A decision earlier this year by the Court of Appeal is set to fundamentally alter the landscape for fixing fees for HMO and selective licensing.
The decision by the Court of Appeal in the Westminster Sex Shop Fees case (Hemming (t/a Simply Pleasure) Limited v Westminster City Council) found in favour of the claimant who believed they had been overcharged for a £29,000-a-year licence to operate their business.
The court case looked at the way in which the European Services Directive (ESD) operates to curtail the ways in which domestic UK legislation provides for fees to be charged by local authorities to landlords for such licences, as well as those for selective and HMO additional licensing.
The RLA has now produced a briefing document about the decision, outlining the main implications and how they may affect landlords and local authorities.
Some of the implications include:
- A local authority can only charge for HMO licensing or selective licensing for:
- The actual and direct administrative costs of investigating the background and suitability of the landlord applicant; and,
- The cost of monitoring the compliance by licensed landlords with the terms of their licences.
- Fees must be reasonable and proportionate.
- Fees can only cover the actual cost of the application process (plus monitoring); i.e. only the cost of processing the application and monitoring can be charged.
- Local authorities cannot include the costs of enforcing the licensing scheme against unlicensed landlords in the licence fee.
- Set up charges for the scheme cannot be recovered.
- Overheads and general administrative costs cannot be recovered. This means that the running and capital costs of the relevant council department cannot be charged as part of the fee.
- The local authority is not allowed to make a profit.
Should a local authority chose to ignore the ESD and implement either a selective or an additional HMO licensing scheme based on a proposed budget that does not adhere to the ESD, then the local authority may become liable for overcharging landlords, and have to refund them in a cash payment with interest.
If landlords believe they have been overcharged they are allowed six years to submit a claim.
- Read ‘RLA Briefing – HMO and selective licensing fees’
- ‘Westminster Court of Appeal sex shop case raises questions about HMO and selective licensing fees’ (27th May 2013)
- ‘Westminster rejects landlord licensing’ (14th March 2013)