Renters Rights Act 2025: The Complete Guide to HMO and Property Licensing Changes

Summary

The Renters Rights Act 2025 represents the most significant overhaul of the private rented sector in decades. With implementation beginning 1 May 2026, landlords operating HMOs (Houses in Multiple Occupation) and properties requiring selective licensing face sweeping changes to licensing requirements, enforcement powers, and financial penalties.

This comprehensive guide explains exactly what's changing, who's affected, and what you need to do to stay compliant.

What is the Renters Rights Act 2025?

The Renters Rights Act 2025 (formerly the Renters Rights Bill) received Royal Assent on 27 October 2025. It introduces fundamental reforms to tenancy law, property licensing, and enforcement across England's private rented sector.

1. 27 December 2025

   New investigatory powers for local authorities came into effect

2. 1 May 2026

   Main tenancy reforms take effect, including abolition of Section 21 and conversion of all tenancies to periodic

3. Late 2026-2028

   PRS Database and Landlord Ombudsman rollout (Phase 2)

4. 2030 onwards

   Decent Homes Standard and enhanced property standards (Phase 3)

How the Renters Rights Act Changes HMO Licensing

Extended Liability for Superior Landlords

One of the most significant changes affects who can be held liable for unlicensed HMOs. Previously, only the "person having control" or "person managing" could be prosecuted for licensing breaches under the Housing Act 2004.

The new rules (from 1 May 2026): Section 105 of the Renters Rights Act extends liability to:

1. Any person having control of or managing the premises (as before)
2. Any person who is the landlord or licensor in relation to occupants
3. Any superior landlord – this includes freeholders and intermediate landlords in the chain

This means if you own a block of flats and a leaseholder operates an unlicensed HMO in one of the flats, you could now face prosecution or civil penalties even if you don't directly manage the property.

What this means for freeholders:

• You need to monitor whether leaseholders are operating HMOs that require licensing
• When granting consent for subletting or HMO use, remind leaseholders of their licensing obligations
• Document all actions taken to demonstrate "reasonable excuse" if challenged
• Consider what proactive steps to detect unlicensed properties are reasonable

The Upper Tribunal case Kumar v Kolev [2024] UKUT 255 shows that superior landlords can establish a "reasonable excuse" defence if they take appropriate preventive measures, but courts will examine this carefully.

Rent Repayment Orders Now Apply to Superior Landlords

The Act doubles the maximum Rent Repayment Order (RRO) from 12 months to two years' rent. More importantly, tenants can now apply for RROs against:

• The immediate landlord (as before)
• Any superior landlord who committed a licensing offence
• Officers of company landlords

Six new RRO offences added:

1. Failing to comply with improvement notices
2. Failing to comply with prohibition orders
3. Breaching banning orders
4. Failing to comply with overcrowding notices
5. Failing to license a property under selective licensing
6. Breach of management regulations

If you're a superior landlord with unlicensed properties in your building, tenants can claim against you for up to two years of rent – potentially tens of thousands of pounds per property.

Selective Licensing: What's Changing in 2025-2026

Easier Implementation of New Schemes

Since 23 December 2024, councils can implement selective licensing schemes without Secretary of State approval, following just 10 weeks of consultation. This has triggered a wave of new schemes across England.

Typical costs: £800-£1,000+ per property for a 5-year licence

What Properties Need Selective Licensing?

Selective licensing applies to privately rented properties let to single households in designated areas. This typically includes:

• Single-person rentals
• Properties let to couples
• Properties let to families
• Two individuals sharing (not forming separate households)

Exemptions:

• Properties already licensed as HMOs (mandatory or additional)
• Social housing
• Properties managed by registered providers
• Resident landlords (in some schemes)
• Student accommodation in certain circumstances

Each council sets its own designation areas based on evidence of poor housing conditions, anti-social behaviour, or high levels of deprivation. Always check your local council's specific scheme.

Understanding the Three Types of Property Licensing

Increased Penalties and Enforcement Powers

Civil Penalties Increase to £40,000

From 1 May 2026, the maximum civil penalty for housing offences increases from £30,000 to £40,000 for:

• Continued or repeated breaches
• Serious first-time offences

Single breaches can attract penalties up to £7,000.

Common offences attracting penalties:

• Operating an unlicensed HMO or selective licensing property
• Breaching licence conditions
• Failing to provide required information to tenants
• Discrimination in the rental market
• Failing to comply with improvement notices

New Investigatory Powers (From 27 December 2025)

Local councils gained significant new powers to investigate potential licensing breaches:

Powers to enter and inspect:

• Business premises (without warrant)
• Residential premises (with warrant)

Powers to demand:

• Documents and records
• Access to third-party data
• Information from landlords, agents, and tenants

What councils can investigate:

• All provisions of the Renters Rights Act
• Housing Act 2004 offences (HMO licensing, selective licensing, HHSRS)
• Banning orders (Housing and Planning Act 2016)
• Letting agent requirements (Enterprise and Regulatory Reform Act 2013)

Councils must now report annually to the Secretary of State on enforcement activity, creating pressure to demonstrate active enforcement.

