HMO Enforcement Is Tightening: The 2026 Guide for London Landlords
For most of the last decade, HMO enforcement in London was a patchwork: real in some boroughs, theoretical in others, and easy to treat as someone else's problem. That era is ending. Two legal developments — one court ruling, one quiet rule change — have combined with new penalty powers to produce the most enforcement-friendly environment the private rented sector has seen. Here's what changed, what it looks like on the ground, and what a well-run portfolio should do about it.
Signal one: the courts closed a favourite loophole
In January 2025 the Court of Appeal decided Nottingham City Council v Housing 35 Plus Ltd — and quietly ended one of the most widely-used routes around HMO licensing. The case concerned the co-operative society exemption (Schedule 14 of the Housing Act 2004), under which properties managed by certain member-run societies fell outside licensing altogether. Structures built on this exemption had spread well beyond Nottingham.
The Court held the exemption applies only where all management decisions are genuinely taken by members in general meeting — not where a co-operative wrapper sits over what is, in substance, a managed letting business. In Nottingham alone, around 70 properties and 500 bed spaces required licensing overnight. The wider message for London landlords is blunter than the ratio: schemes that exist to engineer around licensing are being read for substance, not form, and councils now have appellate authority behind them when they do it.
Signal two: licensing expansion lost its brake
In December 2024, the Government issued a new General Approval removing the requirement for Secretary of State sign-off on additional and selective licensing schemes covering more than 20% of a borough's area or rental stock. Councils still must consult for ten weeks and meet the statutory tests — but the central-government brake is gone.
London's response was immediate and is still unfolding: Camden renewed borough-wide additional licensing in December 2025, Islington went borough-wide in February 2026, Hackney switched on borough-wide additional plus 17-ward selective licensing in May 2026, with Croydon following in September — on top of the schemes already running in Waltham Forest, Barnet, Brent and most of the rest of the capital. Licensing is no longer a designation a borough might have; it is the default operating environment, with fees from around £900 to £2,000+ per property (Lambeth charges £550 per room).
What enforcement actually costs now
The penalty framework has hardened alongside:
Civil penalties of up to £40,000 per offence for serious private-rented-sector breaches came into force on 27 December 2025 under the Renters' Rights Act — raised from the previous £30,000 ceiling, and issuable by the council without a court.
Rent repayment orders allow tenants (or the council, where rent was met by benefits) to claw back up to 12 months' rent from the landlord of an unlicensed HMO.
An unlicensed HMO is a criminal offence with unlimited fines on prosecution, and convictions feed the fit-and-proper-person test — jeopardising every other licence you hold.
On the planning side, operating an HMO in breach in an Article 4 borough invites an enforcement notice; non-compliance with a notice is itself an offence. And since the Levelling-up and Regeneration Act took effect in April 2024, new breaches need ten years — not four — to become immune, while deliberate concealment can defeat immunity altogether.
From May 2026, the Renters' Rights Act's first phase adds a further layer: with Section 21 gone, possession runs through Section 8 grounds — and a landlord's regulatory compliance is increasingly the terrain on which those disputes are fought. The Act's coming PRS database will make non-compliance visible in a way it has never been.
Why this matters even if you run a good HMO
Because the enforcement environment doesn't only catch rogue operators — it catches compliant-in-substance, undocumented-on-paper landlords. The most common London cases we see are not slum housing; they are:
The lawful-but-unevidenced HMO. A C4 use that genuinely predates the borough's Article 4 direction — but with nothing to prove it when the enforcement query lands. With 22 of 33 boroughs now operating directions (five designated since early 2025 — see our verified borough map), this is London's biggest silent exposure. The fix is a Lawful Development Certificate (Existing Use) while the evidence still exists.
The licensing-scheme straggler. A perfectly decent 3–4 person shared house that needed no licence last year and needs one today, because the borough's additional scheme went live. Hackney's May 2026 schemes alone brought most of that borough's shared houses into scope. Check the current position in every borough you hold — our Camden, Islington and Hackney guides cover the newest schemes.
The over-occupied C4. Six sharers becomes seven, and a permitted-development use quietly becomes a sui generis HMO requiring planning permission in every borough. Enforcement officers count beds.
The clever structure. Rent-to-rent arrangements, company lets and co-operative wrappers that promise to make licensing or planning disappear. After Nottingham, assume substance beats form.
The compliance audit we recommend
For each property: confirm the planning position (Article 4 status at the property, what the lawful use actually is, whether it's evidenced) → confirm the licensing position (mandatory, additional or selective scheme; current scheme dates and conditions) → close the gaps (LDC (Existing) for established uses; LDC (Proposed) before new conversions; licence applications before, not after, the council writes) → and keep the evidence file live: tenancies, council tax, licensing correspondence, dated photographs.
An afternoon of audit costs a few hundred pounds of professional time. The downside case — a £40,000 civil penalty, a 12-month rent repayment order and an unsellable asset — does not.
The honest read
Tighter enforcement is not bad news for professional landlords; it is a moat. Every rule that raises the cost of casual operation raises the value of compliant stock — certificated planning status, clean licences, documented management. That is exactly the gap between London's exiting amateur landlords and the incorporated investors replacing them (the data is in our research article). The operators who treat 2026's enforcement environment as a checklist rather than a threat will buy well from those who didn't.
Bashkal runs planning-and-licensing compliance audits across London portfolios — Article 4 position, lawful use evidence, certificates and regularisation where needed. If any property in your portfolio would struggle to prove its status tomorrow, contact us this week rather than after the council writes.
Verified 5 June 2026: Nottingham City Council v Housing 35 Plus Ltd (Court of Appeal, January 2025); the Selective Licensing General Approval (December 2024); Renters' Rights Act 2025 penalty provisions (in force 27 December 2025) and Phase 1 (1 May 2026); LURA 2023 enforcement time limits (from 25 April 2024); borough scheme dates per council sources. This is general information, not advice on a specific case — enforcement positions turn on individual facts.
