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Guidance on the Mandatory Licensing of Houses in Multiple Occupation

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Setting Up and Managing a Mandatory Licensing Scheme for HMOs

Introduction

The basic principles of the licensing scheme are set out in the new Order and in Part 1 and Schedule 1 of the Civic Government (Scotland) Act 1982. Appendix 1 gives details of the general licensing provisions established by the 1982 Act and those in the Order. This section of the guidance sets out in more detail the steps that could be taken in setting up a licensing scheme and various matters to be taken into account when operating the scheme. Those local authorities that already have discretionary licensing of HMOs in place will be able to build on their existing systems when introducing mandatory licensing, but most local authorities have no experience of this. Even those in the former category might consider changes to the way in which they approach HMO licensing, given the increase in the number of properties to be licensed.

The material below is divided into three main sections, dealing with the setting up of a licensing scheme; the efficient operation of the system; and the relationship between local authorities and HMO operators. These are not exhaustive descriptions, but are intended to give pointers to local authorities, partly based on existing good practice.

SETTING UP A SCHEME

Planning

The following are the main aspects of planning the introduction of mandatory licensing of HMOs.

Establishing a framework for implementation

In order to co-ordinate the introduction of licensing, the local authority should first decide on a lead department. That department would raise political awareness of, and establish commitment to, licensing among key players, such as the chief executive and committee convenors.

The lead department should consider bringing together the main players (from within the local authority, and also the voluntary sector, representatives of HMO operators, fire service, police, etc) in an implementation working group. Relevant local authority departments will include housing, environmental health, building control, planning, legal services, and social work. Representation may be fairly high level to start with, but when the working group becomes more operational participation will probably be delegated. It will be necessary to establish the reporting structure and support (a local authority committee) for the working group and to ensure the clarity of its role. Consultations should take place within and outside the working group, following which the necessary tasks can be set out.

Identifying the required information

The lead department should consider carrying out a review of current activity regarding HMOs within the local authority. This should take account of the operation of any discretionary licensing scheme; any registration scheme and the use of other powers under the Housing (Scotland) Act 1987; and action under planning and other relevant legislation. This review should inform the co-ordination of action on HMOs. Consideration should also be given to other issues that might relate to HMO licensing, such as homelessness.

Information gathering is essential for the effective working of a licensing scheme. It will be necessary to estimate the number, size and types of HMOs in the area, using census data, relevant local authority records (such as those relating to environmental health cases, planning and building control matters, council tax and housing benefit, within any limitations imposed by the Data Protection Act 1998), and any other relevant information available. The local authority might also want to carry out field visits. Other sources of information might include voluntary organisations and university accommodation officers. Once this has been done, the local authority can estimate the effect that the numbers of applications involved will have on the licensing system. It should be borne in mind that there might be a lot of applications when the scheme begins, although the pressure will be reduced by the fact that the introduction of mandatory licensing is staged.

One longer term means of obtaining information that might be considered, particularly by local authorities that do not currently have a discretionary licensing scheme, is setting up a registration scheme under Part VIII of the Housing (Scotland) Act 1987, which defines HMOs as ‘houses which, or a part of which, are let in lodgings, or which are occupied by members of more than one family.’ This definition could include some premises occupied by as few as two people. This would establish contact with all the HMO operators and give detailed information on the premises that would need to apply for licences at each stage of the implementation of licensing as the occupation threshold reduces. As well as providing one method of preparatory research, this would also be a basis on which to start work on HMOs. As the threshold comes down, the registration schemes would be progressively superseded by mandatory licensing.

Putting the structure in place

Having carried out planning for the introduction of mandatory licensing, the next stage is to put in place the necessary structure.

Establishing an administrative framework

In order to establish a framework for the operation of the system, the working group should agree on each department’s role in the system, including the exercise of statutory powers, and how the departments will work together. The role of the housing service in particular should be considered, to ensure that it plays a full part in all aspects of work relating to HMOs.

It will be useful for the working group to continue in existence for liaison purposes, to promote a corporate and consistent approach, to provide a forum for HMO policy development, and to clarify professional responsibilities, if necessary, but the lead department will be responsible for the actual operation of the licensing scheme. There should be a section within the lead department that deals with this and the central co-ordination of matters relating to HMOs. Some local authorities might prefer to establish an inter-departmental HMO unit for this purpose. References to the HMO section in this guidance can refer to either of these two types.

In the HMO section there should be at least one officer who is the initial point of contact for anyone with information or queries about HMOs, whether operators, occupiers, members of other local authority departments, or others. This person or persons would probably also be involved in the processing of applications. The HMO section would send out application forms and process them on their return.

