Summary: Mr N is a landlord who complains about the Council’s introduction of a Selective Licensing Scheme. The Ombudsman finds not fault and cannot question the merits of the Council’s decision making.

The complaint

1. The complainant, whom I shall refer to as Mr N, is a landlord, with multiple properties. He complains the Council:
1. has introduced a Selective Licensing Scheme (SLS). But:

• it did not consider the implications for properties like his, that are houses in multiple occupation (HMOs) but were not licensed under the preceding HMO Schemes;
• under the new Scheme, he had to individually register each unit of accommodation, despite these not, practically, being separate;
1. has now advised him to he could apply for its Block Licensing Scheme;
• but that Scheme is meant for purpose built flats; and
• even if the applications were successful, the cost of applying for this is more expensive than a HMO licence under the mandatory and additional licensing schemes. That makes the Council’s proposals unfair;
1. the Council’s fees for its SLS have increased by around 40%. But:
• the Council said, during the consultation period, the SLS was fully costed;
• these fee increases are because of maladministration in the way the Council first introduced the Scheme (particularly around information technology (IT) that was not fit for purpose). So it is unfair to pass these costs onto landlords;
1. the Council drew up the list of properties on very old information (some going back to the Community Charge). Mr N gives the example of his one of his properties. It has five lets. But there are nine listed on the Council’s database.

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The Ombudsman’s role and powers

2. We investigate complaints of injustice caused by ‘maladministration’ and ‘service failure’. I have used the word ‘fault’ to refer to these. We cannot question whether a council’s decision is right or wrong simply because the complainant disagrees with it. We must consider whether there was fault in the way the decision was reached. (Local Government Act 1974, section 34(3), as amended)
3. If we are satisfied with a council’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)

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How I considered this complaint

4. As part of the investigation, I have:
• considered the complaint and the documents provided by Mr N;
• made enquiries of the Council and considered its response;
• considered information about the Council’s decision making when introducing its SLS;
• spoken to Mr N;
• sent my draft decision to Mr N and the Council and invited their comments.

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What I found

Legal and administrative background

Licensing of houses in multiple occupation

5. Within the 2004 Housing Act (which I shall refer to as the Act) is a section setting out the meaning of ‘house in multiple occupation’. It says to be a HMO, a building must fall into certain categories:
• a building or flat in which more than one household shares a basic amenity;
• a converted building that is not entirely self-contained flats;
• a building a local authority declares is a HMO; or
• a converted block of flats where the conversion does not meet building standards, when less than two-thirds of the flats are owner-occupied. The flats in these blocks are usually self-contained.

As the rules for the last type of HMO is set out in Section 257 of the Act, these types of properties are usually known as ‘Section 257 HMOs’.

6. Part III of the Act gives local authorities the discretion to introduce ‘Selective Licensing Schemes’. These provisions require all private rented housing in a defined area to be licenced, subject to a few exemptions.
7. The Government has produced guidance on the introduction of selective licensing. This:
• sets our grounds that must be met before local authorities can consider introducing selective licensing;
• says a local authority must consult before introducing a licensing scheme;
• says landlords who rent out properties in a SLS area are required to obtain a licence from the local authority for each of their properties.

Costs

8. The Act gives the Council the power to consider its costs when setting fees for licence applications.
9. The Council says it uses guidance from the Local Government Association (LGA): “Open for business: LGA guidance on locally set licence fees”. This says:

• “… it is an accepted principle that licensed activities should be funded on a cost-recovery basis, paid for by those benefiting from the licensed activity, rather than drawing on the public purse.”
• “Charges must be reasonable and proportionate to the cost of the processes associated with a licensing scheme.”
• “Annual reviews allow for the fine tuning of fees and allow councils to take steps to avoid either a surplus or deficit in future years”.

The Council’s schemes

10. The Council operates several licensing schemes applicable to HMOs:
• Mandatory licensing. This relates to specific properties which the Act says all local authorities must require licences for.
• Additional licensing. The Council ran its first Additional Licensing Scheme from 2014 until the end of 2018. It introduced a new scheme on 1 January 2019.
• Selective licensing. The Council introduced a scheme starting on 1 August 2018. This is a licensing scheme for private sector landlords. It requires a licence for each property.
• Block licensing. Although this scheme is intended for purpose built flats, the Council has extended eligibility to converted properties that meet certain conditions. This includes Section 257 HMOs.

