High court

New HMO licensing rules loom – but could landlords contest the costs?

From October, new legislation will come in for landlords with houses in multiple occupation (HMOs), but a recent High Court ruling could see councils challenged over their licensing fees.

A landlord in London has succeeded in challenging the London Borough of Richmond on Thames council after proving that, under an EU Directive, the council was only entitled to charge him for the cost of processing his application, not the cost of running and enforcing the HMO licensing scheme.

Originally, the landlord had refused to pay the amount demanded of him by the local authority to obtain a licence to operate his HMO, as he believed the cost was unfair, and offered a lower amount instead to cover the processing costs. When this was rejected, the landlord was taken to the Magistrate’s Court charged with running an HMO without a licence.

Victory for the landlord?

However, under EU Directive 2006/123/EC, if someone is charged for access to a service activity, such as it was ruled was the case for the landlord’s licence to run the HMO, the charge must not exceed the cost of the authorisation procedure. When the case was then heard in the High Court, it was decided that the charge quoted to the landlord was in fact unlawful.

As 1 October looms, which will see more landlords need to apply for HMO licences as the minimum three-storey property height will no longer apply (alongside the changes being made to minimum room sizes and waste disposal requirements), local authorities will need to be prepared – and this latest ruling could change the way and the amount they are allowed to charge landlords.

Giles Peaker of Nearly Legal believes there will be an appeal by the council in this case, as the fees have been planned and set based on the cost of enforcement as well as the processing of the licences themselves.

“This is not to say that an appeal will be successful, just that it is inevitable,” he added.

HMO owners must comply with rules

Andrew Turner, chief executive at buy-to-let mortgage broker Commercial Trust, also commented: “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.”

However, all landlords are encouraged to take up their cases individually with their local authority if they believe they have been overcharged, as any refusal to pay will result in penalties. Across the country we are seeing increasing numbers of councils begin to implement selective licensing schemes as well as the compulsory ones which will come into play from October, so all landlords need to be aware of their licensing responsibilities.

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