Imposing conditions on selective licences
The Upper Tribunal has made some significant clarifications to the scope of conditions that can be imposed on selective licences. Matthew Paul sets out the key conclusions.
On 11 September, HHJ Nicholas Gerald, sitting in the Upper Tribunal (Lands Chamber), gave judgment in the case of Hyndburn Borough Council v. Paul Brown & Anr [2015] UKUT 0489 (LC). He allowed Hyndburn’s appeal against the decisions MAN/30UG/HML/2014/0001 and MAN/30UG/HML/2014/0002 of the First Tier Tribunal (Property Chamber) dated 14 July 2014, to remove or amend conditions imposed on two licences issued pursuant to the selective licensing provisions contained in section 90 of the Housing Act 2004.
History of the appeal
Hyndburn in 2012 designated an area within its district as an SLA. Paul Brown and his co-appellant John Baron, who are landlords with rental property inside the SLA, brought an appeal to the FTT against various conditions imposed on licences issued to two rental properties within the SLA.
The lower Tribunal’s decision was largely in Hyndburn’s favour, but (amongst other variations to the licence) the FTT removed or varied the following conditions:
Condition (6): If gas is supplied to the property, a suitable carbon monoxide detector must be provided, maintained in good working order and tenants made aware as to its operation.
The above condition was redrafted by the FTT to read as follows:
“If a carbon monoxide detector is provided in the property, the licence holder must produce to the tenant (and the Council on request) written confirmation as to which party, landlord or tenant is responsible for maintaining the detector in good working order, including testing and replacing any batteries, and tenants made aware as to its operation”.
A further condition (number 8) was deleted entirely:
(8) The licence holder must ensure, throughout the period of the licence, that the premises are covered by a valid Electric Installation Condition Report (EICR), where the report states the installation is unsatisfactory this must be remedied within 28 days and the licensing team notified upon completion of such works. If a report recommends a re-test during the term of the licence, an up-to-date report must be provided to the landlord licensing team within 7 days of the re-test date.
The FTT’s reasoning for the amendment or deletion of the conditions was as follows;
1. there being no statutory provision compelling the fitment of CO detectors or the production of an EICR, it was outside the Council’s power to impose such additional requirements,
2. the installation of CO detectors and production of an EICR were not functions of the ‘management, use or occupation’ of the properties, but rather constituted ‘an improvement’ to the properties, and
3. the conditions were unlawful as the hazards they were designed to reduce should have been addressed by the exercise of Part 1 powers, not through licence conditions.
Hyndburn applied to the FTT for permission to appeal against its decision in respect of those two disputed conditions. Permission was granted in respect of all the argued grounds. Hyndburn also challenged the FTT’s overall approach to the appeal, in which it was argued that the FTT had erred by failing to follow the approach set out in Hope & Glory Public House Ltd, R v. City of Westminster Magistrates Court & Others [2011] EWCA Civ 31, in that it had effectively placed the burden of justifying the conditions on the Council, rather than requiring the (then) Appellants to demonstrate that the conditions were wrong.
The legal framework for licence conditions
The statutory provisions covering licence conditions are set out at section 90 of the Housing Act 2004:
90 Licence conditions
(1) A licence may include such conditions as the local housing authority consider appropriate for regulating the management, use or occupation of the house concerned [emphasis added].
(2) Those conditions may, in particular, include (so far as appropriate in the circumstances)—
(a) conditions imposing restrictions or prohibitions on the use or occupation of particular parts of the house by persons occupying it;
(b) conditions requiring the taking of reasonable and practicable steps to prevent or reduce anti-social behaviour by persons occupying or visiting the house.
(3) A licence may also include—
(a) conditions requiring facilities and equipment to be made available in the house for the purpose of meeting standards prescribed for the purposes of this section by regulations made by the appropriate national authority;
(b) conditions requiring such facilities and equipment to be kept in repair and proper working order;
(c) conditions requiring, in the case of any works needed in order for any such facilities or equipment to be made available or to meet any such standards, that the works are carried out within such period or periods as may be specified in, or determined under, the licence.
(4) A licence must include the conditions required by Schedule 4.
As yet, no regulations have been created under section 90 (3)(a) of the 2004 Act. This contrasts with the parallel provisions dealing with HMOs under sections 65 and 67 of the 2004 Act.
