Agent advice creates HMO licensing pickle?

Sorry to say, but you could be in very hot water here, as could the agent, for managing/letting a property with no HMO licence in place.
Even with 3 or 4 “unrelated” persons it’s still HMO if they share facilities, and could still need a licence, which licence depends on your local authority.
Think you need specialist advice regarding what best to do.

Definition of an HMO: “A house in multiple occupation (HMO) is a property rented out by at least 3 people who are not from 1 ‘household’ (for example a family) but share facilities like the bathroom and kitchen.”
Whether or not it needs licensing depends upon which council area you are in.
You could get an unlimited fine for renting out an unlicensed HMO.
As the Landlord, you are ultimately responsible, not your agent.
Which council area are you in?

You would need to ask the Council for a Temporary Exemption Notice from the HMO requirement to allow you to serve a s21 notice and comply with their assessment. If they refuse then you would have to take action against the agent, probably through the redress scheme.

It is a defence / lawful excuse that a licence application had been made and was effective (ie not refused) at the time the person was permitted to occupy. See section 72 of the Housing Act 2004: https://www.legislation.gov.uk/ukpga/2004/34/section/72
Section 21 (of Housing Act 1988) cannot be used during the initial fixed term.
Section 8 ground 9 can be used if the local authority commit to providing suitable alternative accommodation.
The options you need to present to the council are that you can issue a Section 21 notice with an effective date one day after the fixed term for one occupant, or they can make a commitment to provide suitable housing from a certain date for one occupant such that Section 8 ground 9 can be used. As others have suggested, perhaps ask for TEN although these are only good for 90 days and can only be renewed once, so play for time and don’t ask for that until other options are exhausted.

There is also the option of making representations and then appealing to first-tier tribunal what it is that they say you need to alter to make it suitable for 5. Many councils go overboard and tribunals are often sympathetic to a landlord with a well-presented case.

It takes time to get to a tribunal for refusal to issue a licence, maybe 8 months or so, so for the £100 court fee, that is worth doing even if you don’t think you have much chance of winning. The council can’t take enforcement action during that period.

Reply to the comment left by Steve Rose at 13/03/2025 – 12:23
I think the agent can be prosecuted as well as the landlord.
The Housing Act 2004 places responsibility for licensing a property on anyone who meets statutory definition of person having control or person managing.
See article in Landlord Today dated 2.8.24 ‘unlicensed HMO puts landlord and managing agents in court’. 1 landlord and 2 managing agents, all 3 prosecuted.
This agent should be held partly accountable at least if, as the post infers, they were managing the property and they created 5 new ast’s without correct licence in place. They should have known that ‘no licence, no eviction’.

Personally I would spend (borrow if necessary) the £20k required to create the 5-bed HMO legally, and in 3 years the extra rent will have paid for the works and you’ll have a much more profitable HMO forever.
Plus it gets you out of the legal issue very quickly.
Councils are almost always very reasonable – SPEAK to them, not just emails, and get a good relationship going with them. Tell them the situation and they’ll help you.
Don’t have anything to do with Landlord Defence companies – they cost, they obstruct, and they’re unnecessary. Get close to the local Housing Officer and show them you’re doing your best.

Reply to the comment left by Mark Hulbert at 13/03/2025 – 15:53
But be somewhat wary of what you say, and if you can, do record the conversation with the council officer, make detailed notes if you don’t have the ability to record. Ask for the detailed reasons behind each of their requirements. Often the officer doesn’t really know why they are asking for what they expect & that’s useful at Tribunal.

If you have applied for a HMO license, and it’s not been refused. The you can still issue s21 notices to any tenants, although they need to be nearing the end of their fixed term (no more than 6 months away, ideally less). Having an application in progress is the same, as being licensed. Been in breach of a license is completely different to not having a license. If you have no license, the tenants can apply for an RRP and get back upto the last 12 months of rent.

Most councils have no alternative accommodation available anymore, so they are likely to accept that you evict any tenant as soon as possible to bring the number down to 4.

You may wish to complain to the estate agent about them approving a 5th tenancy without your agreement. As in doing so they may have caused you a financial loss by acting too swiftly (probably to get more commission).