PART 1: Can an HMO Licence only be served on a named individual?

Relevant legislation:
Housing Act 2004 Sections 64, 66, 263 - click here
Interpretation Act 1978 Section 6 and schedule 1

Guidance

The most appropriate licence holder Section 64 of the Housing Act 2004 on granting or refusal of licences states:
(2) If the authority are satisfied as to the matters mentioned in subsection
(3), they may grant a licence either- (a) to the applicant, or (b) to some other person, if both he and the applicant agree.
(3) The matters are- (a) that the house is reasonably suitable for occupation ……, and (b) that the proposed licence holder- (i) is a fit and proper person to be the licence holder, and (ii) is, out of all the persons reasonably available to be the licence holder in respect of the house, the most appropriate person to be the licence holder;”

The local housing authority needs to decide who is the most appropriate “person” to hold the licence; that “person” will not necessarily be the applicant. Section 66 helps the authority decide who the most appropriate “person” is:
“(4) For the purposes of section 64(3)(b) the local housing authority must assume, unless the contrary is shown, that the person having control of the house is a more appropriate person to be the licence holder than a person not having control of it.”

“Person having control” is defined in section 263:
“In this Act “person having control”, in relation to premises, means (unless the context otherwise requires) the person who receives the rack-rent of the premises (whether on his own account or as agent or trustee of another person), or who would so receive it if the premises were let at a rack-rent.

As we know, the “person” receiving the rent can be a company or more than one individual. This is because the meaning of “person” in law is wider than the common use of the word. Section 6 of the Interpretation Act 1978, which applies to all Acts of Parliament, states:

 “In any Act, unless the contrary intention appears,
(a) words importing the masculine gender include the feminine;
(b) words importing the feminine gender include the masculine;
(c) words in the singular include the plural and words in the plural include the singular.”

Schedule 1 of the same act says: “Person” includes a body of persons corporate or unincorporate. So the person in control of an HMO can be
• an individual
• more than one person e.g. joint owners
• a limited company
• a partnership, or
• any other organisation or “body of persons”.
Any of these can hold the HMO licence, provided they are the most appropriate person(s) or organisation to do so, considering all those available.

Where the “person in control” is a company

In the case of companies, Communities and Local Government (CLG) have advised (in March 07) that the company should be the licence holder, rather than any named individual working for the company. They say:

 “There is no evidence to support that there was intention to exclude companies from the definition. Ministers did not indicate, during the passage of the Bill, that they wished to exclude companies from holding licences and Parliament has not legislated to that effect. As section 251 specifically makes provisions about offences committed by a corporate body, it seems clear that Parliament did contemplate that a company is a person for the provisions of this Act.”

They go on to say that where the rent is paid to a company:
 “An employee or officer of a company is not entitled to receive the rent “on his own account” nor would such a person, even if he was the rent collector, be acting as an agent or trustee of the company - section 263 (1). It is, therefore, not possible for an individual of a company to be the “person having control” and required to hold the licence, if the company is suitable to hold the licence.”

They say an individual within a company
 “may be sufficiently competent per se to manage the property, as an officer or employee of the company, but that competence is qualified by his/ her lack of independence from the non licensed landlord. Moreover, it is always going to be doubtful as to whether that person could comply with the requirements in subparagraph (c) since it will be the non licensed landlord who will retain ultimate control over the management structure of the HMO, or the finances available to affect that management structure.

It would, therefore, be wholly inappropriate to grant a licence to a person who, in effect, has no independent means of managing the HMO from the company landlord who is he is either a servant or officer of.”

CLG concludes:
“So for these reasons the department’s view is that a local authority should be very slow indeed to grant a licence to an individual officer or employee of a company and should never do so if the company is itself the most appropriate person to hold the licence.”

Please note that it would not be appropriate to issue a licence to an off-shore company. Here it may be appropriate to grant the licence to an employee or agent of the company who is based in the UK and has full control of the company’s affairs in this country.

Where the “person in control” is a partnership
In the case of partnerships, all the partners, or one or more named partner can hold the licence. Where there are a large number of partners the local authority could issue the licence to just those more involved in managing the HMO, subject to the agreement of the applicant and the partners concerned.

Organisations as fit and proper persons
Companies can commit offences, so when deciding whether the proposed licence holder is “fit and proper” to manage the HMO, both the company and its employees need to be considered.

The fit and proper person section of the application form can be filled in and signed by one or more individuals on behalf of the company or organisation, but they should state their position in the organisation. (This should be done by the company secretary, a director, area manager or partner.) Practically speaking this means they sign on behalf of all individuals who may be involved with the HMO, not only those that may visit the HMO or receive the rent, but also their managers, directors, partners and the company secretary, as appropriate. The person who signs the form will be associated with all these people through their work and signs the form on their behalf, stating they are fit and proper.