The Council’s Selective Licensing Policy

11. The Council’s policy says it prefers separate dwellings in a building to have their own property licence. But it recognised there were circumstances where it would be beneficial to landlords to offer a Block Licence option.

What happened

12. Mr N’s is a landlord with multiple properties in the city. These properties are mostly Section 257 HMOs.
13. In early 2017, the Council consulted on introducing a SLS. The issue of separate licensing for individual units within a single-ownership block was raised during the consultation. After the consultation, the Council introduced a revised SLS in August 2018.
14. In the run-up to the start of the SLS, Mr N was contacting the Council about problems registering on the Council’s website and problems with the council tax records the Council was using.
15. The Scheme requires most privately rented homes in designated parts of the city to have a licence. This includes Section 257 HMOs, that were exempt under earlier schemes. The Council says it accepts that this was despite them all, “… not, practically being separate (i.e. Land Registration, inability to sell separately)”. It does note however that landlords could choose to register the properties differently, which would allow them the option of selling the units individually.
16. Initially the Council required all SLS applicants to apply online. It says in September, it introduced a paper application. Mr N says this was after it found its IT system could not cope with the application process. Mr N complained to the Council about this.
17. The Council’s January 2019 response to Mr N’s complaint:
• gave its figures for ‘outgages’ (periods when a power supply or other service is not available or when equipment is closed down). It said these accounted for only 0.07% of its website’s total use;
• acknowledged the relevant form sometimes did not load as quickly as people would like. But it said it had tested the process and it typically took 40 minutes to complete. It contended this was a not unreasonable amount of time for a licence that ran for five years.
18. The Council’s final complaint response to Mr N noted the following.
• It disagreed with Mr N’s complaint that it had forgot to put Section 257 HMOs into its fee structure.
• It disputed Mr N’s assertion he had to register a non-existing property. The reality was the property was named slightly differently.
• It would like to prioritise Mr N’s applications and offered him a single point of contact to assist him in doing this.
• It advised Mr N, if he chose to make a block application “…and you have paid a higher licence fee for the individual applications, Nottingham City Council is willing to pay the difference back to you.”
• All of Mr N’s properties were by then licenced.
• It provided Mr N a comparison with other large city councils, showing the Council’s fee structure was not the most expensive.
19. Mr N was not content with the Council’s response, so he complained to the Ombudsman. In response to my enquiries, the Council advised:

• “for comparative purposes the Council has calculated the difference in cost between Individual Property Licences and Block Licences for Mr [N]s portfolio. Out of the two licence options available, it is more financially advantageous for Mr [N] to maintain his current approach of having Individual Property Licences … than it is to apply for a Block Licence. Cost is not the only factor to be considered but this is a matter for Mr [N] to come to a decision upon.”
• “The Council's policy was developed to recognise that legislative provisions contemplate circumstances in which a single property licence may relate to more than one separate dwelling in the same building.”
• The SLS licence fee was set using the same methodology used for previous licensing schemes which had been approved by an independent accountant;
• It acknowledged some delays and apologised.
• Mr N had paid for all his (five year) licences at the original fee structure (from April 2018). He had not had to pay an increased licence fee the Council introduced on 1 April 2020.
• The Council sent me information about this. This shows the IT part of the increase was only about four percent, although there was a larger increase overall. The Council describes the fee change as a ‘revised fee structure’. The minutes of its Executive Board meeting that considered the issue are publicly available – see Appendix 1. These say the Council agreed the revised fee structure after a year of operating and processing applications. So it had more accurate information of resource implications.

