Selective Licensing Area

February 26th, 2018

The appeal in Brown v Hyndburn Borough Council (2018) EWCA Civ 242 raised a question of general importance as to the extent of the powers conferred on local housing authorities under Part 3 of the Housing Act 2004 (respectively “Part 3” and “the 2004 Act”) to include as part of the licence required in the case of any house to which that Part applies conditions regulating the management, use or occupation of the house concerned. The issue is one of statutory interpretation of Section 90 of Part 3, and requires review of the statutory architecture and objectives of the 2004 Act, and, in particular, its Parts 1 and 2.

The context in which the question arose was that the Appellant is a private sector landlord acting in conjunction with 346 other property owners who are all members of the Hyndburn Landlord Association, the representative body for landlords in the Hyndburn area founded by the Appellant and other landlords. The Respondent, Hyndburn Borough Council, is the local housing authority for the district.

The Appellant’s property to which the disputed conditions relate is in an area which, in exercise of its (undisputed) power pursuant to Section 80 of the 2004 Act, the Council designated as a “selective licensing area”. Subject to certain exceptions inapplicable in this case, Section 80 of the 2004 Act prescribes that where a house is situated within a selective licensing area a licence authorising its occupation must first be applied for by the landlord and granted by the designating authority before it can be occupied.

The Respondent imposed the disputed conditions in respect of the Appellant’s property when the Appellant sought the requisite licence. The disputed conditions were common to all licences issued by the authority. Indeed, many other local authorities have also sought to impose similar types of licence condition in relation to licences granted under Part 3 of the 2004 Act.

The two conditions the imposition of which was disputed were:

(1) 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.”

(2) Condition 8:-

“The licence holder must ensure, throughout the period of the licence that the premises are covered by a valid Electrical Installation Condition Report (“EICR”), where the report states the installation is unsatisfactory this must be remedied within 38 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 architecture of the 2004 Act is that Part 1 reformed the law in relation to the fitness for human habitation of residential accommodation. It introduced an entirely new fitness regime by reference to the ascertainment of the risks posed to occupiers from certain features of the property they occupied. The regime is called the “Housing Health and Safety Rating System” or “HHSRS”.   The kinds of dwelling to which the new system applies include single dwellings and houses in multiple occupation. It is noteworthy, however, that the methods of enforcement listed in Section 1(3) do not include the imposition of licensing conditions under Part 3, even though they do incorporate “existing” kinds of enforcement from other Acts.  For the purposes of Part 1, a “hazard” is a “risk of harm … associated with the occurrence of any of the matters or circumstances listed in Schedule 1” of the Housing Health and Safety Rating System (England) Regulations 2005, SI 2005/3208 (the “2005 Regulations”). The matters and circumstances listed in Schedule 1 to the Regulations include (i) carbon monoxide and fuel combustion products (paragraph 6); and (ii) electrical hazards (paragraph 23).  “Harm” is also a defined term; Schedule 2 to the 2005 Regulations prescribes four different classes of harm (from “extreme” to “moderate”) which must be reasonably foreseeable as a result of the hazard in question.

Local authorities are given duties and powers in respect of their responsibilities under Part 1 (and to some extent those arising under other Parts). Section 3 provides that a local housing authority must keep the housing conditions in their area under review with a view to identifying any action that may need to be taken by them under any of the provisions mentioned in subsection (2). Section 4 makes provision for inspections. Thus, an authority is obliged to keep housing conditions in its area under review, and may inspect in order to decide whether to take action under Part 1, whether or not as part of that review. By Section 5, if a category 1 hazard exists, there is a duty to take enforcement action (Section 5); if a category 2 hazard exists, there is a power to take such action (Section 7).

Part 2 of the 2004 Act introduced the concept of licensing houses in multiple occupation (“HMO”). The Secretary of State may prescribe some descriptions of HMO that must be licensed. Local authorities may decide to implement “additional” licensing schemes, by which they may designate all or part of their area as subject to licensing, and may specify descriptions of HMO to be subject to licensing with the designated area(s). Section 56(2) provides that for the power to designate to be available, the authority must consider that a significant proportion of the HMOs of that description in the area are being managed sufficiently ineffectively as to give rise, or to be likely to give rise, to one or more particular problems either for those occupying the HMOs or for members of the public.  Section 65 lays down certain tests as to suitability for multiple occupation, and Section 65(3) provides for “prescribed standards” to be prescribed by “regulations made by the appropriate national authority.” Section 65(4) gives examples of the sort of standards that may be prescribed.

