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Court Case Legal Precedent For Landlord Challenges To HMO Licensing Cost

A recent court case may have set a legal precedent enabling landlords to challenge the cost of HMO licences set by their local authorities.

The court case of Mr Peter Gaskin v LB Richmond Upon Thames [2018] EWHC 1996 (Admin) has called into question the validity of certain licensing costs. Currently, by law local authorities are able to set the cost of HMO licences at their own discretion. The topic has gained traction recently as new rules for HMO licensing will come into effect from October 1st. It is estimated that a further 177,000 more landlords will need to obtain a licence.

However, in the recent court case it was ruled that licence fees can only cover the cost of the licensing scheme and not other costs such as enforcement. This was due to the fact that the Administrative Court decided that Mr Gaskin, a HMO landlord, was providing a service within the meaning of EU law, by the private letting of accommodation. As Mr Gaskin had met the requirements for providing a service, the court determined that the fee charged by the local authority had to be structured in such a way which complied with EU law.

The property in question is situated in Richmond Upon Thames in London. Under the Housing Act 2004 Mr Gaskin was required to obtain a HMO licence from the London Borough of Richmond before he was permitted to let out rooms in the property. HMO licences need to be renewed every five years and when the time came for Mr Gaskin to renew his he was told by the council that he would need to pay a fee which covered the costs of processing his application but also contributing towards the authority’s costs of running the HMO licensing scheme. Mr Gaskin refused to pay the amount requested, instead offering a lower sum.

The landlord was prosecuted in the Magistrates’ Court for operating an HMO without a licence. However, under EU Directive 2006/123/EC (“the Services Directive), there is a provision in its article 13(2), that where a charge is imposed for someone to apply to have access to a service activity, the charge is not permitted to exceed the cost of the authorisation procedures. The Administrative Court handed down judgment on July 31st, 2018, and stated that Mr Gaskin was providing a service within the meaning of EU law. Which therefore deemed that the London Borough of Richmond Upon Thames’s fee for an HMO licence was unlawful as the charge covered costs beyond the cost of processing the licence application. The council was therefore not entitled to demand the fee which it had demanded.

Chief executive at Commercial Trust Limited, Andrew Turner, said: ‘This is an interesting case which may set a precedent for some landlords and could have the potential to save HMO landlords hundreds of pounds, if some local authorities have been charging more than they were legally entitled to, for HMO licences. This is a matter of law and I would urge any HMO landlords that believe they may have been overcharged, to seek professional legal advice.’

Source: Residential Landlord

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What does the future look like for HMOs?

On top of the punishing stamp duty and section 24 changes of 2017, HMO landlords are now being clobbered with a national extension of HMO licensing, navigating a proposal to introduce three-year tenancy agreement. Is the future bright? Is the future still HMO?

Proposed three year tenancies

 Cities up and down the country have bid their student cohorts farewell for the summer and left (some) landlords picking up the rubbish or the one-year-only appliances slapped with the post-it note “works fine but we don’t want it!” – another toaster is added to the tip collection.

And it’s a busy time for student landlords to say the least. I recently drove down the street in Sheffield where we own several HMO’s and it looked apocalyptic! The strewn rubbish of hastily vacated digs of now ex-occupiers heading off to Ibiza, festivals and a break from university.But new government proposals aim to force landlords to offer tenants a minimum three years contract – with tenants able to leave earlier (break clause) should they wish.

The proposal comes at a time when home ownership is at its lowest in 30 years, some 14.3m households (of a total 22.8m) are owner occupied in England (62.9%), according to the English Housing Survey, produced by the Department for Communities and Local Government (DCLG). According to the same report, the private rented sector now accounts for 4.5m households, double the 2.3m in 2004, or 20% of total households as opposed to 10% of total households back in 2004.

While home ownership levels have remained relatively unchanged in the last three years, the private rented sector is a different story, particularly when paired with the latest demographics seeking entry to the current property market.

In 2005-06, 24% of 25-34 year olds were privately renting, that figure is now 46% in 2017. In the same period, 25-34 year olds buying a home with a mortgage dropped from 53% to 35%.

The proposal, which seeks to lengthen the common six-month to 1 year tenancy agreements (currently thought to be around 80% of all contract lengths), looks to give tenants more control, security and longevity in their houses.

Extensions to mandatory HMO licencing scheme – October 2018

 While the UK housing market depends on the private sector investing in houses, it is also bumping up price inflation with knock on economic effects. As a measure, the government has sought to curtail the tax relief that BTL investors have enjoyed, forcing many out of the market and reducing the sector to a sustainable size. But there’s more to come. Long in the cross-hairs of government, the HMO sector has seen particularly heavy regulation with an extension to mandatory licensing requirements, tightening up on the number of storeys loophole as well as new minimum room sizes (see below).

That could be as many as 177,000 HMOs becoming subject to mandatory licensing in England, according Residential Landlords Association research.

From October 2018, the main change to HMO legislation will be the removal of the three storey rule. In the majority of cases, a property occupied by 5 or more individuals forming two or more households will become licensable, irrespective of the number of floors in the property. Landlords will also have to adhere to a new minimum room size standard. Especially for landlords with attic rooms, it’s important to note the ‘size’ will only be considered where there is 1.5m in celling height.

