New Voluntary HMO Licensing Scheme

Oxford City Council

Oxford City Council

Prior to the 2004 Housing Act many Local Authorities (such as Westminster City Council) had their own Licensing Schemes for HMOs (Houses in Multiple Occupation). The 2004 Housing Act unified the many local schemes, provided a legal definition of an HMO, and set up national licensing of HMOs (properties where the occupants don’t live as a single household and share facilities). HMOs of 3 storeys and 5 or more occupants were assigned Mandatory Licensing (the Local Authority were required to operate a licensing scheme), and many members of the local licensing schemes were automatically ported across to the new national scheme. HMO’s of less than 3 storeys or 5 occupants were no longer licensed, and although the 2004 Housing Act did allow Councils to apply for permission to license these properties as well, no Local Authorities applied set up voluntary schemes.

One of the last actions of the outgoing government in April 2010 was to issue an order which allowed local authorities to set up licensing schemes for all HMOs – basically reverting to a system similar to that which existed prior to 2004. Oxford Council is the first Council to use their powers to set up such a scheme (although five additional licensing schemes are in existence in England, along with a further fifteen selective licensing schemes, which are designed to deal with areas of low demand that are blighted by antisocial behaviour), and they give their reasons for this as:

  • Local residents in Oxford have told us that the Council needs to do more to control the impact of HMOs
  • We’ve tried using all our existing powers but they haven’t been enough to make the difference that is needed. We believe that additional licensing will provide us with those extra powers that we need and that it will have a really positive impact.
  • Our aim is to improve the living conditions for tenants within HMOs as they provide the worst accommodation in the City. We also want all landlords to take greater responsibility for managing their properties and ensure that the houses they own don’t blight our neighbourhoods with rubbish and anti-social behaviour.

The Council go on to say something rather strange about how they will implement the scheme:

“Due to the size of the scheme, we will be targeting the highest risk HMOs first. These are the three storey properties and those HMOs where 5 or more people live. We will also be requiring licence applications from all the landlords of those HMOs where we’ve had to take legal action in the past. We’ve estimated it’ll take a year to deal with these high priority HMOs and after that we’ll begin licensing the rest.

The reason I find that statement strange is that they should have been operating a licensing scheme for 3 storey properties for over 4 years now (Mandatory Schemes started in April 2006), so it’s a bit weird to announce a scheme for all properties and then say that you are going to prioritise something that you should already have been doing for years! The rational behind a lot of Oxford’s thinking appears to be driven by their own limited resources. Oxford estimates that 20% of the properties that should have been licensed under the mandatory scheme haven’t been due to landlords taking properties out of use, changing the tenure, selling them, leaving them vacant, or actively avoiding licensing.

Critics of this scheme point out that:

  • The proposed scheme is one which involves annual licensing so landlords will have to reapply, and pay for, a new licence every year. The primary rationale is that the current 5-yearly licensing system has meant that the Council has already spent all the license fee money they derived when the mandatory scheme came into force and so have no money to staff the scheme without providing an annual income.
  • A rationale for the scheme is the belief that it will encourage landlords to deal with anti-social behaviour. Given that private landlords have no legal liability for the behaviour of their tenants and no powers to do anything about such behaviour it is hard to see what the council expects Landlords to achieve in this area.

Schemes like this should be beneficial to Landlords providing accommodation which meets Housing Standards, as it will drive from the market the accidental Landlords who provide low quality accommodation at cheaper rents. Whilst being good news for professional landlords it may not be quite such good news for tenants seeking affordable accommodation (particularly Students in Oxford), inevitably as the slum accommodation is removed from the market the cost of the remaining property will rise, and rents will also include the cost of the licensing scheme which is to be funded by it’s fees (as an example the initial application fee for 2 storey HMO with 3 or 4 occupants is £362 with an annual renewal fee of £150).

PainSmith Solicitors believe that this scheme has the potential to be challenged, and having spoken to counsel are prepared to discuss the possibility of taking such a challenge forward on a no win, no fee basis if a group of interested landlords wished to come forward.

The next few months will be of great interest to Landlords and Tenants alike, not only is there some uncertainty about whether this scheme can be implemented, but the philosophy behind it (regulation of Landlords) is that of the previous administration and contrary to the libertarian instincts of the current government.

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