A couple of recent Upper Tribunal (Land Chamber) decisions on HMOs under licensing schemes.

Urban Lettings (London) Ltd v London Borough Of Haringey [2015] UKUT 104 (LC)

What does an ‘appropriate person’ ‘having control of a HMO’ mean in circumstances where not all of the property making up the HMO is demised to one landlord? The context here was a Rent Repayment Order made against Urban Lettings by the FTT(PC).

The building at issue was a four storey property with commercial premises on the ground floor. The upper 3 floors had each been converted in 4 residential units. Each floor was let under a separate lease to CPR. Urban Lettings had a sub-lease of each of the 12 residential units. There were communal areas (corridors and steps) on each floor which were not sublet to ULL and so retained by CPR.

It was common ground that each floor amounted to an HMO under s.257 Housing Act 2004 and that each floor required a licence, and that there was no licence.

The 12 properties were managed for ULL by ULM – a company in the same group and with the same directors as ULL.

The FTT had found that CPR, ULL and ULM were each in receipt of the rack rents and so persons having control of the premises. Thus each had committed an offence under s 72(1) of the 2004 Act. ULL’s argument that it only received rent for the rooms and not the common parts was rejected. An RRO was made against ULL of £16,000.

On appeal, ULL argued that the FTT was wrong on the common parts issue. ULL did not control the common parts and could not comply with any licence requirements on the common parts that might be imposed, making it unlikely that ULL could obtain a licence. The FTT’s view on control was wrong and had serious consequences. Secondly, ULL had a defence under s.72(5) that they had a reasonable excuse for managing the property as an unlicensed premises that the FTT had not addressed.

The UT was not overly impressed. The defence under s.72(5) had not been raised at the FTT, and as a statutory defence, it had to be. On the ‘common parts’ argument, this did raise an important and not straightforward issue. However:

60. I have identified what seems to me to be the clear policy of Part 2 of the 2004 Act. Adapting the speech of Lord Bridge to the terms of s 61(7). It seems to me that the policy of s 61(7) is also plain:

The owner of an interest in premises who receives the rack rent, as the measure of the value of the premises to an occupier, is a person who ought in justice to be responsible for the discharge of the licensing obligations of the HMO.

61. If Mr Maddan’s submissions are correct no one would fall within the definition of a person in control with the result that no-one would be liable for the licensing obligations of these three HMOs. The lease from Mrs Hussain to CPR is at less than a rack rent and thus she is not within the definition. The 12 leases from CPR to ULL do not include the common parts merely rights of access over them. It follows (if Mr Maddan is correct) that they are not leases of the HMOs. Equally the 12 leases from ULL to the individual occupiers do not include the common parts and are thus (if Mr Maddan is correct) not leases of the HMOs. As Lord Goff pointed out this would be a very undesirable situation and not one which can have been intended by the legislature.

62. In those circumstances I have come to the conclusion that the views expressed by the FTT in paragraph 24 are correct. In my view there is no difference between the aggregate of the rack rent for the rooms with rights of access over the common parts and the rack rent for each HMO as a whole. I would interpret s 61(7) so as to include ULL on the agreed facts of this case.

If there were consequences for ULL in not being able to comply with licence requirements for the common parts, well, “the short answer is that ULL should not have entered into an arrangement whereby they could not comply with the licensing obligations in Part 2 of the 2004 Act”. Appeal dismissed.

The second appeal concerned room sizes, specifically, ss a local housing authority entitled to adopt mandatory minimum space standards for bedrooms in houses in multiple occupation?

Clark v Manchester City Council [2015] UKUT 129 (LC)

Mr Clark had a licence for an HMO for not more than 5 occupants. He had applied to increase this number to not more than 6. The Council rejected the application on the grounds that the additional room which Mr Clark considered suitable for occupation had insufficient usable floor space. The FTT confirmed that decision. Mr Clark appealed.

The room at issue had been a ‘box room’ with a floor space of 5.8m². The room had been given effectively ‘double height’ by extending into an attic, with a staircase to the upper level. Floor space on the lower floor was now 4.155m². The description of the upper area was

At the top of the timber staircase is a small landing from which it is possible to step up into the former attic space. This area is intended for use as a sleeping platform or “bed deck”. It is as wide as the king size mattress which Mr Clark has provided for the use of the intended occupier and deep enough to provide some storage space beyond the head of the mattress. The area is immediately beneath the pitched roof of the Property and the available headroom is severely restricted. Although the upper area adds a further 5.94m2 of floor space to the room, most of that area has clearance from the ceiling of less than 152 cm. The area with headroom (if it can be called that) of greater than 152 cm is restricted to a strip 16 cm wide running the length of the area on one side. A velux window has been installed in the slopping roof to provide natural light to the upper area.

