England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)
His Honour Judge Gerald
UKLC Ref: HA/27/2014

		Royal Courts of Justice Strand, London, WC2A 2LL
		21/02/2018

The Hon. Mr Justice Hildyard:

The question in this appeal

1. This appeal raises a question of general importance as to the extent of the powers conferred on local housing authorities under Part 3 of the Housing Act 2004 (respectively "Part 3" and "the 2004 Act") to include as part of the licence required in the case of any house to which that Part applies conditions regulating the management, use or occupation of the house concerned. The issue is one of statutory interpretation of section 90 of Part 3, and requires review of the statutory architecture and objectives of the 2004 Act, and, in particular, its Parts 1 and 2.
2. It is the need for authoritative guidance on the scope of the powers of local authorities under section 90 of the 2004 Act which primarily persuaded David Richards LJ to grant permission for this second appeal.

Context in which the question arises

3. The Appellant is a private sector landlord acting in conjunction with 346 other property owners who are all members of the Hyndburn Landlord Association, the representative body for landlords in the Hyndburn area founded by the Appellant and other landlords. The Respondent, Hyndburn Borough Council, is the local housing authority for the district.
4. The Appellant's property to which the disputed conditions relate is in an area which, in exercise of its (undisputed) power pursuant to section 80 of the 2004 Act, the Council designated as a "selective licensing area" in August 2012. The designated area includes parts of the Accrington and Church wards within the Council's administrative area. Subject to certain exceptions inapplicable in this case, section 80 of the 2004 Act prescribes that where a house is situated within a selective licensing area a licence authorising its occupation must first be applied for by the landlord and granted by the designating authority before it can be occupied.
5. The Respondent imposed the disputed conditions in respect of the Appellant's property when the Appellant sought the requisite licence. We were told that the disputed conditions are common to all licences issued by the authority. Indeed, it is also understood that many other local authorities have also sought to impose similar types of licence condition in relation to licences granted under Part 3 of the 2004 Act.
6. On that basis, and although it should be recorded that in fact the Appellant's properties have at all material times been compliant with the conditions imposed, the issue remains of importance to him and those he represents, and of wider significance, in that

(1) the Appellant and others like him should not be subject to conditions if they are unlawful, especially given the criminal sanction for breach (which could occur through the actions of his tenants); and,

(2) other, more onerous, conditions requiring properties to be upgraded or have new facilities installed could be imposed by this or other local authorities in the future e.g. on renewal of licences.

7. The Appellant was represented in this appeal (as also below) by Mr Jonathan Manning of Counsel. The Respondent was represented by Mr Leo Charalambides of Counsel. Both have provided great assistance in guiding the Court through the architecture of the 2004 Act and its provisions, which are of some complexity.

The conditions the imposition of which is disputed

8. Before setting out the relevant statutory provisions, it may assist to explain the two conditions which are the subject of this appeal, and the approach of the lower courts.
9. The disputed conditions in the form in which they were originally imposed were as follows:

(1) Condition 6 states:

"If gas is supplied to the property a suitable carbon monoxide detector must be provided, maintained in good working order and tenants made aware as to its operation"

(2) Condition 8 states:

"The licence holder must ensure, throughout the period of the licence that the premises are covered by a valid Electrical Installation Condition Report ("EICR"), where the report states the installation is unsatisfactory this must be remedied within 38 days and the licensing team notified upon completion of such works. If a report recommends a re-test during the term of the licence, an up to date report must be provided to the landlord licensing team within 7 days of the re-test date."

