APPENDIX 2: DRAFT SELECTIVE LICENSING
OF HOUSES (ADDITIONAL CONDITIONS) (ENGLAND) ORDER 2015
Submission from Mr Constantinos Regas
Background
1. In general terms, the owner of a house in
multiple occupation ("HMO") in England which comprises
three or more residential storeys and which contains five or more
persons who form two or more households is required by statute
to obtain a licence from the local housing authority (Housing
Act 2004, Pt 2 and Licensing of Houses in Multiple Occupation
(Prescribed Descriptions) (England) Order 2006, SI 2006/371).
This is known as "mandatory licensing".
2. The 2004 Act also permits local housing authorities
to designate parts, or the whole, of their local government areas
as areas subject to additional and/or selective licensing. In
general terms, additional licensing applies to HMOs which
are not subject to mandatory licensing (s.56). These small HMOs
comprise 3 or more persons, forming more than one household and
sharing amenities. Households are either single persons or members
of the same family who live together. (By way of example, three
unrelated students sharing a house would therefore be an HMO.)
Poor tenancy management must be demonstrated before a designation
can be made (s.56).
3. Selective licensing applies to privately
rented houses which are not HMOs (i.e. those which are let as
separate, or single, dwellings - ss.79, 99). Despite its name,
selective licensing may be applied to a whole borough's area,
even if Parliamentary intention was for it to be used selectively
to target antisocial behaviour or low housing demand (s.80) in
restricted geographical areas.
4. If an authority does make a designation, the
effect is to require landlords of properties specified in the
designation, and within the area to which it applies, to apply
for and obtain a licence, failure to do which is a criminal offence
attracting a fine of up to £20,000 (Pt 2, ss.56-60 (additional)
and Pt 3, ss.80-84 (selective)). Licences will incorporate licence
conditions relating to the management of the property, failure
to comply with which is also a criminal offence, with a fine of
up to £5,000 (ss.67 and 90). Local housing authorities must
impose some conditions set out in the Act (but they can exercise
discretion and add further conditions).
5. Grant of a licence requires the applicant
to pass a "fit and proper person" test (ss. 64
and 88). The licence therefore has both property conditions and
character conditions (relating to the licence holder). Local housing
authorities have powers to inspect any residential premises in
their district with a view to determining whether and category
1 or 2 hazards exist on those premises (s.4) However, licences
may be granted without any prior property inspection by
the local housing authority.
6. Prior to 30 March 2010, local housing authorities
were required to apply to the Secretary of State for confirmation
of proposed designations for additional or selective licensing.
On that date, the then Housing Minister issued a general approval
(ss. 58 and 82), which allowed local housing authorities to designate
areas within their districts or their entire districts, provided
that they had consulted persons affected by a proposed designation
for a period of not less than 10 weeks. Persons affected were
set out in guidance issues by the Secretary of State, Approval
steps for additional and selective licensing, dated February
2010. The guidance is still extant. A recent judicial review successfully
challenged the lawfulness of designations for both additional
and selective licensing made by the London Borough of Enfield,
covering the whole district of the borough. The High Court held
that the council had failed to consult the persons affected (including
in surrounding areas) and had not consulted for the requisite
time. The designations had been ultra vires and were therefore
quashed.[12]
Draft SI and revision of General approval
7. The 2004 Act allows an order to be made (such
as this proposed instrument) so that local housing authorities
can introduce selective licensing under broader reasons
than antisocial behaviour or low housing demand as set out in
the Act (s.80(2)). No such provision exists for additional
licensing. The General Approval applies to both types of designation.
8. The current Housing Minister (Brandon Lewis
MP) proposes to make an order under s.80(2). In addition, he proposes
to amend his General Approval. These proposals would therefore
only effect legislative changes in respect of selective licensing.
The draft SI would expand the criteria under which local housing
authorities can make selective licensing designations so that
the full set becomes:
i. Low housing demand (existing s.80(3))
ii. Antisocial behaviour (existing s.80(6))
iii. Housing conditions
iv. Migration
v. Deprivation
vi. Crime
9. No impact assessment has been made
available. The Department for Communities and Local Government
(DCLG) states that the impact assessment is currently being considered
by the Regulatory Policy Committee. DCLG does not maintain a central
record of existing or proposed designations. The schemes potentially
have very different conditions and costs.
