What Happens If You're Caught Letting an Unlicensed HMO in 2026

Quick answer Two things changed on 1 May 2026 and most published guidance hasn't caught up. Civil penalty: up to £40,000, raised from £30,000. But only for conduct on or after 1 May 2026. Earlier conduct stays capped at £30,000. Rent repayment orders: up to 24 months' rent, doubled from 12, with the application window doubled from 1 year to 2. And liability now reaches superior landlords and company directors personally. On a £2,000 a month London HMO, the RRO exposure alone went from £24,000 to £48,000.

A council letter lands. It's about a property you've been letting to five sharers for two years. It asks whether the property is licensed.

If the honest answer is no, what follows is worth understanding properly, because the numbers changed this year and they changed a lot.

First: does your property actually need a licence?

Three separate licensing regimes exist, and landlords routinely check only the first.

1. Mandatory HMO licensing

Applies across England to any HMO occupied by five or more people forming more than one household, sharing a toilet, bathroom or kitchen facilities.

The old three-storey requirement was removed by the Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018, in force 1 October 2018. A two-storey house with five sharers needs a licence. A ground-floor flat with five sharers needs a licence.

2. Additional licensing

Under section 56 of the Housing Act 2004, a council can designate an area where smaller HMOs also need a licence. Typically three or four occupants. This is entirely local, and London boroughs use it heavily.

3. Selective licensing

Under Part 3 of the Housing Act 2004, a council can require a licence for ordinary private rented homes that aren't HMOs at all, across a designated area.

This one is expanding. Since 23 December 2024, councils no longer need Secretary of State confirmation for schemes of any size. Expect more designations and larger ones.

The only reliable check Always check the specific council's website for the specific postcode, and check all three regimes. Do not assume that because a property didn't need a licence in 2023 it doesn't need one now. Licences last a maximum of 5 years (section 68(4), Housing Act 2004), so a licence you obtained in 2021 may already have lapsed.

The civil penalty route: up to £40,000

Councils can impose a financial penalty under section 249A of the Housing Act 2004 as an alternative to prosecution. That cap rose from £30,000 to £40,000 on 1 May 2026.

There's an important transitional rule that a lot of coverage has missed.

Regulation 4 of the Financial Penalties (Housing Offences and Breach of Banning Orders) Regulations 2026 puts it plainly: the amendments "do not apply where the conduct amounting to the offence occurred before the coming into force of these Regulations."

Section 249A covers five offences:

• Section 30: failure to comply with an improvement notice
• Section 72: HMO licensing offences
• Section 95: Part 3 (selective) licensing offences
• Section 139(7): failure to comply with an overcrowding notice
• Section 234: breach of the HMO management regulations

The criminal route: unlimited fine

A council can prosecute instead. Section 72(1) and 72(2) of the Housing Act 2004 make it an offence to have control of or manage an unlicensed HMO, punishable on summary conviction by a fine with no stated maximum.

Breaching a licence condition is a separate offence under section 72(3), drafted as a level 5 fine.

A conviction also has knock-on effects: it can support a banning order application and can appear on the rogue landlord database.

Superior landlords are now in scope

This is the change most likely to catch out rent-to-rent arrangements and head-lease structures.

From 1 May 2026, section 105 of the Renters' Rights Act 2025 rewrote section 72. The offence now catches not just the person controlling or managing the HMO, but any person with a superior estate, interest or right in it, whether directly or indirectly.

There are defences at section 72(4A) to (4C). A superior landlord can argue they didn't know the property was an HMO, or that they took all reasonably practicable steps to secure licensing, or some other reasonable excuse.

But note this specifically: a term in the tenancy agreement or licence does not on its own constitute a defence. If your rent-to-rent contract says the operator is responsible for licensing, that clause alone won't protect you.

Rent repayment orders: the number that really changed

An RRO lets a tenant (or the council) reclaim rent already paid. Until 1 May 2026, the cap was 12 months. It's now 24.

What that means in money

Take a five-bed HMO in a London borough let at £2,000 a month in total.

• Old exposure: up to £24,000 in RROs, plus up to £30,000 civil penalty.
• New exposure: up to £48,000 in RROs, plus up to £40,000 civil penalty.

And RROs can be sought by each tenant in respect of the rent they paid, so with individual room lets the arithmetic gets worse, not better.

The apportionment trap for ongoing offences

If your unlicensed period straddles 1 May 2026, the tribunal splits it. Regulation 11 of the commencement regulations provides that the new rules have no effect in relation to the period falling before 1 May 2026 for continuing offences.

So an HMO unlicensed from January 2025 to today is assessed under the old rules up to 30 April 2026 and the new rules from 1 May 2026 onwards. It doesn't get you off. It just means the exposure is calculated in two halves.

Directors: the corporate veil just got thinner

Section 51A of the Housing and Planning Act 2016, inserted from 1 May 2026, provides that where a company landlord commits a qualifying offence with the consent or connivance of a director, manager, secretary or similar officer, that person is treated as having committed the offence too.

Holding property in an SPV no longer insulates the individual behind it.

What to do if you've realised you're unlicensed

• Apply now, today. A duly made application is relevant. Under section 72(4), having an application pending can provide a defence. Every day you wait extends the exposure period.
• Don't wait for the council to write to you. Voluntary disclosure is treated very differently from being caught, and most councils' penalty policies formally reflect that in mitigation.
• Gather your compliance documents first. Gas safety record, EICR, fire risk assessment, fire alarm and emergency lighting certificates, floor plans. An application that stalls for missing paperwork doesn't help you.
• Get the property physically ready. Fire doors, alarm grade, means of escape, room sizes, amenity standards. These vary by borough.
• Take advice before responding to an interview under caution. If the council invites you to one, that's a criminal process. Don't attend it casually.
• Check the other two regimes while you're at it. Plenty of landlords fix the mandatory licensing issue and miss an additional or selective designation covering the same street.

Which certificates does a licensable HMO need?

Licence conditions vary by borough, but this is the common core.

Sources

• Housing Act 2004, s.249A (civil penalty, now £40,000)
• Financial Penalties (Housing Offences and Breach of Banning Orders) Regulations 2026, SI 2026/319 (in force 1 May 2026, with the transitional rule at reg 4)
• Housing Act 2004, s.72 (offence, and the superior landlord provisions inserted from 1 May 2026)
• Renters' Rights Act 2025, s.105
• Housing and Planning Act 2016, s.40, s.41, s.44 and s.51A (rent repayment orders)
• Housing Act 2004, s.68 (5-year maximum licence duration)
• Licensing of HMOs (Prescribed Description) (England) Order 2018 (the 5-person threshold, no storey requirement)