Local authorities lose JR over government changes to HMO planning rules

Three local authorities have failed in a bid to have the government’s relaxation of planning laws on houses in multiple occupation (HMOs) quashed on the basis of inadequate consultation.

Housing Minister Grant Shapps laid regulations in September 2010 setting out the government’s approach to dealing with HMOs. The effect of the changes was that people could automatically convert a house into an HMO without planning permission.

Three councils – Milton Keynes, Oxford and Newcastle – launched judicial review proceedings in October. The local authorities submitted that the Secretary of State for Communities and Local Government should have consulted directly with local planning authorities before deciding to make the two statutory instruments, which were:

• The Town and Country Planning (General Permitted Development) (Amendment) (no 2) (England) Order 2010 (“the GPDAO”). This granted a new permitted development right enabling a change of use from a single dwelling house to use as a small HMO
• The Town and Country Planning (Compensation) (No 3) (England) Regulations 2010 (“the Compensation Regulations”). These limit the liability of local planning authorities to pay compensation in the event that they decide to make an Article 4 direction to remove the new permitted development right granted by the GPDAO.

Under s. 108 of the Town and Country Planning Act 1990, compensation may be payable in certain cases where planning permission granted by a development order is withdrawn and where, on an application for planning permission for that development, the application is refused or permission is granted subject to conditions.

The combined effect of Regulation 2 of the Compensation Regulations and s. 108 of the TCPA 1990 was that LPAs’ liability to pay compensation where they make an Article 4 direction withdrawing the permitted development rights under the GPDAO would be reduced in two situations:

• where 12 months' notice is given in advance of an Article 4 direction taking effect, there will be no liability to pay compensation; and
• where an Article 4 direction is made with immediate effect or with less than 12 months' notice, compensation will only be payable in relation to planning applications which are submitted within 12 months of the effective date of the direction and which are subsequently refused or are granted permission subject to conditions.

In Milton Keynes Council & Ors, R (on the application of) v Secretary of State for Communities and Local Government [2011] EWHC 1060, Sir Michael Harrison, sitting as a Deputy High Court judge, summed up the position: "Prior to 1 October 2010 when the GPDAO and the Compensation Regulations came into force, planning permission was needed for a change of use from a dwelling house to an HMO (ie from Class C3 to Class C4) so that LPAs could control the potential amenity and environmental problems that can arise from HMOs, by either refusing planning permission or by the imposition of planning conditions.

“Now that such a change of use is permitted development, the LPAs have no control over the change of use, except by making an Article 4 direction which will expose them to the risk of compensation.”

The judge ruled that the short, informal consultation exercise undertaken by the government – which saw it only consult representative bodies – was not so unfair as to be unreasonable. He said that the option pursued by the minister was the third of three included in a formal consultation on changes to the law on HMOs carried out by the previous government in 2009, and in which LPAs were able to participate.

Sir Michael Harrison said: “It was, in my view, perfectly reasonable for the defendant to have decided that it was not necessary to repeat that exercise after he had decided to go for option 3. He had decided to get on with Option 3 as quickly as possible, but he was conscious that it was a matter that had to be sensitively handled because it involved adoption of an option which was the least preferred option in the 2009 consultation exercise.

“He therefore decided to allow a short, informal consultation exercise to give a last opportunity to all the key interests to bring anything further to his attention which could inform the detailed implementation of Option 3 in due course. In my view, that was a reasonable exercise of his broad discretion as to how the consultation exercise should be carried out in the circumstances.”

The judge said the 2010 informal consultation exercise was “essentially covering matters which had already been covered in the 2009 exercise”.

Sir Michael Harrison added that the decision to limit the informal consultation exercise to representative bodies of the key interests was commensurate with the nature of the exercise intended by the minister. “Bearing in mind the overlap between the questions asked in that exercise with those asked in the 2009 exercise, it was not unreasonable to expect that LPAs would have dealt with most of them in the 2009 exercise,” he said.

The judge pointed out that all three claimant authorities had in fact sent in consultation replies. “I accept that time was short, but all the claimants are well versed in the problems of HMOs,” he said. “It is also clear from the summary of responses on the 2009 consultation exercise, and from the impact assessment following the 2010 consultation exercise, that the main points raised by the claimants were flushed out by those exercises. Despite their objections, all claimants have in fact now made Article 4 directions, one of them by Milton Keynes Council having immediate effect and therefore involving a potential liability to compensation.”

The councils had a full opportunity to make representations on option 3 in the 2009 consultation, including on matters of practical implementation, he added.

Sir Michael Harrison suggested that, on the basis of these conclusions, it was unnecessary to consider whether the claimants had a right to be consulted on the minister’s proposals and whether any duty of fairness only arose in the context of a legitimate expectation to be consulted.

Philip Hoult