10. The draft General Approval is not
available. However, a letter from the Housing Minister to all
local council leaders, states that the general approval will apply
unless a proposed scheme exceeds 20% of a local housing authority's
area or 20% of privately rented homes within the authority's area.
If these thresholds are exceeded, confirmation will be required
by the Secretary of State (see attached letter of 11 March 2015).
Discussion - Wider policy considerations
11. Licensing, particularly if it does not involve
any inspection or enforcement, is potentially a poorly targeted
intervention. It is arguable that the requirement for landlords
to sign up means that local housing authorities can target any
efforts at bad (unregistered) landlords. But this is potentially
an expensive registration scheme. At costs of up to £1,000
a year (authorities can determine whether they issue a licence
for one year at a time), this is a significant financial and regulatory
burden. The financial costs are likely to be passed on to tenants.
12. It seems incongruous to make amendments to
the legislative framework which address only selective licensing
and not additional licensing. In particular, if councils designate
areas of their borough under the arguably less stringent grounds
for selective licensing, landlords would have an incentive to
switch their properties from letting to single households to HMO.
This could create a perverse incentive to evict families
to make way for HMO use, since HMOs would potentially be outside
the scope of licensing in a given area.
13. Using their planning powers, local authorities
could make an Article 4 Direction to require change of use applications
from C3 Dwelling House to C4 House in Multiple Occupation.[13]
This would make it more difficult, but not impossible, to make
the switch described above.
14. However, ring-fencing the housing stock by
placing such limitations is risky. It is more likely to result
in inefficient utilisation of housing and perverse behaviours
due to the complex interaction of housing benefit rates, planning
law and housing law.
15. There is no requirement in the existing General
Approval for evidence of poor tenancy management for HMOs to be
directly attributed to properties in the private rented sector.
This could allow local housing authorities to adopt pseudo-scientific
approaches to establishing correlations which are not causal.
For example, if there is increased fly-tipping, this in an area
near a block of flats that is mainly occupied by private tenants,
the fly-tipping may not have been caused by the tenants themselves.
In the Regas case the council asserted "association
by proximity". If a council is then aware of who the perpetrators
are, it may beg the question of why enforcement action is not
being taken against those individuals, rather than burdening a
whole area with regulation.
16. The draft instrument does not explicitly
state the geographical extent of consultation. The judgment in
Regas advocated adoption of the Sedley principles,
which were endorsed in a previous case by the Supreme Court and
described by the Court of Appeal as a "prescription for fairness".[14]
i. Consultation must be at a time when proposals
are still at a formative stage;
ii. The proposer must give sufficient reasons
for any proposal to permit intelligent consideration and response;
iii. Adequate time must be given for consideration
and response; and
iv. The product of consultation must be conscientiously
taken into account in finalising any statutory proposals.
The Committee may wish to consider whether the
Sedley principles should be codified in the draft instrument and,
indeed, whether additional principles should cover geographical
extent (e.g. all wards in the borough and one ward in all directions
around a borough boundary, or more if a designation area is near
a borough boundary).
17. The legislative framework would maintain
the status quo in allowing designations to be made (even
within the same borough) with different sets of licence conditions.
It could be arguable that areas might have specific problems which
a scheme might seek to address. The Committee may wish to consider
whether it would be unfair on tenants (and landlords) to allow
a situation where conditions are a postcode lottery and, if so,
whether there should be a mandatory standard set of conditions.
18. The Committee may wish to consider whether:
i. The "20% test" would potentially
allow local housing authorities to designate too large an area.
ii. The Minister should use his General Approval
to apply the "20%" limits to additional licensing, as
well as to selective licensing, either individually or combined;
iii. The wording of the General Approval (as
surmised from the Minister's letter) should explicitly state that
the 20% is on a cumulative basis, to prevent
local housing authorities from making many designations
at 20% of area or private homes;
iv. The General Approval should specify that
additional licensing designations made on the basis of poor tenancy
management should have to causally and directly
attribute purported symptoms of poor tenancy management to privately
rented properties;
v. The relevant planning law (such as on Article
4 directions) should be considered together with the proposed
draft order; and
vi. The additional conditions proposed in
the draft instrument are ultra vires, given that
the primary legislation intended for selective licensing to target
areas of low housing demand and/or antisocial behaviour. Issues
such as migration (Article 5 of draft SI) were arguably not envisaged
by Parliament in 2004. As currently
drafted, the revised legislative framework would allow licensing
designations on the basis of low demand or high demand (due to
migration).