Section 67(1) is of particular interest, especially by comparison with Section 90. It provides:

“(1)       A licence may include such conditions as the local housing authority consider appropriate for regulating all or any of the following-

(a) the management, use and occupation of the house concerned, and

                                    (b) its condition and contents”.

Part 3 provides for “selective licensing” of private sector rented properties which are (subject to a few very specific exceptions) let as separate dwellings: in other words, they are not houses in multiple occupation.  Unlike additional licensing, there is no provision in Part 3 for the Secretary of State to require any descriptions of property to be licensed. The question whether to introduce licensing is always for the local authority. Nor is the test for the local authority to meet before selective licensing can be introduced the same as under Part 2. Sections 80(3) and 80(6) specify two alternative sets of “general” conditions, one of which must be met before a designation may be made.

Thus, the permissible reasons for the designation of a selective licensing scheme are low housing demand as assessed on the basis of value, turnover and occupation of residential properties, and anti-social behaviour associated with the private rented sector if private landlords are not combating it effectively. The conditions described in Section 80 give no support for any contention that it is a legitimate basis for selective licensing that the authority wishes to improve the general fabric of the housing stock in the area by requiring private landlords to improve their properties or introduce new facilities or equipment.

Last, but centrally, Section 90 of the 2004 Act provides, so far as relevant, as follows:

“(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.

(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.

(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;

(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;

(c)      the fact that licence conditions are imposed for a particular purpose that could be achieved by the exercise of Part 1 functions does not affect the way in which Part 1 functions can be subsequently exercised by the authority.

…”

By contrast with Section 67(1) in Part 2, no mention is made in Section 90(1) of the use of conditions to regulate the “conditions and contents” of a house. As to sub-sections (3) and (4) of Section 90 no regulations have yet been created pursuant to Section 90(3)(a) of the 2004 Act, and Section 90(4) has no application in this matter: neither of the disputed conditions is required by Schedule 4 to the 2004 Act.

Thus, the only source of power on which the Respondent can have relied is Section 90(1) and (2). In that regard three further questions or qualifications as to the availability of that power need to be noted:-

(1)        First, since neither of the two disputed conditions relate to the use or occupation of the property, the only basis for the exercise of that power would be that the conditions fall within the rubric “regulating the management.”

(2)        Secondly, there is no definition of “management” in the Act; the word must be construed in the context of the Section and Part 3 as a whole.

(3)        Thirdly, the exercise of power under those sub-sections to impose conditions in the case of “hazards” is regulated by sub-section (5). Sub-section 5(a) makes it clear that “in general” the authority must seek to identify, remove or reduce category 1 or category 2 hazards by the exercise of Part 1 functions and not by means of licence conditions. Under Part 1 of the Act, a “hazard” is a “risk of harm … associated with the occurrence of any of the matters or circumstances listed in Schedule 1” of the Housing Health and Safety Rating System (England) Regulations 2005. Both carbon monoxide and electrical hazards are listed in the relevant part of those Regulations. Carbon monoxide and/or electrical hazards are capable of constituting “hazards” under Part 1 of the 2004 Act.

The issue in the appeal fell to be determined according to whether the powers of “management” conferred by sub-section (1) of Section 90 extend to works which improve or change the condition of the property or add new facilities and equipment which were not already present; and if so, whether in light of sub-Section (5)(a) it was open to the Respondent to impose conditions under its licensing powers to address hazards if it could have addressed them by exercise of its Part 1 functions.

Underhill LJ said:-

“82.      The primary question is whether Section 90 (1) of the 2004 Act conferred the power to impose the two disputed conditions in this case – that is, conditions requiring the installation of a carbon monoxide monitor and (broadly) that the electrical installations meet a prescribed standard. That depends on whether such conditions fall within the scope of the phrase “the management, use or occupation of the house concerned”: in practice the relevant word in that triad is “management”.

  1. As to that, my starting-point is the structure of Section 90, … In my view that can be analysed as providing for three kinds of licence condition, as follows:

(1)        Sub-section (1) confers a general power to impose conditions regulating “management, use or occupation”. Sub-section (2) identifies “in particular” two instances of such conditions.

(2)        Sub-section (3) confers a power to include conditions about what “facilities and equipment” should be available in the house. These are not a sub-set of the conditions falling under sub-section (1): they are prefaced not by the phrase “in particular” but by “also”.