The previous appeals and decisions, and the essence of the appeal to this Court

10. The Appellant appealed to the FTT against the imposition of these conditions, pursuant to Schedule 5, paragraph 31(2) or 32(1)(b) of the 2004 Act. The appeal was substantially successful.
11. The FTT determined that the Respondent authority had no power, under the legislation properly construed, to use the licensing regime introduced by Part 3 to require landlords to upgrade their properties, or to introduce new equipment or facilities, by way of licence conditions. In particular, the FTT considered that the requirement to provide a carbon monoxide detector and a valid EICR went beyond regulating the "management, use or occupation of a house concerned" under section 90(1) of the 2004 Act. That phrase could not legitimately be stretched to enable the Council to impose conditions relating to an improvement, as distinct from conditions calculated to address the difficulties at which selective licensing was aimed, being low demand for housing or anti-social behaviour.
12. In the result,

(1) Condition 6 was modified by the FTT to read:

"If a carbon monoxide detector is provided in the property, the licence holder must produce to the tenant (and the council on request) written confirmation as to which party, landlord or tenant, is responsible for maintaining the detector in good working order, including testing and replacing any batteries, and tenants made aware as to its operation".

(2) The FTT determined that Condition 8 should be deleted altogether.

13. The present Respondent ("the Authority") then appealed to the Upper Tribunal (Lands Chamber) (the "UT"). The UT construed the legislation differently. By order dated 11 September 2015 HHJ Gerald allowed the appeal and reinstated the two conditions as originally imposed. He rejected the FTT's conclusion that the requirement to provide a carbon monoxide detector and a valid EICR went beyond regulating the "management, use or occupation of a house concerned" under section 90(1) of the 2004 Act. He considered that the Respondent authority was empowered, and acting well within its discretion, to impose the relevant conditions as part of the "management" of a rented property under section 90 of the 2004 Act.
14. The essence of the Appellant's appeal to this Court is that HHJ Gerald misdirected himself as to the law by failing to construe section 90(1) in the context of section 90 and the Act as a whole, and by adopting an erroneous construction of Part 1 of the Act which infected his approach. The grounds of appeal are addressed in more detail later.

The relevant statutory provisions and architecture of the 2004 Act

15. Before the FTT and the UT the focus of argument was almost exclusively on section 90 of the 2004 Act, which makes provision for conditions which may be attached to a licence. However, in this Court, more extensive consideration of the statutory context, and in particular the somewhat different objectives of Parts 1, 2 and 3 of the 2004 Act and the relationship between those Parts, was considered necessary. I can adopt with gratitude the following description of those parts from the Appellant's skeleton argument.
16. Part 1 reformed the law in relation to the fitness for human habitation of residential accommodation. It introduced an entirely new fitness regime by reference to the ascertainment of the risks posed to occupiers from certain features of the property they occupied. The regime is called the "Housing Health and Safety Rating System" or "HHSRS".
17. Section 1 provides:

"(1) This Part provides–

(a) for a new system of assessing the condition of residential premises, and

(b) for that system to be used in the enforcement of housing standards in relation to such premises."

"(2) The new system–

(a) operates by reference to the existence of category 1 or category 2 hazards on residential premises (see section 2), and

(b) replaces the existing system based on the test of fitness for human habitation…"

"(3) The kinds of enforcement action which are to involve the use of the new system are–

(a) the new kinds of enforcement action contained in Chapter 2 (improvement notices, prohibition orders and hazard awareness notices),

(b) the new emergency measures contained in Chapter 3 (emergency remedial action and emergency prohibition orders), and

(c) the existing kinds of enforcement action dealt with in Chapter 4 (demolition orders and slum clearance declarations)."

18. By section 1(4), the kinds of dwelling to which the new system applies include single dwellings and houses in multiple occupation. It is noteworthy, however, that the methods of enforcement listed in section 1(3) do not include the imposition of licensing conditions under Part 3, 2004 Act even though they do incorporate "existing" kinds of enforcement from other Acts (see section 1(3)(c), which incorporates measures contained in the Housing Act 1985, as amended).
19. For the purposes of Part 1, a "hazard" is a "risk of harm … associated with the occurrence of any of the matters or circumstances listed in Schedule 1" of the Housing Health and Safety Rating System (England) Regulations 2005, SI 2005/3208 (the "2005 Regulations"): see Regulation 3 of the 2005 Regulations.
20. The matters and circumstances listed in Schedule 1 to the Regulations include:

(i) carbon monoxide and fuel combustion products (paragraph 6); and

(ii) electrical hazards (paragraph 23).

