Penalty for Unlicensed HMO in England

Operating an HMO without the required licence is a criminal offence under Section 72(1) of the Housing Act 2004. The penalties are steep, and councils have two enforcement routes: prosecution or a civil penalty as an alternative for a particular offence.

Criminal Prosecution or Civil Penalty — the Council Chooses

When a council discovers an unlicensed HMO, it can either prosecute the landlord in the Magistrates' Court or issue a civil penalty notice (CPN). It cannot do both for the same offence, but it can choose whichever route it considers more effective.

Criminal prosecution carries an unlimited fine on conviction. The council brings the case to the Magistrates' Court, and a guilty verdict creates a criminal record. Councils tend to reserve prosecution for the most serious or repeat offenders.

Civil penalty notices allow the council to impose a financial penalty of up to £40,000 per offence without going to court. Most councils now prefer this route because it is faster, keeps the fine revenue locally (criminal fines go to the government), and avoids the burden of criminal court proceedings.

The £40,000 cap applies per offence, not per property. If the council identifies multiple breaches — say, operating without a licence and breaching management regulations — each offence can attract its own penalty. A landlord running two unlicensed HMOs faces two separate penalties.

How Councils Calculate the Penalty Amount

The Housing Act 2004 requires councils to follow the MHCLG statutory guidance when setting CPN amounts. The calculation typically weighs:

• Severity of the offence — how long the property has been unlicensed, whether tenants were at risk
• Culpability — whether the landlord knew a licence was needed, whether they were previously warned
• Track record — previous licensing offences, history of complaints, prior civil penalties
• Financial benefit — how much the landlord gained by avoiding the licence fee and compliance costs
• Deterrent effect — the penalty should remove any financial incentive for non-compliance

A first-time landlord who genuinely did not know about the licensing requirement and applies immediately on discovery might receive a penalty at the lower end. A landlord who was warned by the council, ignored the warning, and continued collecting rent faces a penalty closer to the £40,000 maximum.

Birmingham City Council, for example, publishes its own civil penalty policy. The exact amount depends on the case and the council's current policy; the statutory cap is £40,000 per offence.

Rent Repayment Orders — the Tenant Route

On top of council enforcement, tenants in an unlicensed HMO can apply to the First-tier Tribunal for a rent repayment order (RRO). For offences committed on or after 1 May 2026, the tribunal can order repayment of up to 24 months' rent. Offences committed before that date remain subject to the previous 12-month limit.

The tribunal considers similar factors — severity, landlord's conduct, financial circumstances — but the money goes directly to the tenants. For an offence in the expanded regime, a property with five tenants each paying £600 per month could face an RRO claim of up to £72,000 (five tenants × 24 months × £600), though tribunals rarely award the full amount.

Councils can also apply for RROs on behalf of tenants who received housing benefit or Universal Credit housing costs. See our full guide to rent repayment orders for HMOs for the process and timeline.

You Cannot Serve Valid Notices While Unlicensed

Section 75 of the Housing Act 2004 restricts a landlord of an unlicensed HMO from recovering possession. Section 21 was abolished on 1 May 2026 under the Renters' Rights Act 2025, so landlords must rely on the current statutory grounds for possession; licensing non-compliance can also prevent a possession claim.

If you need to end a tenancy and your property turns out to require a licence you do not hold, apply for the licence first. Courts have struck out possession claims where the landlord could not demonstrate a valid licence or a duly-made application.

Temporary Exemption Notices

If you discover your property needs a licence and you intend to stop operating it as an HMO — perhaps by reducing occupancy below five people or selling — you can apply for a Temporary Exemption Notice (TEN) under Section 62. A TEN exempts the property from the licensing requirement for three months, extendable once to six months in exceptional circumstances.

A TEN is not a delay tactic. The council expects you to demonstrate a genuine plan to reduce occupancy or cease letting. If the TEN expires and the property still qualifies as a licensable HMO, you are immediately liable for operating without a licence.

How to Fix It

If you suspect your property needs a licence, the safest course is to apply immediately. Once your application is "duly made" — meaning the council has accepted it as complete with all required documents and fees — you are protected from prosecution under Section 72(4)(b) while the council processes it.

The key word is "duly made." Submitting an incomplete application or paying the fee without uploading the required safety certificates does not trigger this protection. You need a current gas safety certificate, EICR, EPC, fire risk assessment, floor plans, and proof of title — all uploaded and accepted by the council.

Our HMO Licensing Guide for England walks through every step of the application, the documents you need, and the fee structure for major councils, so you can get the application duly made as quickly as possible.

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