(3)        Sub-section (4) imposes an obligation to include the specific conditions identified in Schedule 4. Those conditions might otherwise fall within the terms of sub-sections (1) or (3), but they are treated separately because their inclusion is mandatory.

It follows that conditions requiring that facilities and equipment be available do not fall under sub-section (1).

  1. That analysis is confirmed, and can be taken a little further, by a comparison with Section 67 which is the equivalent section in Part 2 of the Act. …

It will be seen that, whereas Section 90 (1) refers only to regulating the “management, use and occupation” of a house, Section 67 (1) refers separately to regulating “its condition and contents”. Further, in Section 67 the conditions relating to “facilities and equipment” are brought into the “in particular” provisions of sub-section (2), and there is no equivalent to Section 90 (3). Those differences between the two sections are plainly intentional … and they only make sense on the basis that regulating the “condition and contents” of a house – which includes what “facilities and equipment” should be available in it – is to be treated as distinct from regulating its “management, use or occupation”.

  1. That means that the phrase “regulating the management, use or occupation …” cannot be read so widely as to apply to conditions that regulate the “condition and contents” of a house or what “facilities and equipment” should be available in it. …
  2. I have reached that conclusion by reference to the words of the statute alone. But it is reinforced by the terms of the “Guide to the Licensing and Management Provisions in Parts 2, 3 and 4 of the Housing Act 2004” issued by the Department of Communities and Local Government in January 2010. …

I need not endorse every word of that Guidance but the substance of it is entirely consistent with the approach which I would take to the scope of Section 90 (1).

  1. If Section 90 (1) is construed in that way, it did not in my view empower the Council to impose either of the disputed conditions. …
  2. As regards condition 6, a condition requiring the installation of a carbon monoxide detector appears to me to involve the provision of new facilities and equipment and to relate to the “condition and contents” of the house rather than to its management. …
  3. As regards condition 8, the primary obligation sought to be imposed is to ensure that an EICR stating that the electrical installations at the premises are satisfactory is in force. What, however, that means in substance is that it should be a condition of the licence that the electrical installations at the property should be of a “satisfactory” standard – and therefore that they should be improved so far as necessary to bring them up to that standard. … Such a condition is … in my view unlawful because it seeks to regulate the condition or contents of the house – or, it could be said, its equipment. …
  4. There is nothing in that outcome which is contrary to the policy of the Act. … Part 3 is aimed at combating the problem of the development of areas of “low housing demand” and/or areas where anti-social behaviour is prevalent. The imposition of conditions regulating the “management, use or occupation” of houses in the more limited sense that I believe to be correct is conducive to that purpose: the better the management of what happens at and to a house, the less the risk of it attracting vandalism or other anti-social behaviour, with a consequent tendency towards the improvement of “social and economic conditions” in the area. No doubt the imposition of conditions designed to achieve a minimum standard of safety in gas and electrical installations, or other facilities and equipment, in houses subject to licensing would also conduce to the purpose of Part 3: indeed both sub-sections (3) and (4) of Section 90 (3) contemplate or require the imposition of such conditions. All that I say is that the policy behind Part 3 does not compel a wider reading of sub-section (1) than its language, read in the context of the other provisions of the Act, justifies. On the contrary, sub-sections (3) and (4) demonstrate that there are more specific means by which the draftsman could have used, or the Secretary of State could still use, Section 90 to allow for the use of licence conditions to enforce minimum standards of this kind. It is important not to lose sight of the fact that the specific job of ensuring fitness for habitation, including minimum safety standards of this kind, is done by Part 1; and that very point is made explicitly by Section 90 (5).”

King LJ added:-

“78       … I am in complete agreement with Underhill LJ that the natural reading of the phrase “regulating the management, use or occupation…” does not allow the application of conditions that regulate the “condition and contents” of a house or what “facilities and equipment” should be available within it.

 

  1. I am reinforced in that view not only by the comparison performed by Underhill LJ of Section 90 with Section 67, … but also by the fact that such an interpretation dovetails with the Guidance issued by the Department of Communities and Local Government in January 2010  … which, whilst not being determinative, says in relation to Section 90:

“…This is less wide than the scope of HMO licensing conditions under Section 67(1) because it does not allow a licence under Part 3 to impose conditions relating to the condition or contents of the house…”.”

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