The Council’s decision letter refusing the variation of licence stated:

“The room in question (first floor flat of building) contains “upper level bed space” which the applicant has created by building a staircase within the room leading into a roof void.  The “upper level bed space” has a strip of 16cm wide x 2m long which has a head height of 5ft or more.  The rest of the “upper level bed space” has a head height below 5ft and therefore, applying Manchester City Council’s HMO standards regarding space which state that vertical height by reason of slopping roof/ceiling less than 1.25m (5 ft) is not included as useable as floor space, the area is unusable.  The strip of 16cm x 2m above 5ft is also considered to be unusable as floor space as there are no possible uses for such a space.  Therefore it is considered that there is no usable space in the upper level.

The staircase itself impinges upon the lower level usable floor space leaving an actual of 4.155m² …. The actual floor space available for use by the occupant would be 4.155m² which is 1.96m² below the agreed minimum standard as set out by the Housing Act 1985 size for a bedroom.”

The UT noted on Part X HA 1985 standards that “Part X of the Housing Act 1985 is not concerned with the licensing of HMO’s but rather with the law on overcrowding of dwellings.  Under section 326 of the 1985 Act a room which has a floor area of between 70sq ft (equivalent to 6.51m²) and 90sq ft is notionally capable of being occupied by one person”. More on this below.

The issues on appeal were

i) Were Manchester entitled to set their own size criteria as part of the licensing scheme? Manchester’s document setting out licensing requirements stated

“room sizes must comply with the standards set out below”.  Measurement criteria are described which include that “the calculation of room size only takes into consideration the part of the room where the ceiling height is greater than 1.5m”, although later a figure of 1.525m or 5 feet is specified.  “Recommended minimum room sizes for HMOs” are then stipulated, with 6.5m² being given as the “minimum standard” for bedrooms for 1 person for whom separate living space is also provided elsewhere in the dwelling.  If no such separate living space is provided a bedroom must satisfy a minimum standard of 10 m².  These minimum standards for room sizes are not of the Council’s own invention, nor are they of modern origin, having appeared first in the Public Health Act 1936.

ii) Had the FTT conducted the hearing as a review, not a rehearing.

The UT began by allowing the appeal on issue ii) The FTT had conducted itself as a review, considering whether the Council’s decision was reasonable, rather than as a rehearing of all the relevant matters.

The UT went on to consider i) – the Council’s adoption of set space standards.

49. It is clearly permissible for a local housing authority to give guidance on what factors it will take into account in determining whether a house is reasonably suitable for use as an HMO by a certain number of occupiers.  The size of the accommodation is obviously a relevant factor in any such assessment.  I see no reason why guidance should not identify a specific room size which will ordinarily be regarded as too small to provide adequate sleeping accommodation.  Such guidance should not exclude the possibility that a room which falls short of the recommended size will nonetheless be capable of being taken into account as sleeping accommodation if other circumstances mean that, viewed as a whole, the house is reasonably suitable for the stated number.  Guidance on how space with restricted head height, such as beneath a sloping ceiling, ought to be treated is also appropriate, but again subject to the possibility of exceptions.  

50. There is some risk of confusion over the significance of the prescribed standards referred to in section 65 of the 2004 Act, compliance with which is necessary in all cases, and the “minimum standards” referred to in the LACORS guidance and in the Council’s own guidance document.  The guidance adopted by the Council is not a substitute for consideration of whether a specific house is reasonably suitable for a particular number of occupiers.  

51. Where the Council’s own “standard” is set by reference to the minimum space standards prescribed by section 326 of the 1985 Act, and explained on that basis (as in the decision letter in this case), there is a risk that it will be seen as a statutory minimum with the same force as the prescribed standards under section 65 of the 2004 Act.  There is nothing objectionable in the use of the 6.5m² derived from the 1985 Act as guidance but for the purpose of HMO licensing it has no statutory force in its own right. The introductory note to the Council’s guidance document offers the possibility of a flexible approach only where “the solution is within the legislative framework”.  The Council’s decision letter suggests to me that the minimum space standard is regarded by its officers as part of the “legislative framework” from which they are not free to depart in any circumstances.  Such an approach is based on a misunderstanding.

In short, local room size standards can be no more than guidance for a local authority decision, and cannot be determinative in themselves. Manchester had fallen into the error of taking its own standards as having statutory force. And another reminder (after the bedroom tax UT decisions) that the HA 1985 space standards are not taken as having any statutory force outside their specific (assessment of overcrowding) purpose.