Buy-to-let landlords could have grounds to challenge HMO licensing fees which could save them hundreds of pounds each year, according to Commercial Trust Limited.
The specialist buy-to-let mortgage broker points to a recent court case that has potentially opened the door for landlords to challenge the fees that local authorities are setting, for HMO licenses.
This news comes just weeks until the deadline for new HMO licensing rules, estimated to impact on 177,000 more landlords, is introduced on October 1.
For many landlords, the price of the license is not the only cost. Further expenditure may be required to make changes to the property in question, to ensure that it meets licensing standards.
But the recent court case of Mr Peter Gaskin v LB Richmond Upon Thames  EWHC 1996 (Admin), has laid to question the validity of some licensing fee costs, set by local authorities.
In the above case, the High Court ruled that license fees can only cover the cost of the licensing scheme, not other costs such as enforcement.
The Administrative Court decided that the claimant, Peter Gaskin, an HMO landlord, was providing a service within the meaning of EU law, by the private letting of accommodation.
Because Gaskin had met the EU requirements for providing a service, the court determined that the fee charged by the local authority for an HMO licence, had to be structured in a way which complied with EU law.
The property in question is located in the London Borough of Richmond Upon Thames.
Under the terms of the Housing Act 2004, Gaskin needed to obtain an HMO licence from the London Borough of Richmond, before he could let out rooms in his property, located in the local area.
HMO licenses have to be renewed every five years and when the landlord came to renew his HMO licence, the council asked him to pay a fee covering not only the costs of processing his application, but also contributing towards the authority’s costs of running the HMO licensing scheme, and that eventually led to him being prosecuted in the Magistrates’ Court for operating an HMO without a licence.
Under EU Directive 2006/123/EC (“the Services Directive), there is a provision in its article 13(2), that where a charge is imposed for a person to apply to have access to a service activity, the charge must not exceed the cost of the authorisation procedures.
In this case, the question of whether the private letting of accommodation amounted to a service, would determine whether the London Borough of Richmond Upon Thames would be allowed to charge an application fee covering both authorisation procedures andthe costs of managing their HMO licensing scheme.
The Administrative Court handed down judgment on July 31st, 2018, stating that Gaskin was providing a service within the meaning of EU law.
The Court therefore held that the London Borough of Richmond Upon Thames’s fee for an HMO licence was unlawful. The charge covered costs that extended beyond the cost of processing the licence application. It was ruled that the council had therefore not been entitled to demand the fee which it had demanded.
Andrew Turner, chief executive at Commercial Trust Limited, commented: “This is an interesting case which may set a precedent for some landlords and could have the potential to save HMO landlords hundreds of pounds, if some local authorities have been charging more than they were legally entitled to, for HMO licenses.
“This is a matter of law and I would urge any HMO landlords that believe they may have been overcharged, to seek professional legal advice.”