21. "Harm" is also a defined term; Schedule 2 to the 2005 Regulations prescribes four different classes of harm (from "extreme" to "moderate") which must be reasonably foreseeable as a result of the hazard in question.
22. Local authorities are given duties and powers in respect of their responsibilities under Part 1 (and to some extent those arising under other Parts). Section 3 provides:

"(1) A local housing authority must keep the housing conditions in their area under review with a view to identifying any action that may need to be taken by them under any of the provisions mentioned in subsection (2).

"(2) The provisions are–

(a) the following provisions of this Act–

(i) this Part,

(ii) Part 2 (licensing of HMOs),

(iii) Part 3 (selective licensing of other houses), and…"

23. Section 4 makes provision for inspections in the following way:

"(1) If a local housing authority consider–

(a) as a result of any matters of which they have become aware in carrying out their duty under section 3, or

(b) for any other reason,

that it would be appropriate for any residential premises in their district to be inspected with a view to determining whether any category 1 or 2 hazard exists on those premises, the authority must arrange for such an inspection to be carried out." ^[1][2][3][4]

24. Thus, an authority is obliged to keep housing conditions in its area under review, and may inspect in order to decide whether to take action under Part 1, whether or not as part of that review. By section 5, if a category 1 hazard exists, there is a duty to take enforcement action (section 5); if a category 2 hazard exists, there is a power to take such action (section 7).
25. Part 2 of the 2004 Act introduced the concept of licensing houses in multiple occupation ("HMO"). By section 55(3), the Secretary of State may prescribe some descriptions of HMO that must be licensed; by sections 55(2) and 56, local authorities may decide to implement "additional" licensing schemes, by which they may designate all or part of their area as subject to licensing, and may specify descriptions of HMO to be subject to licensing with the designated area(s).
26. Section 56(2) provides that for the power to designate to be available, the authority must

"consider that a significant proportion of the HMOs of that description in the area are being managed sufficiently ineffectively as to give rise, or to be likely to give rise, to one or more particular problems either for those occupying the HMOs or for members of the public."

27. Section 65 lays down certain tests as to suitability for multiple occupation, and section 65(3) provides for "prescribed standards" to be prescribed by "regulations made by the appropriate national authority." Section 65(4) gives examples of the sort of standards that may be prescribed, including as to bathrooms and toilets etc.
28. Section 67(1) is of particular interest, especially by comparison with section 90 (see paragraph [33] below). It provides:

"(1) A licence may include such conditions as the local housing authority consider appropriate for regulating all or any of the following-"

(a) the management, use and occupation of the house concerned, and

(b) its condition and contents"

29. Part 3 provides for "selective licensing" of private sector rented properties which are (subject to a few very specific exceptions) let as separate dwellings: in other words, they are not houses in multiple occupation.
30. Unlike additional licensing, there is no provision in Part 3 for the Secretary of State to require any descriptions of property to be licensed. The question whether to introduce licensing is always for the local authority.
31. Nor is the test for the local authority to meet before selective licensing can be introduced the same as under Part 2. Sections 80(3) and 80(6) specify two alternative sets of "general" conditions, one of which must be met before a designation may be made.

"(3) The first set of general conditions are–

(a) that the area is, or is likely to become, an area of low housing demand; and

(b) that making a designation will, when combined with other measures taken in the area by the local housing authority, or by other persons together with the local housing authority, contribute to the improvement of the social or economic conditions in the area."

"(4) In deciding whether an area is, or is likely to become, an area of low housing demand a local housing authority must take into account (among other matters)–

(a) the value of residential premises in the area, in comparison to the value of similar premises in other areas which the authority consider to be comparable (whether in terms of types of housing, local amenities, availability of transport or otherwise);

(b) the turnover of occupiers of residential premises;

(c) the number of residential premises which are available to buy or rent and the length of time for which they remain unoccupied."

