Part 2 of the 2004 Housing Act was intended initially to apply to the larger, higher risk HMOs which had three or more Storeys AND Occupied by 5 or more people.

However, they way the Act is written it covers ALL HMOs from three persons sharing and above.

At present the way in which the Act has been adopted is in two parts, Mandatory and Additional, a third is Selective Licencing which will be dealt with later

What is a storey?

1. A section or horizontal division of a building, extending from the floor to the ceiling or roof lying directly above it

2. all the rooms on the same level of a building

3. any horizontal section or division

So, you can have a property with:

A basement, ground floor first floor – 3 storeys

A ground floor, first floor and second floor – 3 storeys

Ground floor, first floor and attic conversion – 3 storeys

A self contained flat to the ground floor, a separate two storey maisonette above – 3 storeys

A shop to the ground floor and a self contained flat above on 2 floors – 3 storey

A Mezzanine floor would constitute a storey

You will need to check with your local authority for further information on a specific property.

So if we now take this and add it to Section 258 the definition of a single household you will see that a three storey property being occupied by 5 or more persons, who are unrelated forming two or more households would need to be Licensed under the Housing Act 2004, as this fits with the criteria of Mandatory HMOs.

Fit and Proper Person

The License holder must be a FIT and PROPER PERSON – That does this mean?

The Local Authority must have regard to the statutory criteria set out in Section (66 (2) and have regard to any other facts or matters which it considers to be relevant

Matters to which the Local Authority must have regard.

• Any offence involving fraud, or other dishonesty, or violence or drugs or in Section 3 of
  the Sex Offences Act 2003
• Practiced unlawful discrimination of the law in connection with the carrying out of any
  business
• Contravened any provision of the law relating to housing or landlord and tenant law –
  Illegal eviction etc.
• Acted other than in accordance with any code of practice for the management of HMO’s

Associates

The Local Authority may take into account evidence of any of the above conduct by a person “associated or formerly associated with”, the proposed licence holder or manager “whether on a personal, work or other basis”, if relevant.

Any “Spent” convictions cannot be taken into account. However. A lack of conviction may non mean that the incident was not relevant.

Managers

Assumption: the person having control of the property is the most appropriate person to hold the Licence. i.e. the person who receives the rents.

The proposed manager, if not the Licence Holder, and all other persons involved in the management must also be fit and proper

The Decision

If the Local Authority is not satisfied – IT MUST REFUSE and make an Intermediate Management Order instead. Any proposed reasons to be given in advance. There are 14 day to make representations and the Right to appeal to the Residential Property Tribunal (RPT).

Some Local Authorities are also operating a “Zone”, so if the Landlord resides outside this zone and cannot reasonable demonstrate that the property is being managed properly. The Local Authority may appoint a local management agent to be the License Holder.

For the Manager this may have a serious impact on how they act for their client, as they will now have the full weight of the obligations on their shoulders rather than that of the owner.

The Local Authority must grant a License IF it is satisfied that:

The HMO is reasonably suitable (etc)

The Licence holder would be a fit and proper person.

So to summarise:

A property which is three storeys, occupied by 5 or more persons who are unrelated forming two or more households, the owner must apply to the local authority for a mandatory licence. To be the License holder this person must be a Fit and Proper Person.

 Remember that a habitable basement or attic conversion counts as a storey

Penalties for failing to License under Part 2 OR Part 3

If the legal owner fails to Licence a property which requires a Mandatory Licence under Part 2 or Additional Licensing under Part 3 of the Housing Act 2004, he/she will be committing an offence which a local authority can prosecute. The penalty is up to £20,000

Bajinder Bahi – known locally as Gilly – was fined more than £3,000 at Stratford Magistrates Court in June 2007 for failing to licence two flats in Warwick Street which were both occupied by students from Warwick University. In other recent cases landlords have been fined from £1000 up to £13,000 for not licensing an HMO.

Rent Repayment Order

If a landlord has been convicted of operating an HMO without a valid license the local housing authority may apply for a Rent Repayment Order to reclaim money paid to the landlord by means of housing benefit. Tenants including former tenants can also apply for a Rent Reyapment Order following the council being awarded an order for the same property. This would be to claim back money they have paid during this period

An example: a landlord in Leamington was ordered to repay his tenants more than £18,000 in what is believed to be the first case of its kind in Britain. The tenants claiming back rent while the property remained unlicensed between September 2006 and June 2007.

Whilst the property is unlicensed, the landlord will be unable to serve any legal Notice on a tenant for arrears of rent or eviction under Section 21 of the Housing Act 2004.