Discussion - Specific considerations
19. There is currently no provision in the draft
instrument for the Secretary of State to be required to issue
statutory guidance. This leaves the status of occasional
guidance unclear. The Committee may wish to consider whether
the order should include a provision for the Secretary of State
to be required to issue guidance, which a local housing authority
would be required to follow.
20. Article 3 requires that a local housing
authority must consider that "the area contains a high proportion
of properties in the private rented sector, in relation to the
total number of properties in the area". This "high
proportion" is not defined. The Committee may wish to
consider whether a "high proportion" test which is not
specified in legislation and where there is no statutory guidance,
is open to abuse.
21. Article 4 is the first extra condition
under which a local housing authority can make a selective licensing
designation. Article 4(b) states that a "local housing authority
intends to carry out such inspections" to ascertain
whether properties are hazardous (emphasis added). There is a
huge difference between "intends" and "must".
As currently formulated a local authority would have the option
to draw up a plan to inspect (thereby showing intent) and then
abandon that plan. The Committee may wish to consider whether
the new "housing conditions" test is too broad and whether
it would make inappropriate designation powers available to local
authorities.
22. Articles 5 and 6 relate to migration
and deprivation, respectively. Article 5(b) refers to "a
significant number of the properties", whereas Article 6(a)
refers to "a significant number of the occupiers of properties".
The Committee may wish to consider the definition of "significant"
and whether any ambiguity arising, coupled with the lack of statutory
guidance, could potentially lead to abuse of powers by local housing
authorities.
23. In relation to deprivation, Article
6(2) lists a number of factors that, "the local housing authority
may have regard" to. There has been a relatively recent run
of plain English interpretations by the Court of Appeal (particularly
leading judgments by Lewison LJ), including of the word "may",
which was interpreted as permitting, rather than directing an
action.[15] The Committee
may wish to consider whether "may have regard" ought
to be replaced by "must have regard". Furthermore, the
Committee should consider whether the absolute figures should
be considered, or whether these should be evaluated on a relative
scale or compared to other areas, for example.
24. Article 7 relates to crime. "High
levels of crime" are not defined. The Committee may wish
to consider whether the definition of crime levels is ambiguous
and whether this creates scope for abuse of powers.
25. The draft instrument contains no appeal mechanism
and any challenge would again result in judicial review. The
Committee may wish to consider whether the General Approval should
contain provisions that, where designations are made by local
housing authorities under the General Approval, there should be
a standstill period during which objectors may contact the Secretary
of State. Any objections made but not withdrawn would then render
a proposed designation subject to the Secretary of State's confirmation
process. A suggestion is that a competent body (such as the
Planning Inspectorate) could exercise this function on behalf
of the Secretary of State. Alternatively, the Residential Property
Tribunal, which may hear appeals when a local housing authority
refuses to grant an individual licence, could be involved in the
designation process.[16]
The Committee may also wish to bear in mind another judicial review,
where it was shown that a local authority misled the Secretary
of State.[17]
Discussion - Interaction with other SIs
26. There is no explicit requirement in the draft
instrument for local housing authorities to comply with the Provision
of Services Regulations 2009 (also known as the European Services
Directive), which would ensure that regulation is necessary and
proportionate.[18] It
is arguable that the regulations are engaged because landlords
can be self-employed businesses. Article 22(3)(c) of the Regulations
requires that, in relation to authorisation schemes "it must
not be possible to replace those requirements with other, less
restrictive measures that attain the same result." The Regulations
would therefore reduce the likelihood of onerous conditions
being added by local housing authorities to their own licences.
27. The Regulations also provide some protection
over what licensing fees can be charged by local housing authorities.
Since fees are likely to be passed on to tenants, this is an indirect
benefit to tenants too. In that regard, it would be useful for
the instrument to set out examples of activities which constitute
authorisation, compliance and enforcement for the purposes of
the Regulations. In relation to fees, the Regulations are currently
the subject of a Supreme Court case.[19]
It is important to note that the Department for Business, Innovation
and Skills (in its capacity as UK Point of Single Contact for
the single market[20])
considers that the Regulations already apply to the mandatory
HMO licensing regime. The Committee should consider whether
the Provision of Services Regulations 2009 are applicable to the
draft instrument.