Section 90 (5) circumscribes a Council’s ability to use licence conditions to address category 1 or 2 hazards within the house:
(5) As regards the relationship between the authority’s power to impose conditions under this section and functions exercisable by them under or for the purposes of Part 1 (“Part 1 functions”)—
(a) the authority must proceed on the basis that, in general, they should seek to identify, remove or reduce category 1 or category 2 hazards in the house by the exercise of Part 1 functions and not by means of licence conditions; [emphasis added]
(b) this does not, however, prevent the authority from imposing (in accordance with subsection (3)) licence conditions relating to the installation or maintenance of facilities or equipment within subsection (3)(a) above, even if the same result could be achieved by the exercise of Part 1 functions;
Part 1 hazards should therefore generally be dealt with by the exercise of Part 1 functions, unless the conditions are imposed under section 90 (3)(a). The Council however has no power to impose conditions under section 90 (3) as the relevant secondary legislation has not yet been passed.
Hyndburn argued that while the wording of section 90 (5)(a) prohibits the use of licence conditions in general to deal with hazards, it affords a residual discretion to deal with a hazard in any one individual property, or more widely regarding any hazard that is better addressed through the use of licence conditions than part 1 functions.
Hyndburn argued that its freedom to impose conditions is very broad in imposing general requirements on the management, use or occupation of the premises, as is indicated by the use of the wording ‘considers appropriate’. This indicates a subjective test, and a local housing authority’s decision that it considers a condition appropriate ought not to be interfered with unless it can be shown to be wrong.
The CO detector condition
Hyndburn accepted that there is at present no general statutory requirement to fit CO detectors in houses, except where a new or replacement solid fuel burning appliance is installed. However, the presence of CO in a house can be lethal. A build-up of CO is materially different from other Category 1 and 2 hazards, in that it is frequently related to a sudden and undetectable failure or misuse of equipment, and there may be no warning of this that would be flagged up by a Part 1 inspection. As such, greater precautions over and above Part 1 inspections are justified. It was not intended as a ‘general’ duplication or replacement for the performance of its Part 1 functions, but as a justifiable exception to the Part 1 regulatory regime. Fitting and maintaining CO alarms is, it was argued, plainly a function of the management of the property. As such, it falls within the wide discretion conferred by section 90 (1) of the 2004 Act to impose such a condition.
The condition was in Hyndburn’s view proportionate, given the life-threatening nature of CO poisoning on one side, and the relatively low cost (around £20-£30 per unit) to landlords of fitting the CO detectors on the other. What was more, the Appellant, Respondents and the FTT all agreed that it was desirable to fit CO detectors in any property with gas appliances.
HHJ Gerald agreed with Hyndburn that the condition as modified by the FTT was perverse. The condition as amended positively encouraged landlords to rip out existing CO detectors before licensing a house, rather than be potentially held liable for their maintenance. It had ‘the curious result of reducing, rather than enhancing or maintaining, the safety of residential premises within a selective licensing area’ (paragraph 24).
The Upper Tribunal found that the fitment of CO detectors fell squarely within the definition of ‘management’ and could not rationally be described as ‘an improvement’ (paragraphs 43-46).
The absence of any statutory duty to fit CO detectors did not preclude the Council imposing such a duty by way of licence conditions (paragraph 47).
The Council’s discretion to impose conditions governing the management, use or occupation of the premises was not linked to the statutory test in making an SLA designation. Such conditions did not have to address ASB or low housing demand (paragraph 48). It should perhaps be noted that The Selective Licensing of Houses (Additional Conditions) (England) Order 2015 adds, amongst others, the statutory purpose of the improvement of housing conditions, and could be said to provide a solid framework of statutory purpose to such conditions as were the subject of this appeal, if imposed on licences issued after its commencement.
HHJ Gerald then went on to find that the Council’s Part 1 duty to inspect for the hazard of CO had not been engaged in relation to either of the properties subject to the appeal (paragraph 50). Secondly, as the properties in question were fitted with CO detectors ‘there was in existence no category 1 or 2 hazard without which the local authority’s Part 1 functions could not be engaged’ (paragraph 52). This second limb of the Judge’s reasoning is questionable. The presence of a detector will not eliminate the hazard it is designed to guard against. At best, it reduces the likelihood of an exposure to the hazard causing harm.
The EICR condition
Many house fires are caused by defective wiring in private rented accommodation. A detailed and professional examination of a house’s electrical system is not a matter within the competence of the Council’s housing officers, and does not form part of the Council’s Part 1 inspection regime. There is at present no specific obligation on landlords to hold or provide an EICR, unless it forms part of the terms of a tenancy agreement. Hyndburn argued that it was proportionate to impose such a requirement with a view to ensuring the safety of occupants of licensed houses. Hyndburn submitted that the provision by landlords of an EICR to the Council, and the duty to re-test if necessary, relates to the management of the house. As such, it falls within the discretion conferred by section 90 (1) of the 2004 Act. There was no duplication of a Part 1 function or other statutory provision, and section 90 (5) did not apply.