If an organisation is hesitant about signing this part of the application form you could mention the example of some letting agents in Manchester. They have asked all their relevant employees to obtain a form from Disclosure Scotland or their local police station to show whether they have unspent convictions. However this is not something which local authorities can insist on.

If there is evidence that a relevant offence has been committed, it must be relevant to the management of the HMO for the organisation to be deemed not “fit and proper” to hold the licence.

Licences issued to a person or body who/which is not the applicant
If the authority decides that the applicant is not the most appropriate “person” to hold the licence, they will need to seek agreement from the applicant that the most appropriate person(s) or organisation can be the licence holder. If they will not agree, then the application must be refused. The most appropriate person must then apply, but if they don’t, the authority will need to consider prosecuting them for not licensing the HMO.

Summary
An HMO licence holder does not have to be an individual person. It can be more than one individual or an organisation of any kind. When licensing an HMO the local authority must decide who is/are the most appropriate individual(s) or which is the most appropriate organisation to hold the licence, irrespective of who has applied. In general the “person in control” of the HMO will be the most appropriate licence holder.

Where a company is the “person in control” of the HMO, the licence should be issued to the company rather than an individual employee of the company. Where a partnership is in control of an HMO the licence should be issued to one or more of the partners.

To ascertain whether an organisation is fit and proper, one individual can complete the relevant section on the application form on behalf of the organisation, if they state their position in the organisation, indicating a level of seniority.

Please Note: This article has been prepared in good faith at the time of publication but does not constitute statutory guidance and may be subject to challenge by the Courts or the Residential Property Tribunal or may need to be updated from time to time to reflect decisions by either of those bodies.


PART 2

Section 257 HMOs (Certain Converted Blocks of Flats)

Adrian Turner, Chief Executive of ARLA writes:

The implementation of this section of the Housing Act 2004 was postponed to allow for further consultation and clarification on the intent and interpretation of the legislation and supporting regulations to be set out in Statutory Instruments. The implementation date has now be announced as 1st October 2007 and the Regulations themselves will be set out in two proposed Statutory Instruments which were due to be laid before parliament in mid July 2007. –
• The Houses in Multiple Occupation (Certain Converted Blocks of Flats) (Modification to the Housing Act 2004 and Transitional Provisions) (England) Regulations 2007; and
• The Licensing and Management of Houses in Multiple Occupation (Additional Provisions) (England) Regulations 2007.

The first set of regulations, as the title implies, modifies certain provisions in the Act in relation to their application to section 257 HMOs and makes further transitional provisions in connection with the repeal of Part XI of the Housing Act 1985. The second set of regulations provides a scheme for the management of section 257 HMOs and also makes important modifications to the certain regulations which came into force in April 2006.

As Agreement Magazine goes to print ARLA has not seen the final versions of these SI’s due to go before parliament in mid July (although we have commented on the draft versions as part of the consultation process) and so will provide more detailed explanations on the provisions in the September issue.

I thought it perhaps appropriate however to clarify for ARLA members the purpose and scope of the application of licensing to section 257 HMOs, since there seems to be a degree of misunderstanding in the public domain.

First, licensing of HMOs falling within the definition of section 257 is not mandatory, but is discretionary under section 56 of the Housing Act 2004. This means that if a local housing authority wished to apply licensing to such HMOs it would need to identify problems with the management of the stock, consider how those problems might otherwise be resolved, consult on its proposal and obtain consent from the Secretary of State for any proposed scheme.

Secondly, licensing of section 257 HMOs is a targeted measure to arrest problems in specific circumstances and specific types of blocks. The geographical extent of a scheme will be determined by the extent of the problems identified within the local authority area. Furthermore, a scheme must be limited to the types of HMOs which fall within the definition where the problems identified manifest themselves. It would not, therefore, usually be appropriate for a local housing authority to adopt a licensing scheme (i.e. make a designation) that covered all section 257 HMOs throughout its area.

In particular, a local housing authority must have regard to the aims of the licensing provisions in the Act, which is namely the protection of the welfare of tenants and the community more widely by ensuring HMOs are properly managed. It is not concerned with regulating owner- occupied properties, even if their management is problematic. The correct vehicle for addressing such problems is through leasehold legislation, not licensing.

Thirdly, whilst it is proposed the legislation will come into force on 1st October no licensing schemes can come into force until three months after they have received approval.

Finally, under the transitional provisions local housing authorities who currently operate section 257 registration schemes will be able to continue to do so until October 2008, unless they elect to revoke them earlier. However, after that date if a local authority wishes to adopt an additional licensing scheme for s257 HMOs they must comply with the conditions set out in section 56 of the Act.

