Penalties for Operating, or Selling, a Residential, Unlicensed HMO Property

The 2004 Housing Act was introduced in response to public outrage over the treatment of tenants living in shared accommodation properties by unscrupulous landlords. The Act introduced mandatory HMO certification for all residential properties with more than 4 rentable bedrooms, a Local Authority status of multiple tenancy, and where the tenants were from at least two separate households. However, it appears that a well-known property developer, with a top 500 law firm acting as their corporate lawyer, launched a business model in 2005 that involved

the sale of hundreds of unlicensed HMO properties. This business model included the use of fraudulent valuations and vendor-gifted deposits, and the properties were sold for use as shared accommodation for student tenants without mandatory HMO certification. It is illegal for a landlord to manage or sell an unlicensed HMO. The lender who was aware of these activities and did not take any action, but instead accepted an arbitrary out-of-court settlement, would be guilty of professional negligence, and the sale of these properties, would have been a criminal offence.

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