How the Renters Rights Act Affects Existing HMO Tenancies

No More Fixed-Term Tenancies from 1 May 2026

All assured shorthold tenancies (ASTs) automatically convert to assured periodic tenancies on 1 May 2026. This includes existing fixed-term agreements.

What happens to your HMO tenancies:

• Fixed terms end – all become periodic (month-to-month or based on rent period)
• Section 21 "no fault" evictions abolished
• Landlords must use grounds under Section 8 for possession
• Tenants can give 2 months' notice to leave (or less if tenancy agreement states shorter)

• Information Sheet by 31 May 2026 (government will publish in March 2026)
• Written Statement of Terms by 31 May 2026 (for verbal agreements)

Failure to provide these documents can result in civil penalties up to £7,000.

Rent Increases Must Follow New Rules

From 1 May 2026, all rent review clauses become void – including RPI, CPI, or percentage increases written into tenancy agreements.

New rent increase procedure:

• Maximum once per year
• Minimum 2 months' notice using Section 13 procedure
• Tenants can challenge increases at First-tier Tribunal within first 6 months
• Tribunal will assess if rent is at "market rate"

Landlords cannot:

• Require more than one month's rent in advance
• Charge "bidding war" premiums
• Discriminate against tenants with children or on benefits

Compliance Checklist for HMO and Licensed Property Landlords

Common Questions About HMO Licensing and the Renters Rights Act

Do I need both HMO licensing and planning permission?

Often yes. Licensing is separate from planning:

• Planning permission: Required to use the property as an HMO (changing from C3 to C4 or Sui Generis)
• HMO licence: Required to rent the property as an HMO legally

Many councils (over 100) have Article 4 directions removing automatic permitted development rights for HMO conversions. Check your local planning authority.

What happens if I'm caught operating without a licence?

Potential consequences:

• Civil penalty up to £40,000 (increased from £30,000)
• Prosecution with unlimited fine
• Rent Repayment Order up to 24 months' rent (doubled from 12 months)
• Cannot use Section 21 to evict (now irrelevant after 1 May 2026)
• Cannot use Section 8 possession grounds in some circumstances
• Damage to reputation and future licence applications

The financial risk is substantial – a typical 5-bed HMO renting for £2,500/month faces potential RRO liability of £60,000, plus civil penalties up to £40,000.

Will councils enforce more aggressively?

Yes, for several reasons:

1. New reporting requirements: Councils must report enforcement activity annually to the Secretary of State
2. Enhanced powers: Easier to investigate, inspect, and access information
3. Higher penalties: Greater deterrent and revenue from enforcement
4. Public pressure: Increased focus on rogue landlords and poor housing standards
5. Superior landlord liability: Freeholders now have incentive to report unlicensed properties

Many councils have already ramped up enforcement. London councils alone have issued over £10 million in fines to rogue landlords in recent years.

Can I challenge a selective licensing designation?

Challenges must be brought by judicial review within three months of the designation being confirmed. Grounds might include:

• Procedural irregularity in consultation
• Insufficient evidence of need
• Scheme covers >20% of private rented sector without Secretary of State approval
• Scheme is irrational or disproportionate

However, since December 2024, councils can designate schemes more easily under the General Approval 2015, making successful challenges harder.

How long do licences last?

• Standard term: 5 years for HMO and selective licences
• Reduced term: 1-2 years if property has previous issues, licence holder has poor track record, or compliance is uncertain

Licence conditions typically require:

• Annual gas safety checks
• Five-yearly electrical inspections
• Adequate fire safety measures
• Provision of waste disposal facilities
• Maintaining accurate tenancy records
• Providing written tenancy agreements
• Responding to repair requests promptly

Breaching licence conditions can result in civil penalties or prosecution.

How Barnab Can Help With Your HMO and Licensing Applications

Navigating the complex landscape of HMO licensing, selective licensing, and Renters Rights Act compliance can be overwhelming. Application requirements vary by council, fees run into thousands of pounds, and rejection rates exceed 60% for unprepared applications.

Barnab simplifies the entire process:

Pre-Application Assessment

• Determine exactly which licences your property needs
• Check for Article 4 directions and planning requirements
• Identify compliance gaps before you apply
• Avoid costly application rejections

Application Preparation

• Generate compliant floor plans and fire safety documentation
• Complete applications accurately for your specific council
• Compile all required supporting documents
• Ensure your property meets room size and facility requirements

Ongoing Compliance Support

• Track licence renewal dates
• Monitor new licensing schemes in your areas
• Stay updated on regulatory changes
• Access expert guidance for hearings and appeals

Cost Savings

• Avoid rejection fees (typically £1,000-£2,000+ per failed application)
• Reduce professional fees
• Prevent penalties for non-compliance
• Save time with streamlined process

Whether you operate a single HMO or manage a large portfolio across multiple councils, Barnab provides the expertise and tools to stay compliant in the evolving regulatory landscape.