The section would also co-ordinate the local authority’s actions on HMOs; it is important that in doing so a balance is struck between, on the one hand, housing concerns and the position of occupiers, and, on the other, technical considerations. The purpose of mandatory licensing is not to drive HMO owners out of business, but is to ensure that they provide safe, quality housing.

In order to obtain economies of scale, a local authority with only a few HMOs might consider banding together with others to establish a joint structure for dealing with inspection and perhaps other aspects of licensing, although the decision on whether to grant a licence would remain with the relevant local authority responsible for the area in which the HMO is located. There may also be scope for contracting this work out to a larger local authority or to the private sector. This question will be examined when applying Best Value principles to the local authority’s activities.

Collecting statistics and monitoring the scheme

A system will be required to review the numbers in the scheme and to collect statistics. These will include numbers of applications, licences granted, refusals and types and sizes of HMOs; the length of time for which licences are granted; and reasons for refusals. The system will include checks on the accuracy of information.

This information will be necessary because the Scottish Executive will monitor numbers. It will also feed into the local authority’s own monitoring process, which will have to be established. This will include key performance indicators such as the time taken to process applications, renewals, enquiries, etc, and the cost of doing so. Performance indicators should be qualitative as well as statistical.

Part of the monitoring process would be surveys of applicants, licensees and tenants, which could be carried out by telephone. Surveys could also relate to the complaint procedure. The system will also monitor what workers are doing and where, and who is being refused a licence.

Setting fees

Under the 1982 Act, local authorities are expected to ensure that fees received cover the costs of licensing schemes. Fees will vary in different parts of the country, depending on the numbers and standard of HMOs, but they should be kept as low as possible.

There is a good case for setting renewal fees at a lower rate than the initial fee, since in most cases the initial inspection and other procedures will be more extensive than the action required for renewal.

Local authorities might consider introducing a sliding scale of fees, related to the number of occupants. A lower institutional fee could be charged for identical flats within university residences, as Edinburgh has done in its discretionary licensing scheme.

Where local authorities have entered into arrangements with fire authorities for the latter to carry out fire inspections, they will want to discuss with the fire authorities whether to make payments towards their costs and, if this is agreed, the level of charges that would be appropriate. In setting licence fees local authorities will want to take account of any such charges.

Consideration could be given to allowing operators to pay fees monthly by standing order or direct debit. However, local authorities would have to consider potential problems if, for example, a business ceased trading during the year.

Publicity

It will be necessary for the local authority to publicise the introduction of licensing. This should include advertising and producing information material, such as leaflets for HMO operators. Licensing could be publicised on websites. There should also be written standards, showing all the rules and regulations with which operators will have to comply, written in a clear and easily understood style. The HMO section might consider organising seminars for operators. There should also be leaflets and posters directed at occupiers, making clear the standards they should expect and giving the HMO section contact number in case of problems. When a licence application is received, leaflets could be delivered to occupiers at the relevant address. Leaflets explaining mandatory licensing should also be provided for neighbours of HMOs.

EFFICIENT RUNNING OF THE SYSTEM

Below are some suggestions for ways in which the licensing scheme could be operated more efficiently. Local authorities will want to consider which of these are appropriate in their areas.

Inspections

Multiple inspections of an HMO by members of different departments on different occasions can be an inefficient use of resources and cause annoyance and expense to operators. Where it is necessary for more than one inspector to go to the premises (which will probably always be the case on a first visit), the HMO section should consider arranging a group visit. This should also ensure that the operator receives consistent advice.

In the longer term the best solution might be to have inspection staff adequately trained – with cross training of professionals – to be able to carry out an inspection alone. They should be able to spot any signs that would justify calling in an expert in fire safety or another topic to make a more detailed inspection. In most cases this would mean only one inspection visit (apart from fire inspections) to an HMO was required. Whichever department leads on this, there should be a comprehensive list of issues which need to be considered, including technical standards and tenancy issues. In some cases, a specialist may need to be brought in.

Usually the fire authority should carry out initial fire inspections; if possible, this should be at the same time as the general inspection. Thereafter, any fire inspections could be carried out by the local authority’s inspector, except in cases of High or Very High risk, where the fire authority should continue to inspect. However, some local authorities may agree other arrangements with fire authorities, such as having their own staff carry out the initial inspection and calling in the fire authority where necessary. The fire service will advise on fire precautions and certificates.

Visits should be carried out only when necessary (although there is a need for random inspections to check that conditions are being complied with). For example, tenancy management issues, such as leases, can often be checked without a visit to the HMO. Visits should usually be by prior arrangement with the operator, but there may be exceptions when landlords can not be contacted or the attendance of the landlord is inappropriate (for instance, because information regarding the management of the premises is being sought from residents).

Although risk assessment is not formally part of the licensing system, in practice local authorities should be able to prioritise inspections, concentrating staff and visits on problem HMOs.

