HMO fees’

In Gaskin v LB Richmond Upon Thames the High Court held that the private letting of accommodation amounted to a service within the meaning of the Services Directive making the Council’s fee for an HMO license unlawful in part.

Background

Mr Gaskin rented out a number of rooms in a number of properties. One particular property in Richmond Upon Thames was an HMO property within the meaning of the Housing Act 2004. Mr Gaskin applied for the requisite HMO licenses in order to rent out the rooms in the property located within Richmond.

When Mr Gaskin came around to renewing these HMO licenses Richmond council requested a fee. This fee not only covered the license itself but also the council’s costs of running the HMO scheme within its borough. Mr Gaskin refused to pay the fee and in response the Council refused to issue an HMO license and commenced proceedings to prosecute Mr Gaskin for operating an HMO without a license.

Judicial Review

Mr Gaskin commenced judicial review (JR) proceedings of the council’s decision to refuse to issue him with an HMO license. The High Court granted permission for the JR and stayed the criminal proceedings pending the outcome of these proceedings. The single issue for the High Court to consider was ‘in refusing to process the application without the fee demanded from Mr Gaskin, did the council act contrary to the Service Directive?’

The Services Directive has been implemented within English Law by the provision of the Services Regulations 2009 (SI 2009 No 2999). A ‘service’ is defined in the Directive as “any self-employed economic activity normally provided for remuneration.” It is also important to note that the Directive also states, “any charges provided for by a competent authority which applicants may incur under an authorisation scheme must be reasonable and proportionate to the cost of the procedures and formalities under the scheme and must not exceed the cost of those procedures and formalities.”

There were 2 prongs to Mr Gaskin’s argument:

  • that as a landlord he was providing a ‘service’ within the meaning of the Directive; and
  • that the charge for the HMO license in part breached the Directive because it was for not only the cost of the license itself but also administrative costs the council incur for running the HMO licensing scheme. It was argued that these administrative costs were not ‘reasonable and proportionate to the cost of the procedure and formalities’of the HMO licensing scheme.

Decision

The High Court held that:

  • by letting and managing private residential accommodation for profit, Mr Gaskin is providing “a service” for the purposes of the Directive. Mr Gaskin did not use agents and in fact managed the HMO property himself. His management included undertaking tasks such as negotiating insurance terms and conditions to carrying out maintenance work. This all amounted to a service which constitutes “self-employed economic activity…provided for remuneration.”
  • by concluding that Mr Gaskin was providing a service counsel for the council had no choice but to concede that they had no right to demand that he should pay the fee which was demanded. This fee infringed the Directive because it was not limited to the costs of the procedures and formalities of the HMO scheme under the Housing Act 2004. Essentially the council could only charge an application fee which reflected the cost of processing the application itself and not one which included the costs of running the entire HMO scheme.

Comment

We are not aware of any appeal at the time of writing, but this case has no doubt raised alarm bells with many local authorities across England and Wales. Given that this is a High Court decision it will be binding on lower courts and as such council’s should be acting to amend their fee structures so that they do not infringe the Directive. However, in light of this case landlords and agents who have concerns over the HMO fees charged by councils should seek advice.

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