Letting Room by Room (Student HMOs)
The ideal situation for student lettings is to let properties to groups on joint and several tenancies. However, with evolving market conditions, an increasing number of student Houses in Multiple Occupation (HMOs) are being let room by room. This guide outlines key considerations if you are contemplating letting your student HMO on a room-by-room basis.
Purpose of Room-by-Room Letting
- This approach is typically adopted as a strategic fallback when a full student group has not been secured for the property.
- The primary objective is to minimise potential void periods and associated income loss, rather than to significantly increase rental income.
- It's crucial to recognise that once additional operational and administrative costs are factored in, the net income generated from a room-by-room let may be similar to, or even lower than, that achieved through a standard group tenancy.
Student-Only Letting and Possession Strategy
- If the property is let exclusively to full-time students, landlords and agents can effectively utilise Ground 4A of Schedule 2 to the Housing Act 1988 to regain possession in alignment with the academic cycle. This is paramount for ensuring the property can be efficiently prepared and re-let to a new student group each year.
- The presence of even one non-student occupant removes the availability of Ground 4A for that tenant. This means landlords would lose the critical ability to guarantee possession in line with student letting timelines, introducing a significant and undesirable risk to future academic year lettings.
Renters’ Reform Act Considerations (Effective May 2026)
- Impact on Tenancy Structures: From May 2026, all new and existing tenancies will convert to periodic tenancies. This grants tenants the ability to provide two months' notice to vacate at any point.
- Increased Vacancy Risk: This change significantly increases the likelihood of staggered vacancies in a room-by-room setup, making consistent occupancy more challenging.
- Loss of Section 21 and Possession Grounds: Combined with the abolition of Section 21 'no-fault' evictions, careful and precise management of statutory possession grounds becomes absolutely essential.
- Maintaining Control: Retaining a fully student household status is one of the few avenues available to landlords to maintain a degree of control over tenancy timing and re-letting cycles.
Council Tax Implications
- Student Exemption: Where all occupiers are certified full-time students, the property will typically be exempt from council tax.
- Loss of Exemption: If a non-student occupies any room within the property, the council tax exemption is immediately lost for the entire property.
- Landlord Liability: In a room-by-room arrangement where the exemption is lost, the liability for council tax payments would typically fall to the landlord. This means landlords are responsible for either paying the council tax or providing compelling evidence for an exemption.
- Local Council Strictness: Some local councils are exceptionally rigorous in their application of student council tax exemptions. They may levy charges for periods even after students' courses have officially ended. It will be the landlord's responsibility to manage and pay these charges, and they may be unable to legally pass on such unexpected costs to the tenants.
Utilities and Room Lets
Rent for properties let room by room must include utilities payable by the landlord. Whilst we include fair usage policies in our tenancies, these are not easy to enforce so landlords must accept the risk of potentially high utilities usage.Our Recommendation
- Full-Time Student Occupancy is Key: If you wish to keep your property let to students on an academic year cycle, you decide to proceed with room-by-room letting, we strongly advocate for restricting occupancy solely to full-time students.
- Dual Protection: This critical approach protects both the property's council tax exempt status and the landlord's ability to regain possession efficiently using Ground 4A at the end of an academic year.