PART 3:

Islington Landlord Fined for Operating Unlicensed HMO

An Islington landlord has been found guilty of failing to properly licence his premises following a prosecution brought by Islington Council.

Despite warnings and requests to comply with the Housing Act 2004 from Islington Council’s residential environmental health service, Mr Mehta, the owner of the house in multiple occupation (HMO), still failed to apply for and hold an HMO licence.

On 13 March 2007, Mr Mehta was ordered to pay a £5,000 fine and £818.79 in costs at Highbury Magistrates Court.

PART 4: LACORS

In order to help develop best practice and bring some consistency of actions and interpretations to Local Authorities around the country a panel of experts has been created by the Local Authority Coordinators of Regulatory Services to consider some of the issues arising from aspects of the 2004 Housing Act.

In order to help ARLA members better understand and interpret relevant aspects of the Act Adrian Turner, ARLA Chief Executive will regularly be providing summaries of a selection of the guidance given to questions raised in this forum.

What Powers do Councils Have to Control Anti-social Behaviour in Private Rented Housing?

Relevant Legislation
• Mandatory Licensing of HMOs Housing Act 2004 Section 57 (5) Definition of anti-social behaviour Section 67 Licence conditions
• Selective Licensing Housing Act 2004 Section 80 Designation of selective licensing areas
• Special Interim Management Orders Housing Act 2004 Section 103 Special Interim Management Orders
• The Housing (Interim Management Orders) (Prescribed Circumstances) England Order 2006, SI 369

Guidance

Definition Anti-social behaviour is defined in respect of licensing of private sector housing in Housing Act 2004 Section 57(5) as: “Conduct on the part of occupiers of, or visitors to, residential premises-
(a) which causes or is likely to cause a nuisance or annoyance to persons residing, visiting or otherwise engaged in lawful activities in the vicinity of such premises, or
(b) which involves or is likely to involve the use of such premises for illegal purposes.”

Anti-social behaviour can be caused by an occupier or a visitor to the house or HMO. It will affect other people in the property or in the vicinity of the property.

Examples of anti-social behaviour in private rented housing include the tenants:
• doing car repairs on driveway
• selling drugs from the property
• intimidating and harassing nother tenants within the property or those in neighbouring properties.

Conditions on HMO licences

Councils have powers to attach conditions to HMO licences under Housing Act 2004 Section 67:
“(1) A licence may include such conditions as the local housing authority consider appropriate for regulating all or any of the following- (a) the management, use and occupation of the house concerned, and (b) its condition and contents” Conditions relating to anti-social behaviour are specifically mentioned in section 67(2)(b):
“(2) Those conditions may, in particular, include (so far as appropriate in the circumstances)- (b) conditions requiring the taking of reasonable and practicable steps to prevent or reduce anti-social behaviour by persons occupying or visiting the house”

However section 67(5) limits licence conditions imposing restrictions on tenants:
 “A licence may not include conditions imposing restrictions or obligations on a particular person other than the licence holder unless that person has consented to the imposition of the restrictions or obligations.”

So conditions can be imposed on the licencee or manager of the HMO (if they consent), but not on tenants as they are unlikely to consent to conditions relating to anti-social behaviour and the tenants of the HMO may regulatory change.

In addition section 67(6) goes further to disallow conditions which would alter tenancy agreements:

“(6) A licence may not include conditions requiring (or intended to secure) any alteration in the terms of any tenancy or licence under which any person occupies the house.”

CLG advise that landlords can only be required to control what occurs within curtilage of their property, as they do not have the powers of local authorities, which are expected to protect the wider community interests. (Members may recall that this was a key area and successfully argued in the Judicial Review which ARLA supported of the HMO legislation in Northern Ireland)

CLG gave an example in November 2006:

“If a tenant sold or stored drugs in the premises then clearly that constitutes antisocial behaviour for the purpose of the Act, but if he sold drugs on the pavement outside of his house and stored them other than in the house, it would not constitute antisocial behaviour.”

They go on to say:

...a condition cannot, therefore, be imposed unless it relates to the property. A condition purporting to relate to tenant’s behaviour outside of the property would not, in DCLG’s opinion, be valid.”

So conditions can be applied to licences requiring the licencee or manager (if they consent) to deal with anti-social behaviour occurring within the curtilage of the HMO. Conditions cannot be imposed on tenants or require the alteration of a tenancy agreement.

In an area where anti-social behaviour is a problem, the authority should consider the use of a standard condition on all licences, for example:

“The licencee shall respond to complaints of anti-social behaviour (as defined in Housing Act 2004, Section 57(5)) arising from their property and being caused by their tenants or tenants’ visitors. Where appropriate they shall take legal advice and act to either caution or evict the tenants.”