Joint working

Joint working with the fire service, police, voluntary organisations and other relevant agencies should be established when the scheme is being implemented. It is useful to build up informal contacts with all of these bodies as well as the formal structure. Liaison among local authorities, the police, the fire brigade and other agencies in the application of the Licensing Act could provide examples of good practice in this regard.

The involvement of the fire and police services is dealt with elsewhere. Voluntary organisations can advise on standards of accommodation, tenant advice and management. They can also provide information on particular properties and can in turn look out for complaints from tenants in properties of which they are informed and pass them on. These could relate to physical conditions, harassment by HMO operators, illegal eviction, and so on. Voluntary organisations can be a brake on local authorities taking enforcement to the point of closure, since they are exclusively concerned with the position of the residents.

Internally, the HMO section should also consider establishing contacts with the Social Work Department, since clients may tell social workers about problems in HMOs. The local authority should ensure that all of its relevant staff know whom to contact about HMO issues.

Contacts with occupiers

An information and advice service should be provided for occupiers, including advice on where to obtain assistance on such matters as key schemes and difficulties with deposits. This should all be within the agreed information and advice strategy of the local authority. HMO contact officers would refer any approaches on to the appropriate department. They would also be the first points of contact in the complaint procedure.

Contact should be made with occupiers, if they are present, during inspections, when they can be asked about any problems. However, it should be borne in mind that they may not feel comfortable about raising problems on the premises, so publicity materials should be left with them. There should be co-operation with other agencies and departments dealing with occupiers, including housing benefit sections, to ensure that they are aware of the system.

Information should also be provided to neighbours of HMOs and other interested parties.

Delegating decisions on applications to a senior officer

Local authorities will have to decide whether determinations on licence applications should be made by a committee – and, if so, which one – or delegated. The most efficient method might be for a senior officer to consider applications in the first instance and only those applications that had been refused or where there were valid (particularly public) objections (often objections are only on technical grounds) would go before the committee. A procedure would have to be established to deal with unsuccessful applicants who take further action, including appeals to the sheriff court. Appendix 1 explains the right of appeal to a sheriff.

Granting licences subject to fulfilment of conditions

The period for a local authority to make a final decision on an application is being extended from six months to twelve months, so that HMO operators will have a longer period in which to obtain necessary permissions or carry out works required before a licence can be granted. The Civic Government (Scotland) Act 1982 allows licences to be granted (or renewed) subject to conditions. One example of this would be making a grant if the operator can prove that preparations for works required are well under way, for instance, by producing a contract with a builder. A licence may also be granted subject to fulfilment of conditions if minor matters are outstanding. Such a licence would be granted for the minimum period and there must be processes in place to check that the operator carries out the work, in order to have an effective control on standards. If the work is not done, it would probably be appropriate not to renew the licence.

In some circumstances, where an institutional landlord (such as a university) has to carry out improvements to a number of properties, a licence could be granted on the basis of an agreed staged programme of works, where the local authority is satisfied that they will be carried out.

Enforcement action

Enforcement procedures have to be established, to deal with unsatisfactory HMOs that fail to obtain licences. In particular, local authorities have to decide how to treat tenants if an HMO closes due to the refusal of a licence. An example of good practice is for the local authority to give priority to the rehousing of tenants in this situation. Local authorities should have a clear statement of what they will do in such circumstances (and also if there is a fire or other imminent risk).

In some cases where a licence is refused, the operator will be unable to cease operating the premises as an HMO immediately, because of statutory restrictions or the terms of the tenancy agreements. It is considered likely that this could comprise a reasonable excuse for operating without a licence, under section 7(1) of the 1982 Act, provided that the operator takes such steps as can be taken at once to bring about the termination of the tenancies as soon as is legally possible.

Involvement of the police and Procurator Fiscal

Local authorities need to liaise and establish good relations with the police and procurator fiscal, since prosecution is the ultimate sanction in the licensing scheme. Officials could meet the procurator fiscal to discuss any problems and to find out what he or she wants and needs with regard to cases. Reports to the Procurator Fiscal – A Guide for Non-Police Reporting Agencies (third edition, 1999) provides guidance on the information that has to be included in all reports to the procurator fiscal. The police are likely to receive some complaints relating to HMOs, which will be useful in considering whether to grant or renew licences, so communication is important. The involvement of the police in the authority’s implementation group should be used to provide a basis for co-operation on enforcement and on the provision of information regarding whether an applicant is a fit and proper person.

