## Establish the HMO facts
[GOV.UK HMO guidance](https://www.gov.uk/private-renting/houses-in-multiple-occupation) describes an HMO as a property where at least three tenants form more than one household and share a toilet, bathroom or kitchen. It describes a large HMO as at least five tenants forming more than one household who share facilities.
Large HMOs need a council licence. Start by recording planned occupants, households and shared facilities in the [HMO licence and evidence pre-check](/tools/hmo-licence-evidence-pre-check).
## Check the council scheme
The national threshold is not the whole answer. [Section 56 of the Housing Act 2004](https://www.legislation.gov.uk/ukpga/2004/34/section/56) allows a local housing authority to designate an area for additional HMO licensing when the statutory requirements are met.
Create one evidence row for each answer: HMO definition, mandatory licence, additional scheme, planning, room standards, fire safety and certificates. Name the source and reviewer for every row so a later council update can be traced to the affected assumption.
## Build the evidence file
The pre-check tracks council checks, room standards, facilities, fire safety, planning, certificates and room-rent evidence. The [HMO management regulations](https://www.legislation.gov.uk/uksi/2006/372/contents) set management duties for HMOs in England.
Those regulations cover safety, services and living accommodation. The evidence pre-check keeps those operating items beside the occupancy, household, licensing and planning inputs rather than treating the national licensing threshold as the whole review.
Record each unresolved item as a proof gap. The pre-check states that council schemes and planning rules determine the live property-specific answer. Its evidence fields include council checks, planning, room standards, fire safety and certificates.
## Model the operating effect
Use a controlled property example in the [gross and net yield calculator](/tools/gross-net-yield-calculator): GBP 180,000 price, GBP 18,000 annual rent, 10% management, 5% maintenance, GBP 600 insurance, 5% voids and GBP 600 other annual costs.
The controlled output is GBP 4,800 annual operating costs, GBP 13,200 net rent before borrowing and 7.33% net yield. Add the verified licence and compliance costs as separate lines and rerun the result.
The tool calculates gross yield from annual rent and capital. Its net-yield path deducts voids, management and fixed annual operating costs before dividing net operating income by the same capital base.
## Set the decision state
Keep the deal at Needs Evidence while the council scheme, planning position, required documents or room standards remain unresolved. The pre-check is a screen; the council and property-specific evidence determine the live answer.