Legal ruling on HMO licensing requirements in England

An HMO landlord in Richmond upon Thames has recently won a case against his local council that could have a big impact on the industry – specifically on how much councils charge for licences.

The landlord, a Mr Gaskin, had applied to the local authority for renewal of his HMO licence. He felt they were asking for an excessive amount of information on the application form and charging too much, so he returned it to them with what he felt was reasonable, based on the current legal regulations, which had been amended and simplified in 2012.

The council decided Mr Gaskin’s application had not been properly completed on two main accounts:

1. He had not provided the names of the current tenants or details of the terms of their tenancy agreements

2. He had not paid the correct fee: of the £1,799 charge, he had only paid £850.

As such, they refused to licence the property and prosecuted Mr Gaskin.

The court decided there was no legal requirement for the tenants’ information to be supplied but the matter of the licence fee was slightly more complex.

Licensing of a business that provides a service

The EU’s Provision of Services Directive (which appears in UK law under the Provision of Services Regulations 2009), states that the fee for a licence application can only include the cost of the application process itself – it cannot include the cost of enforcing and managing regulation.  That’s to limit the cost of remaining compliant to business that provide a service.

Mr Gaskin argued that, as he was providing the regulated service of letting and managing houses, the fee of £1,799 was excessive and the Court agreed. They decided the £850 he had paid was sufficient and that he should not have been prosecuted.

With mandatory HMO licensing due to be extended as of 1^st October, this ruling could hardly have come at a worse time for councils already in the throws of preparing and budgeting for the planned changes.

Potential implications of the ruling

The ruling is potentially significant for licensing schemes so it is likely it will be appealed, however it may lead to some changes, for example:-

1. Local authorities will need to check and potentially modify their renewal application forms, making sure they’re only asking for the information set out in the regulations as revised in 2012, nothing else. That’s in the Licensing and Management of Houses in Multiple Occupation and Other Houses (Miscellaneous Provisions) (Amendment) (England) Regulations 2012.

2. Secondly, it’s possible there will be some scrutiny of the charges made by local authorities, as HMO licence application fees currently can include an amount relating to enforcement and management activity.

In other areas of business where the Directive applies, local authorities have made two separate charges to businesses: a fee for the licence application, then a further fee payable on approval. However, while the Housing Act 2004 states that the council can require licence applications to be accompanied by a fee, there’s nothing that says they could then legitimately charge another fee on top.

As most property licensing schemes are funded entirely, or at least in part by licensing fees, if it’s decided that councils can no longer make any charge to landlords for the cost of running them, that could leave them simply not financially viable.

If it looks as though there is to be an overhaul of fees, it is possible the planned extension of HMO licensing could be postponed, to give councils time to make the necessary adjustments.

Whatever happens with this case, it is worth keeping in touch with your local authority or managing to see if any changes are going to be made to existing or newly introduced licensing schemes.