Renewal of licences

Local authorities will have to decide how to deal with applications for renewal of licences. Re-inspecting every property every time there is a renewal application might be a waste of resources. One suggestion is that, in order to use resources efficiently, self-regulation could be the general basis of the scheme once initial licences have been issued. Under the 1982 Act, licence holders must obtain the prior consent of the licensing authority before making any material change to the premises. Licence holders could be required to certify, in addition, that the necessary standards were being maintained. If the authority was satisfied that no change had occurred, the licence could be renewed automatically. If there were any doubt, an inspection would take place. Inspections would be carried out on a random basis to provide a check; local authorities would always have the right to inspect. There would also be inspections where complaints were received from residents and appropriate action would be taken if complaints were received from neighbours. This means that the complaint procedure would have to be publicised. Complaints and comments from other departments and agencies could also lead to inspections. Generally, the onus would be on operators to certify that their premises were continuing to meet the required standards. Making a false statement in making an application for a licence is an offence under section 7(4) of the 1982 Act. Safety certificates would be submitted with applications (whether renewals or initial applications) as further evidence.

The Scottish Executive intends to produce further guidance to local authorities on the use of priority planning in deciding the frequency of inspections related to applications for renewal and in determining the length of licences.

Local authorities can grant licences for up to three years, and in deciding the duration of a particular licence they should consider whether there have been any substantiated complaints or other problems regarding the HMO.

Continuing powers

The new Order will not repeal any previous legislation that affects HMOs, except (eventually) the discretionary licensing Order. Other statutory powers will continue in effect, including those in the Housing (Scotland) Act 1987, such as powers to apply management codes, require provision of means of escape from fire, and make control orders. There will continue to be a place for the use of these powers, rather than simply relying on the power to refuse or withdraw licences.

DEVELOPING PARTNERSHIPS WITH OPERATORS AND GRANTS POLICY

Mandatory licensing aims not to close down HMOs, but to ensure that they all provide safe, good quality accommodation. Local authorities should try to work with private operators towards the achievement of this aim and should ensure, in promoting the licensing system, that this co-operation is stressed. Responsible operators will benefit, since licensing will prevent them from being undercut by those whose properties are not of a reasonable standard and should improve the image of the private rented sector.

Private Rented Sector Strategy

The introduction of mandatory licensing of HMOs can be used to develop a private rented sector (PRS) strategy within a local authority’s overall housing strategy. HMO licensing, because of its statutory nature, can form the basis for a wider strategy.

Partnerships with operators

Local authorities should consider developing partnerships with reputable private landlords to promote the supply of good quality private rented accommodation and to develop a private rented sector strategy. Incentives for operators in the system should be considered. There should be an information and advice service for operators that goes as wide as possible. For example, model leases could be provided, advice on sanctions given, and seminars arranged. An operator forum could be set up. Wider accreditation for operators and agents who operate satisfactory HMOs could be considered, based on their meeting standards on such matters as inventories, deposits kept in secure accounts and returned, and other guarantees that go beyond physical conditions. Licensing and accreditation, by showing that operators and their properties have reached a certain standard, can make them more attractive to tenants.

It should be borne in mind that some owners will employ agents who are members of professional organisations, such as the RICS, and that such agents might have to meet their own standards. This could mean that the properties run by them are less likely to require close supervision. Some local authorities may wish to consider allowing the members of such professional organisations to provide certificates in respect of individual properties confirming that the benchmark standards and tenancy management standards have been met. The provision of such certificates might be recognised by a lower fee for registration, as the local authority would not need to inspect all such properties or monitor them so closely. Where such a scheme is established the local authority may still wish to carry out random checks to verify the correctness of certificates being presented and this could of course involve spot checks on particular properties. Should certificates of compliance be fraudulently presented then the local authority would probably wish to consider prosecution, or if there was evidence of negligence to inform the professional body concerned. The development of such schemes involving professional bodies could reduce the workload on local authorities and recognise the role played by professional letting agencies.

Absentee landlords should be encouraged to appoint local agents.

Partnerships should also be developed with not-for-profit operators. Registered social landlords (RSLs) are subject to regulation by Scottish Homes, whose aim is to ensure that RSLs provide high standards of service and management. If problems are found with HMOs owned or managed by RSLs, Scottish Homes Registration and Supervision Department would be glad to be informed, particularly if any matter is not promptly and effectively dealt with when notified to the RSL.

Grants

It is up to local authorities to decide on priorities as regards grants for fire safety and repair and improvement, so they will want to review policy on grants for HMOs. In some circumstances grants may be mandatory, where they are linked to statutory notice provisions under the Housing (Scotland) Act 1987². In other cases discretionary grants may be given to private landlords operating HMOs. Local authorities will want to consider the use of grants to complement their HMO policies. For instance, it would be desirable for local authorities to consider prioritising grants towards works that are required in HMOs over and above normal repairs. It should be borne in mind that these grants can not be tied to conditions on the operation of the premises.

As part of the advice service to operators, they might be informed about other possible sources of finance.

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