Council defeats High Court bid by landlords to derail additional licensing for HMOs

March 23, 2015

A High Court judge has refused a group of landlords permission to seek a judicial review of a city council’s decision to designate certain areas as subject to ‘additional licensing’ in relation to houses of multiple occupation (HMOs).

On 17 September 2013 the executive board of Nottingham City Council decided, in respect of a number of identified areas within its district designated on a plan attached to the decision, to exercise its powers under section 56 of the Housing Act 2004.

The designation was to come into force on 1 January 2014 and run for up to five years. Applications for HMO licenses would be received from 1 December 2013.

At a ‘rolled-up hearing’ last week, Mr Justice Wilkie had to consider whether to grant the claimant – East Midland Property Owners (EMPO) – permission to seek a judicial review. EMPO is the largest landlords’ association in Nottingham, Derby and Leicestershire.

The claim for judicial review had been instituted by a claim form dated 13 December 2013.

The High Court judge said the issues to be determined on the application for permission were as follows:

Did EMPO have sufficient standing to bring the claim for judicial review?
Had the application for permission to seek judicial review been brought promptly?
If not, should he extend time so as to give permission, notwithstanding the want of promptitude?
Of the three grounds upon which judicial review was claimed, were all or any of them sufficiently arguable for him to give permission?

Mr Justice Wilkie added that if permission were given, then he would have to decide whether the claim for judicial review succeeded on any of the grounds upon which permission had been given. If it did succeed, he would then have to consider what, if any, relief should be given to EMPO, having regard to section 31(6) of the Senior Courts Act 1981 by reason of any undue delay in making the application for judicial review.

In East Midlands Property Owners Ltd, R (on the application of) v Nottingham City Council [2015] EWHC 747 (Admin) the High Court judge rejected the council’s attack on EMPO’s standing, pointing out inter alia that the organisation had been consulted by the city council in advance of its decision.

However, he did rule that the application for permission to seek judicial review had not been brought promptly – the application was not brought until four days before the expiration of three months.

Mr Justice Wilkie decided that there was no good reason for EMPO not to be in a position once the decision was taken on 17 September to act promptly by deciding to proceed, by raising sufficient funds, and then to commence proceedings within a much shorter time than that which elapsed.

“Had that been the case, an application for urgent consideration and interim relief, if permission were given, might have been viable so as to prevent this scheme being launched with the consequence that it has now been operating for some 14 months,” the judge added.

Mr Justice Wilkie then considered whether he should extend time so as to grant permission notwithstanding the delay in commencing proceedings.

The High Court judge described as “unarguable” the second ground of challenge advanced by the claimants, namely that "the defendant failed to consider properly or at all the requirements of section 57(4) of the 2004 Act and the conclusion it reached that section 57(4)(b) was satisfied [was] not available to it on the information before it and was based on a misunderstanding of the purpose of the designation".

The judge also rejected the claimant's third ground as “unarguable”. This alleged that the calculation of the licence fee was unlawful as it included and allowed for expenditure other than for the processing and monitoring of the additional licensing scheme. Reliance was placed on the case of R (on the Application of Timothy Martin Hemming and 6 others) v Westminster City Council [2013] EWCA Civ 591 [2013] LGR 593.

Mr Justice Wilkie said: “Although at first blush the report to the council in September 2013, dealing with the licence fee, was not happily expressed and might, upon a fair reading, including reference to Appendix IV to the report, have been thought to involve a decision contrary to the guidance given in Hemming, it is accepted now by [counsel for the claimants], as a result of further evidence by way of explanation put in by the defendant, that in fact the licence fee does not reflect council expenditure which it is impermissible in the light of Hemming to include in the calculation.”

The claimant's first ground meanwhile focused on s. 56(2) of the 2004 Act. EMPO asserted that Nottingham had erred in law by using, in order to form its view for the purpose of satisfying the section, “an inappropriate formula”.

