The Ministry of Housing, Communities & Local Government (MHCLG) has issued a short note on what the Gaskin case means for local authorities. The full details of the Gaskincase can be read here.
Summary of case
The High Court held that the local authority’s fee for HMO licence renewals was unlawful under the Provision of Services Regulations 2009 because it covered not just the cost of the licence application but also the cost of running and enforcing the entire HMO scheme.
The note issued by MHCLG states that HMO fees for the private rental sector must be proportionate for the area to which they apply and should be applied in 2 parts:
- Part one to cover the costs of administering the application process;
- Part two, only if the licence is issued, to cover the costs of running the HMO scheme itself.
MHCLG acknowledges that post Gaskin, it is unlawful for a local authority to take a full HMO or selective licensing fee upfront and then refund the second part of the fee where the application is unsuccessful.
Accordingly, MHCLG recommends that each local authority seeks their own independent legal advice but also shares (and presumably endorses) the procedure adopted by Liverpool and Brent councils following the Gaskincase.
Brent charges the same fee, but it is now charged in 2 parts. The first, on application and the second on the award of the licence. Brent was due to undertake a review of this new scheme in December, but we do not have the results of the review at the time of writing.
Applicants in Liverpool pay 1 fee split into 2 payments. Payment 1 is paid on application and payment 2 within 14 days of the application being granted.
The primary problem with the MHCLG note and the 2-stage payment is that in the Gaskincase the High Court only addressed the manner in which the local authority charged the HMO licence fee. The Court did not address the question of a 2-stage payment and so the legality of this process is uncertain.
Furthermore, what we understand to be the current situation is that some local authorities are only charging for the HMO licence application process and not charging for the operational costs which are paid from general local taxation. A second alternative appears to be to not charge for the application and only to seek a fee when the licence is in fact granted. Finally, there is, of course, the option to charge in 2 phases as referred to in the MHCLG note.
If an authority takes the second or third option, the difficulty is how to enforce the payment of the whole sum once the licence is granted or the second payment in the two-stage alternative. We do not know what local authorities will do if payment is not made but as soon as we hear of any progress we will update this post.