Family Subletting to unrelated couple?

It appears that the house is now a large HMO https://www.gov.uk/house-in-multiple-occupation-licence and so should be licensed.

I recommend you get formal legal advice. Now you are on notice the Council may come after you for allowing it. I would not notify the Council without taking advice.

If the house is the new guests permanent place of residence, then it is a HMO, however if they are only bunking there temporarily then it isn't necessarily a HMO. Assuming your tenancy agreement does not allow subletting then notify your tenants that they are in breach of the Tenancy Agreement. Providing the Tenancy Agreement does come to an end in December (it's only two months away) and all tenants vacate, there is little to worry about in the current climate of "no evictions". However, it will be worth notifying the tenants that their tenancy won't be extended and issue the appropriate eviction notices for breach of the Tenancy Agreement. Do not accept any payment from the tenant's guests.

Many lenders require the property to be let to a single family or define permitted occupiers. If you have a mortgage check its terms as your tenant could put you in breach of your mortgage. Similar mortgage conditions should also be reflected in your tenancy agreement to protect you and the lender.

Have a read through this it may answer many of your questions.
https://www.property118.com/subletting-can-lead-to-unlicensed-hmo/

However, you might find that you do not need to worry too much as the couple may be related to the other 3 family members in some way, you will have to find that out and authenticate their relationship, if it can be reasonably proved that they are related in some way then it cannot be an HMO, and you need to not worry , but I am a bit baffled as to why you had to give individual ASTs to 5 members of the same family, as oppose to giving one AST to the head of the family.

Hello Arjun
It sounds very much as though your tenants have created an HMO for which you as the landlord are criminally liable because it is not licensed.

Failure to licence an HMO is unfortunately a criminal offence, although councils have the option to fine you (landlord) instead. We frequently see landlords fined from £4,000 to over £12,000 for failure to licence.

A property legally becomes an HMO when there are THREE or more persons where ONE or more is not related. See here https://www.landlordsdefence.co.uk/is-my-rental-property-an-unwitting-or-accidental-hmo/

The moment your property becomes legally an HMO (usually by a tenant moving a non-related friend in) you are legally required to comply with all of the Management of Houses in Multiple Occupation (England) Regulations 2006. This includes a number of factors particularly relating to fire alarms and fire doors where your property is very unlikely to be compliant. The council finds that fining landlords is a great source of revenue. If they discover you have an unlicensed HMO then you can expect them to inspect the property without telling you and then summarily issue civil penalty fines.

I'm sorry to say it sounds as though your tenants have got you into a lot of criminal trouble and I can only recommend you seek professional help as soon as possible.

Do feel free to get in touch if you would like our firm to assist you.

Arjun,
You need to commence Possession proceedings ( to protect yourself )

Your tenants cannot force you to become an HMO landlord, there is an easier way out, just boot them out! In any case in some areas under the Article 4 directive an HMO may not be permitted. He should just start eviction proceedings, by serving the 6 months Notice now required, so for the next 6 months he is not officially running an HMO as he serves them a notice to quit. Sure he is not going to spend a fortune on changing his bedroom doors to 30min fire doors and install a linked smoke detectors along with a heat detector in the kitchen, equip self closing kitchen fire door and a fire extinguisher, etc etc. Just boot everyone out unless they are related.

Reply to the comment left by Mike at 09/10/2020 - 13:14
I don't think Arjun gave 5 AST's to family members, I read it that he has one Tenancy Agreement contract (AST) to which all family members are signatories. Which is sensible if they are all adults as it makes them all equally liable.

I agree with you that he should just start eviction proceedings and ensure the tenants and their guests move out in December.

Thanks Smartermind, indeed that may be the case, they may all have signed as 5 signatories.

He only needs to write them a warning letter served by recorded delivery letter that they are not allowed to sublet or take on but one single lodger, as otherwise they would be breaching the tenancy terms and if they do not take immediate action to rectify the issue then he will be forced to serve them all a notice to quit.

Reply to the comment left by Mike at 09/10/2020 - 17:13
I cant see these tenants taking much notice of a warning letter. The reality is that there is little a landlord can do in this situation other than go through a very long eviction procedure. A Notice to Quit wouldnt be of any legal effect unless all the original tenants were no longer living there. A section 8 ground 12 notice for breach of contract is probably similarly useless as its discretionary and there's little chance of winning possession with it. S21 is probably the only realistic option at this point and assuming the notice was valid, (a big assumption), its likely to take around 12-18 months to evict.