EMPO argued that the council took into account irrelevant considerations; failed to provide consultees with accurate and clear information to enable them to respond in an informed manner; and reached a decision to proceed with additional licensing in the designated areas that was irrational and was made without any, or any proper, basis.

But Mr Justice Wilkie concluded that ground 1, the heart of the judicial review, was not made out. Amongst other things he said that:

There was nothing irrational or unlawful in the council identifying areas using the ONS "output areas" used for census purposes but tweaked by reference to the individual councillors' knowledge and experience so as to form coherent areas by reference to natural or physical boundaries.
In the absence of any statutory provision or guidance, there was nothing irrational or unlawful in the council limiting its consideration of designation to those areas, thus defined, in which there was a minimum cluster of 10 non-mandatory HMOs.
On the assumption that there was nothing unlawful in the council regarding evidence of complaints to the Environmental Health Department as evidencing "sufficient ineffective management giving rise to, or likely to give rise to, one or more problems", there was nothing irrational or unlawful in the council adopting the formula that 20% of the HMOs in that area, over a period of 4 years 9 months, making such a complaint, constituted a "significant proportion". Whilst a different council might take a shorter period than 4 years 9 months, the judge did not regard it as arguable that the council acted irrationally in fixing on the period that it did.
There was nothing irrational or unlawful in the council using the making of a complaint to the Environmental Health Department (or, as a supplement in certain areas at certain times, to the police) about the matters used in the gathering of data for this purpose. Those areas of complaint reflected the guidance when giving examples of properties being managed sufficiently ineffectively so as to give rise to or be likely to give rise to problems.
An experienced housing officer, who gave a witness statement to the court, was entitled to form the view which he did, that complaints about these matters did reflect upon the ineffectiveness of the management of the properties and that such complaints were not made lightly to the council's Environmental Health Department, reflected a real problem existing at the time and, given the type of issues, reflected the likelihood of problems arising for occupiers and others.
The claimant's contention that a strict application of the minimum requirements of the formula could not rationally form the basis of a conclusion that the section 56(2) requirement was satisfied was flawed. “[P]rovided the area is identified in a rational way by reference to a minimum number of HMOs being sited within it and provided the proportion identified is a significant one (which in this case it is), then the use of data recording complaints about such properties to the Environmental Health Department over a period of time, sufficiently long to avoid giving a misleading snapshot, can rationally be used as a method of satisfying the council of the requirements of section 56(2) of the 2004 Act.”
There was nothing flawed about the consultation. “It made clear what the formula was, how the data was accumulated, sufficient to enable the claimant and the RLA to voice their opposition and to call into question the sufficiency or validity of the evidence. The outcome of that consultation was faithfully recorded for the benefit of the council when taking its decision in September 2013 and the observations of the council officers in response to those particular grounds of opposition was an honest and rational one.”

Following the ruling, Nottingham City Council said the additional licensing scheme had been introduced to ensure that privately rented HMOs in a significant part of the city centre and inner city area were managed properly and met basic standards for quality and safety. The scheme was also at helping to reduce complaints about noise, rubbish, and other anti-social behaviour, it said.

Cllr Dave Liversidge, the council’s Portfolio Holder for Community Safety, Housing and Voluntary Sector, said: “People living in HMOs, and private rented accommodation generally, have a right to expect a decent standards. The additional licensing scheme is one of a number of initiatives we are undertaking with partners to ensure they get this.

“It was extremely disappointing that EMPO chose to challenge the scheme rather than work with us as many landlords have been more than happy to do, but we’re obviously very pleased that the judge has ruled in our favour.”

Cllr Liversidge added: “It’s important to note that EMPO’s challenge didn’t simply fail on a legal technicality. The judge carefully considered the scheme, believed it to be rational and reasonable and ruled that there were no grounds for a judicial review.“

Nottingham said that out of around 3,200 HMOs covered by the new scheme, there had been 1,497 licence applications so far. Of these, 59% had required further licence conditions to improve the property.