Below has been amended to include a link to the Court of Appeal judgment because it was first reported from High Court judgment.

The general consensus is that the below case is authority that HMO licensing fees charged by a local authority must only cover actual costs they incur in operating the scheme.

Hemming (t/a Simply Pleasure Ltd) & Ors v Westminster City Council [2012] EWHC 1260 (High Court) and now Court of appeal – Hemming (/a Simply Pleasure Ltd) & Ors, R (on the application of) v Westminster City Council (Rev 1) [2013] EWCA Civ 591 is a case brought by a number of licensees of sex shops in Soho and other parts of London within the City of Westminster concerning the calculation of licence fees being charged by the local authority.

The below commentary is in relation to the High Court case but is equally applicable to the Court of Appeal ruling in it’s essence.

The charging of a fee for the licence is provided for by para. 19 of Schedule 3 to the Local Government (Miscellaneous Provisions) Act 1982, which provides:

“An applicant for the grant, variation, renewal or transfer of a licence under this Schedule shall pay a reasonable fee determined by the appropriate authority.”

The annual licence fee for sex establishments in Westminster did not change for a number of years. It was determined at £29,102.00 in September 2004 for the year from 1 February 2005 to 31 January 2006, and that was the fee which the Council demanded of the claimants for every year thereafter up to and including the year from 1 February 2011 to 31 January 2012.

The fee was described as two parts. The sum of £2,667.00 was described as “the administration of the application”, and the sum of £26,435.00 was called “the management of the licensing regime”. In addition, it should be noted that the whole of the £29,102.00 was payable when an application for a sex establishment licence was made, but if the application was refused, the element which represented “the management of the licensing regime”, i.e. the £26,435.00, was refunded. Only the element which represented “the administration of the application”, i.e. the £2,667.00, was non-returnable.

Before 2009 the Council was permitted to reflect the costs of enforcing the licensing system in the fees which it charged. As Roch J said in R v Manchester City Council ex p. King (1991) 89 LGR 696 at p. 710, albeit in the context of licences for street traders:

“[Local authorities] may take into account the costs which they will incur in operating the street trading scheme, including the prosecution of those who trade in the streets without licences.” (Emphasis supplied)

However, the Provision of Services Regulations 2009 which came into force on 28 December 2009, in particular regulation 18(4) provides:

“Any charges provided for by a competent authority which applicants may incur under an authorisation scheme must be reasonable and proportionate to the cost of the procedures and formalities under the scheme and must not exceed the cost of those procedures and formalities.”

For the purposes of this case, it was decided that [after 28 December 2009]

“… the Council has not been permitted, when determining the reasonable licence fee for sex establishments, to reflect in the fee which it determines the costs of enforcing the system.”

HMO Licence fees

Section 63 Housing Act 2004 and section 87 permits a local authority to charge a fee when an application for a licence is made whether that be for a mandatory, additional or selective licence.

In particular:

When fixing fees under this section, the local housing authority may … take into account—(a) all costs incurred by the authority in carrying out their functions under this Part (which includes enforcement under sections 72 – 75 for example) and(b) all costs incurred by them in carrying out their functions under Chapter 1 of Part 4 in relation to HMO’s … (which is interim and final management orders, so basically a form of enforcement action again).

The question that arises therefore is can the fees include any enforcement action under the Housing Act or, must fees only seek to cover the “administration of the application” itself and nothing else?

It seems that at the time, Communities and Local Government were satisfied that the Provision of Services Regulations 2009 did apply to the Housing Act 2004 but that they were satisfied that the provisions complied and no amendments to the Act were necessary.

A list was compiled for the purpose of tracking progress of checking that all legislation was compliant with the new regulations. The Housing Act 2004 is marked as in scope of the regulations but the provisions are justified and will be retained. A report was being prepared for the Commission (I have tried without success to find the report referred to).

Charge to vary license

As detailed above, a local authority may only charge for things which they are statutorily allowed to charge for. In the Residential Property Tribunal (RPT) case CAM/38UC/HMV/2013/0006-7 it was ruled that a fee for a variation was unlawful and that it could not be charged.

This case also means that any fees charged previously can be reclaimed (presumably up to 6 years ago). See this useful article for a sample letter.