Taylor v Mina An Ltd – A case law update on the licensing of Houses in Multiple Occupation

We examine a case that looks at the licensing of Houses in Multiple Occupation. On 13th August 2019 the Upper Tribunal (Lands Chamber) overturned a refusal of a Rent Repayment Order (‘RRO’) by the First Tier Tribunal.

The RRO was applied for in relation to a house in multiple occupation (‘HMO’). A person who manages, or who has control of a property used as a HMO must obtain a Licence from the Local Housing Authority (‘LHA’) under the Housing Act 2004. It is a criminal offence not to do so where required and the landlord can be fined by the LHA and made subject to an RRO, which requires a repayment of up to 12 months’ rent.

The case has confirmed that such HMO Licences are personal and non-transferable, meaning that if the property is sold, the new owner cannot rely on an existing Licence to satisfy the licensing requirements.

Facts

The appellant in Taylor had taken a tenancy at the property on 01 July 2016 and left on 14 August 2018. There were other tenants in the property and it was not in dispute that the property was required to be licensed, as it was being used as an HMO.

The owners of the property when the appellant’s tenancy commenced, had a Licence which was issued in 2016 and would expire in 2021. The respondent in this case then purchased the property around October 2016.

The respondent did not apply for an HMO Licence until 12 May 2017. A Licence was granted to the respondent on 06 September 2018.

In November 2018, the appellant applied to the First Tier Tribunal (‘FTT’) for an RRO on the basis that the respondent had committed an offence by not having a Licence in place, under section 72(1) of the House Act 2004.

First Tier Tribunal

The FTT declined to make the award of an RRO to the appellant. Paragraph 3 of its decision explained that the respondent had not applied straight away for an HMO Licence because of a misunderstanding that the Licence ran with the land so that new owner did not have to get another Licence. The FTT rightly decided that this was not correct because, under section 68(6), a Licence may not be transferred.

However the FTT went on further to take the view that, while they agreed that the respondent landlord held no licence, the existing licence from the previous owner remained in force until such time it was revoked. The FTT’s decision set out that the Housing Act 2004 does not have provision for the licence to terminate automatically, without a decision from the authority, other than on the death of the licence holder under section 68(7). Following this, the FTT concluded that the licence therefore continues unless and until the LHA decide otherwise. In this case, the FTT noted that the licence granted in 2016 to the previous owner had not been revoked prior to the grant of the new licence to the respondent, so that the property continued to be licensed throughout. Therefore it said it had no power to make a RRO and dismissed the application.

Upper Tier Tribunal

The appellant appealed the decision. The Upper Tier Tribunal (Lands Chamber) (‘UTT’) allowed the appeal. In allowing the appeal, the UTT confirmed that it remains the law that where a property is sold and the new owner takes over management and control from the seller, that new owner requires a licence. At paragraph 13 of its decision the UTT set out:

“The previous licence cannot be transferred to the new owner and is of no assistance, whether or not expressly revoked, because the new owner does not have a licence.” 

The UTT did note the temporary exemption created under section 68(7) of the 2004 Act, which is where the licence ceases to be in force in the event of death of the licence holder. Section 68(8) goes on to say that for the following three months the house is to be treated as if it had the benefit of a temporary exemption notice. The UTT confirmed that a new owner must take steps to comply with the act.

Commentary

This case confirms the evident position that, a HMO licence does not run with the land and is personal. On the intended purchase of an existing HMO, buyers should make an immediate application for a new Licence. An application can be made before it is required with the Licence to come into effect on a future date.