However, even if the Upper Tribunal were to find that section 90 (5) were relevant to this condition, the Appellant contended that the condition would not represent a ‘general’ duplication or replacement for the performance of its duties under Part 1, but would constitute a justifiable exception to the Part 1 regulatory regime.
The FTT had heard undisputed evidence that many properties within the SLA had antiquated electrical systems that would ‘likely fail the test’, and that ‘a high percentage’ of properties would require work. The Respondents submitted that the condition would impose a financial burden on landlords within the SLA and increase rents. This rather unattractive line of argument was relied on by the FTT in ruling that the condition was unlawful. The FTT also found, as with the fitment of CO detectors, that remedial work to an unsafe electrical system constituted an improvement, taking it outside the scope of section 90 (1).
For the same reasons as pertained to the fitment of CO detectors, the Upper Tribunal rejected the Respondent’s arguments. Both of the disputed conditions were restored to the premises’ licences.
Blanket conditions
The Respondent argued before the FTT and Upper Tribunal that the presence in section 90 (1)(a) of the words ‘the house concerned’ signified that ‘blanket’ conditions applying to all houses within an SLA were impermissible; citing in support of this contention the FTT decisions of 11 Diana St, Roath, Cardiff CF244TS [RPT/WAL/HMO/1] and Kexgill (Middlesborough) Ltd v. Middlesborough B.C. [MAN.EC.HMO.2008.001-5]. Hyndburn contended that these decisions were not binding on the FTT and established no such principle of law.
Although it was not a matter that the Upper Tribunal was required to determine, HHJ Gerald stated obiter that, in his view, the instant conditions were lawful. With regard to the EICR condition, the Judge’s reasoning, at paragraph 58, is confusing. He rules that the condition ‘only bites if there is no extant EICR which has not been complied with [sic]’. This seems at odds with the wording of the condition, which imposes an ongoing duty from which no landlord within the SLA is exempt. The reasoning apparently confounds the crystallisation of criminal liability for breach of the condition (which obviously is not ‘blanket’), with the nature of the duty imposed.
The Hope & Glory test
As the decisions which were the subject of this appeal were questions of law, in which the question of deference by the FTT to the discretion of the Council was immaterial, it was unnecessary to determine the point raised by Hyndburn as to the proper test on appeal, and HHJ Gerald declined to do so.
However, it was submitted that the ratio of the Court of Appeal’s decision in Hope and Glory is of considerably wider application than proceedings under the Licensing Act 2003. It is applied in cases relating to hackney carriage licensing, such as Gateshead Council v. Crozier [2014] EWHC 2097 (Admin), and in appeals under the 2005 Gambling Act. The High Court’s decision in Hope and Glory (upheld at appeal) was founded principally on the judgment of Edmund Davies LJ in Sagnata Investments Ltd v Norwich Corp [1971] 2 Q.B. 614, a case concerning an appeal under the Betting, Gaming and Lotteries Act 1963. Sagnata in turn was informed by Goddard LCJ’s observation in the 1949 case of Stepney BC v. Joffe [1949] 1 K.B. 599 (dealing with street trading licenses):
"It is constantly said (although I am not sure that it is always sufficiently remembered) that the function of a Court of appeal is to exercise its powers when it is satisfied that the judgment below is wrong, not merely because it is not satisfied that the judgment was right" (emphasis added).
That observation is not in any way limited to the specific type of appeal at issue in that case, or indeed to appeals in licensing cases; it is a principle which applies to appeals generally, not least to those brought under the 2004 Act.
The FTT was also bound by the decision of the Court of Appeal in Brent LBC v. Reynolds [2002] H.L.R. 15, which dealt with an appeal under broadly similar provisions of the 1985 Housing Act, and observed at paragraph 16:
“That said, however, the county court's jurisdiction is subject to the very significant condition that the court should pay great attention to any view expressed by the LHA, and should be slow to disagree with it”.
It accordingly seems likely that, despite this being an issue the Upper Tribunal did not need to resolve in the context of this case, the ratio in Hope & Glory applies equally to appeals brought to the FTT.
Conclusions
This decision of the Upper Tribunal has made it clear that licence conditions ordering the fitment of CO detectors in all properties within an SLA, and conditions requiring the production of an EICR and undertaking remedial work if the report is unsatisfactory, are lawful and appropriate.
There is no requirement that licence conditions be linked to the statutory test for making a SLA designation, i.e. addressing ASB or low housing demand.
Local housing authorities can in my view have a higher degree of confidence in imposing licence conditions, in circumstances where they represent a proportionate means of ensuring the safety of tenants within an SLA.
Matthew Paul, of Civitas Law, represented Hyndburn Borough Council. He was instructed by Gordon Macmillan.