28. The 2004 Act and the draft instrument do
not explicitly require local housing authorities to undertake
safety inspections, wither before a licence is issued or during
the licence period. If the Provision of Services Regulations 2009
are engaged, consent is granted tacitly after a specified period
of time, unless there is an "overriding reason relating to
the public interest" (ORRPI). One such ORRPI is safety. However,
a local housing authority could potentially make a designation
and grant a licence without making any safety inspections in the
5 years of a licence period. (Indeed this has been standard practice
in many schemes to date.) The Committee may wish to consider
whether the absence of property inspections prior to the grant
of a licence could be perverse and dangerous, and whether the
absence of such a condition in the draft instrument could allow
a local housing authority to give a seal of approval to dangerous
premises.
16 March 2015
The Department's responses to Mr Regas' submission
[shown in bold and italics] are as follows:
The Committee may wish to consider whether
the Sedley principles should be codified in the draft instrument
and, indeed, whether additional principles should cover geographical
extent (e.g. all wards in the borough and one ward in all directions
around a borough boundary, or more if a designation area is near
a borough boundary).
Section 80(9) of the Housing Act 2004 requires a
local housing authority to take reasonable steps to consult persons
likely to be affected by the designation and to consider any representations
made in accordance with the consultation and not withdrawn, before
making a selective licensing designation. However, the Department
agrees that local authorities should be expected to adopt the
Sedley principles when consulting and if a local authority does
not do this they are at risk of challenge. The General Approval
requires all consultations to take place for a period of at least
ten weeks. Where selective licensing applications come to the
Secretary of State for confirmation, the Secretary of State will
need to be content that a proper consultation has been carried
out, and the forthcoming guidance will make this clear to local
authorities.
No Impact Assessment has been made available
The Impact Assessment for this Order is currently
being considered by the Regulatory Policy Committee. A draft of
this document has been made available to the Committee and the
document will be laid in Parliament. We will ensure a copy is
shared with Mr Regas as soon as it has been finalised.
The Draft General Approval is not available
The General Approval is currently being drafted.
This is an administrative document which is not subject to Parliamentary
Approval. If the Statutory Instrument is passed a revised General
Approval will be published before 1 April.
i The "20% test" would potentially
allow local housing authorities to designate too large an area.
ii The Minister should use his General Approval
to apply the "20%" limits to additional licensing, as
well as to selective licensing, either individually or combined;
iii The wording of the General Approval (as
surmised from the Minister's letter) should explicitly state that
the 20% is on a cumulative basis, to prevent local housing authorities
from making many designations at 20% of area or private homes.
Section 80(1) of the Housing Act 2004 sets out that
a local housing authority may designate either: "(a) the
area of their district, or (b) an area in their district, as subject
to selective licensing, if the requirements of subsections (2)
and (9) are met."
This statutory instrument introduces additional sets
of conditions in relation to selective licensing, in accordance
with section 80(2)(b) of the Housing Act 2004. The Secretary of
State does not have equivalent powers under section 56(2) of the
Housing Act 2004 to introduce additional conditions in relation
to additional licensing.
The General Approval is designed to cover schemes
on a cumulative basis preventing local authorities making multiple
sub 20% designations, unless they come to the Secretary of State
for approval.
Assuming that the draft statutory instrument obtains
Parliamentary approval, the Secretary of State intends to amend
the General Approval from 1st April 2015, to provide that proposed
selective licensing designations covering more than 20% of a local
authority's geographical area or affecting more than 20% of privately
rented homes in the local authority area are required to apply
to the Secretary of State for confirmation of the designation,
in accordance with section 82(1) of the Housing Act 2004.
iv. The General Approval should specify that
additional licensing designations made on the basis of poor tenancy
management should have to causally and directly attribute purported
symptoms of poor tenancy management to privately rented properties;
v. The relevant planning law (such as on Article
4 directions) should be considered together with the proposed
draft order
Article 4 directions require that planning permission
is obtained before a building can be converted into a HMO. They
are not relevant to this order.
The draft Order does not refer to antisocial behaviour.
The Department considers that the drafting of article 4 of the
Order makes it sufficiently clear that the poor housing conditions
referred to should be found within the private rented sector.
