area. Single-family homes, small flats, large houses—all require licensing if they're in the zone.

4. Condition Stringency

HMO Licensing: Conditions are detailed and prescriptive. Specific room sizes, fire door specifications, facility ratios, and management requirements.

Selective Licensing: Conditions are broader and less technical. Focus on basic safety compliance and responsible tenancy management.

5. Fee Structures

HMO Licensing: Fees tend to be higher (£500–£1,500) reflecting the more complex inspection and compliance requirements.

Selective Licensing: Fees are generally lower (£400–£1,000) as the compliance burden is simpler.

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When Do You Need Both Licences?

Here's where it gets complicated—and expensive.

A property can require both an HMO licence AND be in a selective licensing area.

However, you typically don't need two separate licences. The key rule:

If a property requires a mandatory HMO licence, it's exempt from selective licensing (but you still need the HMO licence).

But there are nuances:

Scenario 1: Large HMO in Selective Area

• Property: 6-bed house with 6 unrelated tenants sharing
• Location: Within a selective licensing area
• Required: Mandatory HMO licence only (exempt from selective)

Scenario 2: Small HMO in Selective Area (No Additional Licensing)

• Property: 3-bed flat with 3 unrelated professionals sharing
• Location: Within a selective licensing area, council has no additional HMO scheme
• Required: Selective licence only (doesn't meet mandatory HMO threshold)

Scenario 3: Small HMO in Selective Area (With Additional Licensing)

• Property: 3-bed flat with 3 unrelated professionals sharing
• Location: Within both selective licensing area AND additional HMO licensing area
• Required: Additional HMO licence only (HMO licensing takes precedence)

Scenario 4: Standard Rental in Selective Area

• Property: 2-bed flat let to a couple
• Location: Within a selective licensing area
• Required: Selective licence only

The Critical Question

When determining licence requirements, ask:

1. Does this property meet the HMO definition? (3+ people, 2+ households, shared facilities)
2. If yes, does it meet the mandatory threshold? (5+ people)
3. If not mandatory, does the council have additional HMO licensing?
4. Is the property in a selective licensing area?
5. Which licence takes precedence?

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Common Mistakes Letting Agents Make

These classification errors lead to civil penalties every week across the UK.

Mistake 1: Assuming HMO = Selective

"We've got an HMO licence, so we're covered."

Wrong. HMO licensing and selective licensing are entirely separate regimes. An HMO licence doesn't exempt you from selective licensing requirements—unless it's a mandatory HMO licence.

Mistake 2: Ignoring Tenant Changes

You licence a property as a standard rental under selective licensing. Later, the landlord allows additional occupants, and the property now functions as an HMO.

The original licence doesn't cover the new arrangement. You need to reassess licensing requirements whenever tenant configurations change.

Mistake 3: Relying on Postcodes

"Our property is in [postcode], which isn't in the licensing area."

Selective licensing boundaries follow ward boundaries, not postcodes. A postcode can span multiple wards, with some parts licensed and others not. Always verify against the council's boundary map.

Mistake 4: Confusing Additional with Mandatory

Additional HMO licensing (council discretion) and mandatory HMO licensing (national law) have different triggers and different coverage. Don't assume one means the other.

Mistake 5: Missing Dual Requirements

Some properties genuinely require careful analysis to determine which licence applies. Assuming "one or the other" without checking can leave you unlicensed under the wrong regime.

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How to Determine Which Licence You Need

Follow this decision tree for each property in your portfolio:

Step 1: Count Occupants and Households

• How many people live in the property?
• How many separate households do they form?
• Do they share kitchen, bathroom, or toilet facilities?

Step 2: Check HMO Status

• 5+ people from 2+ households sharing facilities = Mandatory HMO licence required
• 3-4 people from 2+ households sharing facilities = Check if council has additional HMO licensing
• Fewer than 3 people OR single household = Not an HMO

Step 3: Check Selective Licensing

• Is the property located in a selective licensing designated area?
• Check the council's boundary map, not postcodes
• Remember: schemes change—check current status, not historical

Step 4: Determine Precedence

• Mandatory HMO? = HMO licence only (exempt from selective)
• Additional HMO? = HMO licence only (typically takes precedence)
• Standard rental in selective area? = Selective licence only
• Standard rental outside selective area? = No licence required

Step 5: Document Your Assessment

For each property, record:

• Current occupancy arrangement
• HMO status determination
• Selective licensing area status
• Licence held and expiry date
• Date of last assessment

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Frequently Asked Questions

What's the main difference between HMO and selective licensing?

HMO licensing is based on who lives in the property—specifically, multiple households sharing facilities. Selective licensing is based on where the property is located—any privately rented property within a council-designated area. HMO licensing is mandatory national law for larger shared properties, while selective licensing is discretionary and implemented by individual councils.

Can a property need both HMO and selective licensing?

In most cases, no. If a property requires a mandatory HMO licence (5+ people from 2+ households), it's exempt from selective licensing. However, smaller HMOs that don't meet the mandatory threshold may require either an additional HMO licence or a selective licence, depending on the council's schemes. You won't typically need to pay for both.

Which licence has stricter conditions?

HMO licences have stricter and more prescriptive conditions, including specific room size requirements, fire safety measures, and facility ratios. Selective licence conditions focus on basic safety compliance and responsible property management. This reflects the higher risks associated with shared housing arrangements.

How do I know if my property is in a selective licensing area?

Check the relevant council's website for their selective licensing boundary map. Don't rely on postcodes—boundaries follow electoral wards, not postal areas. Search for "[council name] selective licensing" and use their interactive map or address checker. Remember to verify regularly as schemes can be introduced, expanded, or expire.

What happens if I have the wrong type of licence?

Having a selective licence when you need an HMO licence (or vice versa) means your property is effectively unlicensed for its actual use. You could face a civil penalty of up to £30,000, plus potential rent repayment orders. Always ensure your licence matches the property's current occupancy arrangement and location status.

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Stay Compliant Across Both Licence Types

The difference between HMO and selective licensing might seem technical, but getting it wrong carries a £30,000 penalty. With councils introducing new selective licensing schemes monthly and HMO definitions catching out even experienced agents, staying compliant requires constant vigilance.

The properties that slip through are rarely the obvious ones. It's the 4-person shared house in an area that just introduced additional licensing. The student let that now has 5 occupants. The rental in a ward that was added to a selective scheme last quarter.

ProperLet Protect monitors your entire portfolio against both HMO and selective licensing requirements. When boundaries change or your property's circumstances shift, you'll know within 24 hours—not when an enforcement officer arrives.

Book a Demo to see how ProperLet keeps you compliant across every licensing regime.

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This article is for informational purposes only and does not constitute legal advice. For specific guidance on licensing requirements, consult your local authority or a solicitor specialising in housing law.