## HMO status is not the same as mandatory licensing
The official [HMO licence guidance](https://www.gov.uk/house-in-multiple-occupation-licence) explains the national mandatory licensing baseline. In England, mandatory licensing generally applies to properties occupied by five or more people forming more than one household, where facilities are shared. The wider HMO framework comes from the Housing Act, including [Part 2 of the Housing Act 2004](https://www.legislation.gov.uk/ukpga/2004/34/part/2).
Three unrelated tenants can still make the property an HMO. The question is whether national mandatory licensing, additional licensing, or selective licensing applies in that local authority.
## What investors should check
Before offer, check:
- Number of occupiers and households.
- Whether facilities are shared.
- Local additional licensing schemes.
- Minimum room sizes and amenity standards.
- Fire safety works and management duties.
- Mortgage and insurance acceptance for the actual use.
Licensing cost belongs in the deal model. So do any works needed to meet standards.
## Worked example
A landlord plans to let a three-bed house to three unrelated sharers. That may be an HMO because there is more than one household sharing facilities. It may not need mandatory licensing nationally, but the council may run an additional licensing scheme that captures three or four-person HMOs.
If the licence fee is 900 and required fire works cost 3,500, the investor's cash stack changes by 4,400 before allowing for time and management. That can move the maximum purchase price.
## Better underwriting habit
Do not ask only "is it five people?" Ask "what is the current use, what is the proposed use, and what does this council require?" Save the council link, licence conclusion, and cost allowance in the model before you bid.
## What to save in the model
For this 3 tenant hmo licensing rules check, save the source links, date checked, calculator inputs, base case, downside case, professional question, and final pass or proceed decision in the deal notes. Also save who verified each assumption: broker, solicitor, council, insurer, accountant, or your own viewing notes. The article should not be the evidence itself. It is the checklist that tells you which evidence to collect, where to link it, and which calculator result changed the decision. For live deals, rerun the model whenever one assumption changes. If the answer changes, update the offer price before sharing the pack. Keep rejected assumptions visible too.