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Having more than one tenant in a property can offer benefits to a residential landlord in terms of economies of scale, not to mention potentially higher rental income, and the fact that you are unlikely to lose all your tenants at one time.

Conversely, it can involve increased management time and effort and may also introduce an additional level of regulation to comply with; in some cases involving the need to be licensed by the local council.

So what exactly is a HMO? Houses in Multiple Occupancy fall into two categories; those that need to be licensed and those that do not.

Those requiring licensing are properties of more than two storeys shared by five or more tenants who are not members of the same family, forming two or more households and who have common facilities such as a kitchen, bathroom or toilet. This definition would include a house which has been converted entirely into bed-sits or other non-self-contained accommodation. It does not normally include purpose built blocks of flats or buildings which were converted entirely into self-contained flats if the conversion met the standards of the 1991 Building Regulations.

The property must be used as the tenants’ only or main residence and it should be used solely or mainly to house tenants. Properties let to students, nurses and migrant workers will be treated as their only or main residence and the same will apply to properties which are used as domestic refuges.

Either the owner, or his or her managing agent, of any licensable HMO must obtain a license from the local authority. The license lasts for five years and the fee is set by the local authority, rather than nationally.

In general the requirements (many of which apply even if the HMO is not licensable), are that the property must be maintained in a safe condition, including obtaining annual gas safety certificates, ensuring that there are no major hazards and that there are adequate means of escape in the event of fire, as well as adequate smoke detectors and fire extinguishing appliances.

Failure to obtain a license, where necessary, is a criminal offence and carries a fine of up to £20,000 plus costs. Breach of license conditions is also a criminal offence and carries a fine of up to £5,000 plus costs. Local authorities can extend licensing to include properties not defined as above.

Property owners insurance will not necessarily specifically relate to Houses in Multiple Occupancy, but insurance companies will need to know the precise nature of the occupancy as this could affect the premium, or even the type of insurance cover provided. In particular, it may be necessary to consider the form of ‘loss of rent’ cover, to ensure it reflects your needs.

You will also need to ensure that you have adequate insurance to cover loss of or damage to property in the shared parts of the buildings as well as the content of any furnished accommodation you may offer.

It is worth considering that insurance, landlord insurance and in particular rent guarantee insurance could be particularly useful for HMOs, because this covers a landlord’s loss of rent following a tenant’s default for anything up to a year after the tenant has ceased to pay rent (although it is normal to exclude the first month’s rent, because this is usually covered by the deposit). Schemes also normally cover costs associated with eviction proceedings (including professional fees) and other legal costs.

Reviewing your property owners insurance is always a good idea, but this should be done in the light of ensuring that adequate cover exists, at the right (not necessarily the cheapest) cost.

Insuring commercial premises for property owners is a specialised area and you should always ask your insurance advisers what experience they have of dealing in this sector.