The landlord would be expected to take some or all of the following actions:
• investigate complaints of antisocial behaviour
• interview and verbal warning to tenant
• warning letter
• serve notice seeking possession
• enforce the notice through the court.

Special Interim Management Orders (SIMOs)

A SIMO should be considered where the landlord of any private rented dwelling fails to take action against anti-social behaviour caused by his/her tenant and there is a threat to the health, safety and welfare of the tenants.

A Residential Property Tribunal (RPT) can authorise a SIMO on a private rented dwelling or HMO under Housing Act 2004, Section 103. The effect of such an order is to transfer all management responsibilities and rent collection to the local housing authority for a period of up to one year. A SIMO can be followed by a Final Management Order, if there is no improvement in the situation, this can last for up to five years.

To make a SIMO the RPT must be satisfied that various criteria are fulfilled. There must be a problem with anti-social behaviour and the “the making of the order is necessary for the purpose of protecting the health, safety or welfare of persons occupying, visiting or otherwise engaging in lawful activities in the vicinity of the house” (section 103 (4).

The criteria relating to anti-social behaviour, which have to be fulfilled, are prescribed in SI 369/2006 ”(a)the area in which the house is located is experiencing a significant and persistent problem caused by anti-social behaviour[3]; (b)that problem is attributable, in whole or in part, to the anti-social behaviour of an occupier of the house; (c) the landlord of the house is a private sector landlord; (d) the landlord of the house is failing to take action to combat that problem that it would be appropriate for him to take; and (e) the making of an interim management order, when combined with other measures taken in the area by the local housing authority, or by other persons together with the local housing authority, will lead to a reduction in, or elimination of, that problem.”

Once again a SIMO can only be made where the anti-social behaviour arises within the curtilage of the dwelling.

This is a strong power, which would be useful in rare cases where it is clear that one or more occupiers are causing anti-social behaviour, which is a serious problem in the area, and the landlord is not taking action.

Liaison with police and local authorities

Where the anti-social behaviour is a problem in an area and is arising from private rented housing, landlords should be encouraged to work with the police and local authority and attend case conferences, if appropriate. This could also assist landlords in collecting evidence to take their own action. However landlords cannot be legally required to co-operate with other authorities.

Selective Licensing of Rented Housing

Where landlords are not co-operating with the authorities section 80 of the Act gives Local Housing Authorities (LHAs) the power in certain circumstances to designate part or all of their area for Selective Licensing. This means that all private rented properties have to be licensed. Section 80 (6)(a) describes one of the reasons for making a Selective Licensing designation as where “the area is experiencing a significant and persistent problem caused by antisocial behaviour.”

CLG guidance (November 2006) “Approval Steps for Additional and Selective Licensing Designations in England” states that such a designation is appropriate where:

 “The area is experiencing a significant and persistent problem caused by anti-social behaviour and that some or all private sector landlords in the area are not taking appropriate action to combat the problem that it would be appropriate for them to take; and the making of a designation, when combined with other measures taken by the LHA, or by the LHA in conjunction with others, will lead to a reduction in, or elimination of, the problem.”

To designate an area with a problem of anti-social behaviour for selective licensing, an authority would need to show that:
1. the anti-social behaviour is significant and persistent
2. landlords should be taking more action to combat the problem, and
3. the LHA or other authorities in the area are taking other action to deal with anti-social behaviour.

So to obtain approval from CLG for Selective Licensing, which would result in the licensing of all private rented housing in an area, substantial evidence will be required.

Conclusion

A range of legal powers are available to councils to ensure private landlords deal with anti-social behaviour caused by their tenants or their tenants’ visitors, if the problem is occurring within the curtilage of their property. Where a tenant’s behaviour is anti-social the landlord should issue warnings and where these are not effective, serve a notice seeking possession and where necessary, enforce it through the courts. In the case of licensable HMOs this can be reinforced by attaching a condition to the licence.

If the landlord of any private rented dwelling fails to take action against antisocial behaviour caused by his/her tenant within the dwelling and there is a threat to the health, safety and welfare of the occupiers then an application to the RPT for a SIMO should be considered.

In areas where antisocial behaviour is a serious problem and it is arising from private rented housing, landlords should be encouraged to work with the council and the police to properly address the problem. In the more serious cases, the Local Housing Authority can build up evidence to designate an area for Selective Licensing.

Please Note: This article has been prepared in good faith at the time of publication but does not constitute statutory guidance and may be subject to challenge by the Courts or the Residential Property Tribunal or may need to be updated from time to time to reflect decisions by either of those bodies.