Selective Licensing

April 26th, 2017 by James Goudie KC

Part 3 of the Housing Act 2004 (“the Act”) provides for the selective licensing by local housing authorities of private sector housing in an area which may be as large as the whole of the local housing authority’s district. In general, where an area has been designated as subject to selective licensing no house in that area which has not been licensed may lawfully be occupied under a tenancy or licence. The issue in the appeals to the Upper Tribunal (Lands Chamber) in Waltham Forest LBC v Khan (2017) UKUT 153 (LC) was whether a local housing authority which has designated an area as subject to selective licensing may have regard to the planning status of a house when considering an application for a Part 3 licence. Each appeal concerned converted flats created without the benefit of planning permission by the respondent, Mr Khan, who subsequently applied to the local housing authority for a Part 3 licence for those flats. In each case the London Borough of Waltham Forest granted a licence for a period of 1 year only with the intention that during that period the planning status of the flats should be regularised. In each case on appeal to the First-tier Tribunal (Property Chamber) (“the FTT”) the period of the licence was increased to 5 years on the grounds that the respondents’ compliance with planning requirements was irrelevant to the question of licensing. The local housing authority appealed against the FTT’s decisions. The appeals were allowed.  It was legitimate to have regard to planning status.

The power to designate an area as subject to selective licensing is conferred on local housing authorities by Section 80(1) of the Act. The circumstances which must exist before a designation can be made shed some light on the purpose of the selective licensing regime. Before making a designation an authority must consider that certain general conditions are satisfied in relation to an area. The first set of general conditions, described in Section 80(3), are that the area is, or is likely to become, an area of “low housing demand” and that making a designation will contribute to the improvement of the social or economic conditions in the area. Waltham Forest is not such an area.

The second set of general conditions, which were relied on by Waltham Forest when it introduced its Borough wide selective licensing scheme, are provided by Section 80(6). The authority must be satisfied of all three of the following conditions: first, that the area is experiencing a significant and persistent problem caused by anti-social behaviour; second, that some private sector landlords who have let premises in the area are failing to take action which it would be appropriate for them to take to combat the problem; and third that, when combined with other measures, making a designation will lead to a reduction in or elimination of the problem.

Waltham Forest suggested that the general object of any designation under Part 3 was to “bring an area up” and to improve housing standards in the private rented sector. The Upper Tribunal said that while in very broad terms that may be a fair description of the purpose of the legislation, Parliament obviously considered that the substantial restrictions which designation places on the freedom of residential landlords to let their property are only justified where, and to the extent that, the specific conditions in Sections 80(3) or (6) are encountered.

A designation cannot come into force unless under Section 82 it is confirmed by the appropriate national authority (in England the Secretary of State) or is of a class to which general approval has been given. On 10 March 2010 the Secretary of State gave a general approval for the designation of any area by a local housing authority in England conditional only on a period of consultation with those likely to be affected by the designation. This approval remained in force when Waltham Forest introduced its own Borough wide selective licensing scheme. A designation under Part 3 must specify the time at which it will cease to have effect, which must be not later than five years after it comes into force (Section 84(1)-(2)). Waltham Forest designation was for five years from 1 April 2015.

For the purpose of Part 3 a “house” is a building or part of a building containing one or more dwellings (Section 99). It follows that each flat in a house converted into a number of separate flats is itself a house for the purpose Part 3. A house occupied under one or more tenancies or licences granted by a private landlord which is in an area designated under Section 80 is referred to as a “Part 3 house” (Sections 79(2), 85(5)).

By Section 85(1), every Part 3 house must be licensed unless it falls within certain exceptions. A licence under Part 3 authorises occupation of the house under a tenancy or licence (Section 85(2)). A licence is personal to the licence holder.  It may not be transferred to another person (Section 91(6)).

Sections 87 to 90 deal with applications for licences, the granting or refusal of licences and the imposition of licence conditions. Application must be made to the local housing authority, which may charge a fee (Section 87(1), (3)). Where an application is made to an authority under Section 87 the authority must either grant or refuse a licence. Amongst other matters specified in Section 87(3) of which the authority must first be satisfied before it grants a licence is that the proposed licence holder is a fit and proper person to hold the licence and that the proposed management arrangements are satisfactory. When deciding whether a person is fit and proper the authority must have regard to evidence including any evidence that the person has “contravened any provision of the law relating to housing or of landlord and tenant law” (Section 89(2)). No mention is made of the relevance of any contravention of planning law.

If it is satisfied that the conditions in Section 87(3) are met the authority “may grant a licence” (Section 87(2)); it is therefore clear that the authority has a discretion to refuse a licence even when the specified conditions are satisfied. A licence may include such conditions as the local housing authority consider appropriate for regulating the management, use or occupation of the house (Section 90(1)).

A licence comes into force on the date specified in or determined under the licence and continues for the period specified (Section 91(3)). That period must not end more than five years after the date on which the licence was granted or came into force (Section 91(4)).

A licence may be revoked under Section 93. There is no general discretion to revoke, but only where conditions relating either to the licence holder or another person, or to the house itself are met. None of the conditions of revocation specified in Section 93 is concerned with the planning status of the house.