Analysis

The introduction of the SLS scheme and the option of applying for a block licence

20. Mr N is concerned about the Council’s decision to charge each of the units in his ‘Section 257 HMOs’ as a separate unit of accommodation, despite them not being so. His view is that was due to an oversight by the Council.
21. The government’s guidance envisages each property requiring a separate licence. The Council also contends Mr N and other landlords did have other land registration options. And, as set out in appendix one, the Council can evidence it carried out a consultation before introducing the Scheme. I cannot see any fault in this.
22. The Council allowed landlords of Section 257 HMOs access to its Block Licensing Scheme, after landlords raised concerns about the process of applying for the SLS. I do not share Mr N’s concerns about this option – it was within the Council’s discretion to offer it. Although the Council says the costs of applying for this scheme are expensive for Mr N, it would presumably have administrative benefits. So the option of this scheme is one Mr N could consider in the future.
23. I see no fault with the Council’s decision making in its introduction of the SLS or allowing access to the Block Licensing Scheme. It is not for the Ombudsman to question the merits of the decisions it has made.

The licence fee

24. The Act allows councils to set fees for property licences that cover their costs, although they cannot make a profit from fees. The Council says the licence fee was set using LGA guidance. The fee is comparable with that charged by other local authorities. I find no grounds to criticise this.
25. Mr N says the Council increased its fees because of problems with its IT, leading to increased costs. The Council has sent Mr N information which shows the IT costs went up by around four percent, which is not an excessive increase.
26. But I understand that Mr N’s concerns might be that the Council has had increased administration costs due to, what he sees as, the Council’s maladministration.
27. The Council describes the fee change as a revised fee structure, following a review. I am not convinced it is the Ombudsman’s role to investigate whether the Council was entitled to increase its fees. This is because:
• it is wholly appropriate for a council to keep its fees under review – to ensure it is neither making or losing money;
• it is unlikely the Ombudsman could make the casual link Mr N suggests between any fault and the increased licence fee;
• licence fee costs are an issue that has been the subject of caselaw, including to the Supreme Court; (R (on the application of Hemming (t/a Simply Pleasure Ltd) and others) (Respondents) v Westminster City Council Appellant))
• the Ombudsman is not a substitute for the court: it is not our role to make decisions on contested questions of fact and law such as this. That requires the more stringent and structured procedures of civil litigation for its proper determination.
28. A further reason to not investigate the matter further is because the fee increase has not caused Mr N a personal injustice. That is because the Council says he registered his properties under the old fee structure.

The incorrect information

29. The Council’s explanations suggest that any injustice to Mr N is not significant enough to warrant the public expense of further investigation by the Ombudsman.

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Final decision

30. My decision is there was no fault by the Council. I have completed my investigation.

Investigator’s decision on behalf of the Ombudsman

Appendix 1

Nottingham City Council – Housing Licensing Schemes

Set out in the table below are direct web links to specific reports and Policies adopted by the Council’s Executive Board in relation to its Housing Licensing Schemes.

1. Proposal for a Scheme of Selective Licencing for Privately Rented Houses – Executive Board – Key Decision – 22 November 2016

http://committee.nottinghamcity.gov.uk/ieListDocuments.aspx?CId=177&MId=5771&Ver=4

2. Proposal for a Scheme of Selective Licencing for Privately Rented Houses – Consultation Results and proposal to submit Scheme to the Secretary of State - Executive Board – Key Decision – 17 July 2017

http://committee.nottinghamcity.gov.uk/ieListDocuments.aspx?CId=177&MId=6595&Ver=4

3. Implementation of a Scheme of Selective Licensing for Privately Rented Houses and approval of licence conditions and fee.

http://committee.nottinghamcity.gov.uk/ieListDocuments.aspx?CId=177&MId=6603&Ver=4

4. Housing Licensing Houses in Multiple Occupation (HMO) Revised Fee Structure Dated 18/09/2018

https://committee.nottinghamcity.gov.uk/ieIssueDetails.aspx?IId=41516&PlanId=0&Opt=3#AI25196

5. Executive Board Report on Block Licensing dated November 2018

https://committee.nottinghamcity.gov.uk/ieListDocuments.aspx?CId=177&MId=7396

6. Implementation of proposed scheme of Additional Licensing of Houses in Multiple Occupation

Implementation, following consultation, of a new scheme of Additional Licensing of HMOs to run from 1 January 2019 to 31 December 2023

https://committee.nottinghamcity.gov.uk/mgIssueHistoryHome.aspx?IId=41929&optionId=0

7. Local Government Association Guidance on Locally Set Licence fees

https://www.local.gov.uk/open-business-lga-guidance-locally-set-licence-fees

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Investigator's decision on behalf of the Ombudsman