  • Minimum double room size: 10.22sqm
  • Minimum single room size: 6.51sqm

There will also be a mandatory requirement for landlords to adhere to council refuse schemes to ensure that HMO properties have adequate waste management facilities.

Will the three year tenancy proposal affect HMO landlords?

There shouldn’t be a direct effect. The proposal is considering making student accommodation exempt as the sector clearly follows academic turnover and, indeed, the higher education sector relies more heavily on private accommodation than many others – this is already the case in Scotland. There is less clarity around the young professional house share market though.

Of more concern is what it does to other BTL landlords. Those who have not already sold off part of their portfolios to afford mortgage repayments following the newly introduced tax pressures, could now face even greater reluctance from lenders.

David Smith of the Residential Landlords Association responded cautiously to the new proposal: “We would warn against making it a statutory requirement to introduce three year tenancies. Many tenants simply do not want to be tied to a property long term.

“It is vital that the market is able to provide the flexibility that many need in order to swiftly access new work and educational opportunities.” says Smith.

While the proposal allows landlords to increase rent once a year to reflect interest rate changes, it does not however provide a repossession clause. This may make many lenders reluctant to shoulder the added risk (should the landlord default and the property not repossessed for three years) and may lead to even higher interest rates on Buy-To-Let mortgages.

This could mean more BTL landlords dropping out of the market altogether or, more landlords turning to the exempt sectors, such as student accommodation, actually making the HMO market more competitive.

Source: Property118

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Sneinton Landlord Prosecuted For Aggressive Behaviour

A Sneinton rogue landlord has been prosecuted by Nottingham Magistrates Court for acting aggressively towards his tenant.

Landlord Sahfaqat Ali Sadiq threatened to throw his tenant’s belongings onto the street. Nottingham City Council became aware of his behavior following a complaint from a tenant who claimed to have been ‘forcibly removed’ from a house despite paying rent and not causing any damage to the property.

The council discovered that the tenant had not received any paperwork from Sadiq, of Vicarage Avenue, Derby, after paying his deposit and rent in cash. It was also reported that the landlord had let himself into the Sneinton house on a number of occasions in pursuit of money that did not belong to him.

The tenant also claimed that Sadiq had acted aggressively towards him by shouting and threatening to throw his belongings into the street. The landlord then placed kitchen items into bin bags.

Upon inspection, it was discovered that the Sneinton house did not have the correct licensing for a house in multiple occupation (HMO).

Sadiq was found guilty of aggressive practices, failing to protect a tenancy deposit and operating a House of Multiple Occupation (HMO) without a licence at Nottingham Magistrates’ Court on Friday. He was fined £1,750.

Nottingham City Council stated that the three offences fell beneath the Housing Act 2004 and Consumer Protection from Unfair Trading Regulations.

Sadiq denied assaulting one of his tenants. He also stated that he had submitted an application for a HMO licence which he assumed was being processed as he had not heard of its progress.

Portfolio holder for housing and planning, Councillor Jane Urquhart, said: ‘Landlords are required to manage their property in accordance with the law. Failing to secure tenants’ deposits and acting aggressively towards them is not acceptable. This case shows that Nottingham City Council will take robust action through the courts to prosecute rogue landlords.’

Portfolio holder for community protection, Councillor Toby Neal, added: ‘This is a great result for the council, showing the importance of different teams working together and using consumer protection legislation to protect vulnerable tenants.’

Source: Residential Landlord

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New powers to tackle rogue landlords unveiled

Private sector landlords operating in Cheshire East are being warned of tough new penalties to crack down on poor housing standards.

Cheshire East Council has amended its housing enforcement policy to include new powers, which could see the most serious offenders banned from letting properties altogether or entered on to a national database of rogue landlords.

In addition, landlords will have to ensure their properties comply with a minimum energy efficiency standard or face a fine of up to £5,000.

These new powers add to the enforcement options already available to the council, which include civil penalties of up to £30,000 and rent repayment orders for certain housing offences – both of which were added to the policy in August 2017.

Since last year, the council has issued fines totalling almost £25,000 against five landlords, all of whom had failed to apply for a licence for a house in multiple occupation (HMO).

Councillor Ainsley Arnold, Cheshire East Council cabinet member for housing, planning and regeneration, said: “There are many responsible private landlords in Cheshire East, who offer well-managed accommodation that is of a good standard, helping to ensure the welfare of tenants.

“Disappointingly, though, there are a small number who either do not understand their legal responsibilities when providing housing or deliberately ignore their duties.

“This council is committed to challenging poor-quality housing and will proactively work with landlords to improve standards, where they fall short.

“But, where landlords fail to take the necessary action, we will make full use of the enforcement options available to us.”

The updated housing enforcement policy now includes a guide for landlords of HMOs, outlining the amenities, property and management standards expected of them and details a stronger ‘fit and proper person’ test.

It also includes the revised definition of HMOs that require a licence. From 1st October, all HMOs where there are five or more occupants – living in two or more separate households – must be licensed.

Cllr Arnold said: “Operating without a licence is a criminal offence and landlords could face an unlimited fine. That is why we are urging landlords of HMOs, who have not already done so, to apply for one as soon as possible.”

Source: Alderley Edge