The consequences of a failure to comply with the requirements of Part 3 are draconian. It is an offence for a person to have control of a house which is required to be licensed under Part 3 but is not so licensed (Section 95(1)) although it is a defence if an application for a licence has been made but not yet determined. Amounts paid in respect of rent or other periodical payments under a licence or tenancy of such a house may be recovered by means of a rent repayment order (Section 96(4)). No notice of seeking possession may be given under Section 21 of the Housing Act 1988 to terminate a shorthold tenancy of a house required to be licensed for so long as it is unlicensed (Section 98(1)).

A right of appeal is available to the FTT against a decision to grant a licence and the appeal may “in particular, relate to any of the terms of the licence” (paragraph 31(2) of Schedule 5). In accordance with paragraph 34 of Schedule 5 such appeals are determined “by way of re-hearing” but the FTT may have regard to matters of which the authority was unaware when it made its own decision. In this context the direction that an appeal against such a decision is to be by way of re-hearing means that the FTT must make its own decision on the application for a licence, and is not simply to ask itself whether the decision made by the local housing authority was open to on the material it considered.  The FTT must therefore exercise its own discretion whether to grant a licence and on what terms. Having undertaken that exercise the FTT is then empowered by paragraph 34 to “confirm, reverse or vary the decision of the local housing authority”.

A further appeal lies to the Upper Tribunal under Section 11, Tribunals Courts and Enforcement Act 2007 against a decision of the FTT under paragraph 34 of Schedule 5 to the 2004 Act. Such an appeal is an appeal on a point of law only and is conducted on a different basis from the re-hearing to be undertaken by the FTT. Since the decision in question concerns the exercise of a statutory discretion over the terms of a licence, the issue for the Upper Tribunal is whether the decision making Tribunal, properly directing itself on the law and taking proper account of the relevant facts, and ignoring irrelevant facts, could have exercised its discretion in the manner in which it has done.

The Upper Tribunal (Martin Rodger QC, Deputy Chamber President) said:-

“44.     I agree with the general observations of the FTT in both appeals that Part 3 licensing should not be seen as an alternative to the use by a local housing authority which is also a local planning authority of its powers of enforcement under the Town and Country Planning Act. But that does not mean that where a building has been converted to residential use, or an existing residential use has been intensified, in either case in breach of planning control, those circumstances are irrelevant to the decision whether to grant a licence or to its terms.

  1. In the case of the Waltham Forest licensing scheme, the designation was made in the light of the authority’s conclusion that the general condition in Section 80(6) of the Act were satisfied, that is that the area designated was experiencing a significant and persistent problem caused by anti-social behaviour, which some private sector landlords were failing to take appropriate action to combat and which the designation would contribute to reducing. In my judgment it cannot possibly be said that, in the light of that objective, the issue whether a house has been built or occupied in breach of planning control is irrelevant.
  2. Inappropriate or over-intensive uses of land, especially in a densely populated urban area, are an obvious manifestation of anti-social behaviour in themselves and create conditions in which anti-social behaviour is liable to be a significant problem. Planning control is directed in large measure at ensuring that new or additional uses of land do not have an unacceptably adverse impact on existing users. Where consideration of the impact which the occupation of a new house will have on its neighbours has been by-passed, because the house has been built or converted without planning consent, important safeguards against anti-social behaviour will have been evaded. To that extent the concerns of planning control and the concerns of licensing under Part 3 of the 2004 Act overlap.
  3. It is therefore unnecessary and unrealistic, in my judgment, to regard planning control and Part 3 licensing as unconnected policy spheres in which local authorities should exercise their powers in blinkers. I am satisfied that it is legitimate for a local housing authority to have regard to the planning status of a house when deciding whether or not to grant a licence and when considering the terms of a licence. It would be permissible for an authority to refuse to determine an application until it was satisfied that planning permission had been granted or could no longer be required. It would be equally permissible, where an authority was satisfied that enforcement action was appropriate, for it to refuse to grant a Part 3 licence, but as Waltham Forest points out that would make it difficult for a landlord to recover possession of the house and would expose him to prosecution for an offence which he would be unable to avoid by his own actions. The solution adopted by Waltham Forest of granting a licence for a short period to allow the planning status of the house to be resolved was, in those circumstances, a rational and pragmatic course which I accept was well within its powers.
  4. Nor would it be satisfactory to place the onus on the local authority to establish a breach of planning control in costly and time consuming enforcement proceedings when the landlord’s requirement of a Part 3 licence provides an opportunity to require that he take the initiative of demonstrating that he does not need, or alternatively is entitled to, planning permission. The authority has a discretion over the duration of each licence it grants, and there is no automatic entitlement to a period of five years. Where there are grounds to believe that the applicant requires but does not have planning permission the grant of a shorter period is a legitimate means of procuring that an unlawful use (which itself may exacerbate anti-social behaviour) is discontinued or regularised.
  5. I am therefore satisfied that both FTTs were in error in regarding the issue of planning status as irrelevant to the terms of a Part 3 licence. … Moreover, although it would be wrong for a local housing authority to use its Part 3 powers with the intention of punishing a landlord for a breach of planning control, there is nothing in Waltham Forest’s guidance to its staff that could reasonably be interpreted as reflecting such an intention …”

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