Article 5, 6 and 7 of the Order also set out that there should
be a link between the particular condition referred to in that
article and the occupation of properties in the private rented
sector. However, it is not necessary for a particular condition
to have an exclusive link to the private rented sector - for example,
whilst we consider that a local authority would need to show that
criminal activity is affecting those living in the private rented
sector in order to make a designation in relation to the 'crime'
condition in article 7 of the Order, we do not consider that it
would be appropriate to specify that all the criminal activity
in the area needs to relate to the private rented sector, or that
criminal activity cannot affect any others living or working in
the area
The Committee may wish to consider whether
the order should include a provision for the Secretary of State
to be required to issue guidance, which a local housing authority
would be required to follow.
The Department will publish guidance in time for
when the new selective licensing statutory instrument to comes
into force, subject to it being approved by Parliament.
The Committee may wish to consider whether
a "high proportion" test which is not specified in legislation
and where there is no statutory guidance, is open to abuse.
The Department considers that local authorities are
best placed to decide whether the 'high proportion' test has been
met.
There is a huge difference between "intends"
and "must". As currently formulated a local authority
would have the option to draw up a plan to inspect (thereby showing
intent) and then abandon that plan. The Committee may wish to
consider whether the new "housing conditions" test is
too broad and whether it would make inappropriate designation
powers available to local authorities
The duties of local authorities in relation to the
inspection of properties and their assessment for hazards are
set out in sections 4 to 7 of the Housing Act 2004. The statutory
instrument contains a footnote referring to these provisions.
The Department did not wish to create any confusion by seeking
to reproduce these duties within the statutory instrument. Local
authorities are required, under section 84 of the Housing Act
2004, to review from time to time the operation of any designations
that they make, so where a local authority made a selective licensing
designation on the basis of intending to carry out inspections,
we would expect to see the designation revoked if in fact the
local authority then abandoned its plans to inspect.
Articles 5 and 6 relate to migration and deprivation,
respectively. Article 5(b) refers to "a significant number
of the properties", whereas Article 6(a) refers to "a
significant number of the occupiers of properties". The Committee
may wish to consider the definition of "significant"
and whether any ambiguity arising, coupled with the lack of statutory
guidance, could potentially lead to abuse of powers by local housing
authorities.
The Department considers that local authorities are
best placed to decide on the definition of 'significant number
of the properties'.
The Department does not believe this will result
in any ambiguity.
The Department will publish guidance in time
for when the new selective licensing statutory instrument to comes
into force, subject to it being approved by Parliament.
The Committee may wish to consider whether
"may have regard" ought to be replaced by "must
have regard". Furthermore, the Committee should consider
whether the absolute figures should be considered, or whether
these should be evaluated on a relative scale or compared to other
areas, for example.
The wording "may have regard" is deliberately
used here in order to make clear that local authorities are not
required to have regard to each factor listed in article 6(2)
of the statutory instrument. This allows some discretion on the
part of the local authority to determine the factors that they
consider to be relevant when determining levels of deprivation
in their area. The drafting therefore provides some flexibility
for local authorities have regard to the criteria that are most
appropriate to their own circumstances.
The Committee may wish to consider whether
the definition of crime levels is ambiguous and whether this creates
scope for abuse of powers.
The Department considers that local authorities are
best placed to decide on the definition of 'crime levels'.
The Committee may wish to consider whether
the General Approval should contain provisions that, where designations
are made by local housing authorities under the General Approval,
there should be a standstill period during which objectors may
contact the Secretary of State. Any objections made but not withdrawn
would then render a proposed designation subject to the Secretary
of State's confirmation process.
The Department believes the 10 week consultation
period is an adequate period of time to raise any objections
16 March 2015
12 R(Regas) v London Borough of Enfield [2014] EWHC 4173 (Admin) Back
13
Article 4, Town and Country Planning (General Permitted Development)
Order 1995 Back
14
R(Moseley) v London Borough of Haringey [2014] UKSC 56: summary
and judgment Back
15
http://nearlylegal.co.uk/blog/2015/02/lord-justice-lewison-return-english/
Back
16
First-Tier Tribunal (Property Chamber - Residential Property) Back
17
R(Peat & ors) v Hyndburn Borough Council [2011] EWHC 1739 Admin Back
18
Provision of Services Regulations 2009 UK SI 2009/2999 Back
19
R(Hemming t/a Simply Pleasure Ltd & ors) v Westminster City
Council, case ID: UKSC 2013/0146 Back
20
https://www.gov.uk/eu-services-directive Back
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