(6) The second set of general conditions are–

(a) that the area is experiencing a significant and persistent problem caused by anti-social behaviour;

(b) that some or all of the private sector landlords who have let premises in the area (whether under leases or licences) are failing to take action to combat the problem that it would be appropriate for them to take; and

(c) that making a designation will, when combined with other measures taken in the area by the local housing authority, or by other persons together with the local housing authority, lead to a reduction in, or the elimination of, the problem."

32. Thus, it appears that the permissible reasons for the designation of a selective licensing scheme are low housing demand as assessed on the basis of value, turnover and occupation of residential properties, and anti-social behaviour associated with the private rented sector if private landlords are not combating it effectively. The conditions described in section 80 give no support for any contention that it is a legitimate basis for selective licensing that the authority wishes to improve the general fabric of the housing stock in the area by requiring private landlords to improve their properties or introduce new facilities or equipment.
33. Last, but centrally, section 90 of the 2004 Act provides, so far as relevant, as follows.

"(1) A licence may include such conditions as the local housing authority consider appropriate for regulating the management, use or occupation of the house concerned.

(2) Those conditions may, in particular, include (so far as appropriate in the circumstances)–

(a) conditions imposing restrictions or prohibitions on the use or occupation of particular parts of the house by persons occupying it;

(b) conditions requiring the taking of reasonable and practicable steps to prevent or reduce anti-social behaviour by persons occupying or visiting the house.

(3) A licence may also include–

(a) conditions requiring facilities and equipment to be made available in the house for the purpose of meeting standards prescribed for the purposes of this section by regulations made by the appropriate national authority;

(b) conditions requiring such facilities and equipment to be kept in repair and proper working order;

(c) conditions requiring, in the case of any works needed in order for any such facilities or equipment to be made available or to meet any such standards, that the works are carried out within such period or periods as may be specified in, or determined under, the licence.

(4) A licence must include the conditions required by Schedule 4.

(5) As regards the relationship between the authority's power to impose conditions under this section and functions exercisable by them under or for the purposes of Part 1 ("Part 1 functions")–

(a) the authority must proceed on the basis that, in general, they should seek to identify, remove or reduce category 1 or category 2 hazards in the house by the exercise of Part 1 functions and not by means of licence conditions;

(b) this does not, however, prevent the authority from imposing (in accordance with subsection (3)) licence conditions relating to the installation or maintenance of facilities or equipment within subsection (3)(a) above, even if the same result could be achieved by the exercise of Part 1 functions;

(c) the fact that licence conditions are imposed for a particular purpose that could be achieved by the exercise of Part 1 functions does not affect the way in which Part 1 functions can be subsequently exercised by the authority.

…"

34. By contrast with section 67(1) in Part 2, no mention is made in section 90(1) of the use of conditions to regulate the "conditions and contents" of a house.
35. As to sub-sections (3) and (4) of section 90:

(1) No regulations have yet been created pursuant to section 90(3)(a) of the 2004 Act.

(2) Section 90(4) has no application in this matter: neither of the disputed conditions is required by Schedule 4 of the 2004 Act.

36. Thus, the only source of power on which the Respondent can have relied is section 90(1) and (2). In that regard three further questions or qualifications as to the availability of that power need to be noted:

(1) First, since neither of the two disputed conditions relate to the use or occupation of the property, the only basis for the exercise of that power would be that the conditions fall within the rubric "regulating the management."

(2) Secondly, there is no definition of "management" in the Act; the word must be construed in the context of the section and Part 3 as a whole.

(3) Thirdly, the exercise of power under those sub-sections to impose conditions in the case of "hazards" is regulated by sub-section (5). Sub-section 5(a) makes it clear that "in general" the authority must seek to identify, remove or reduce category 1 or category 2 hazards by the exercise of Part 1 functions and not by means of licence conditions. Under Part 1 of the Act, a "hazard" is a "risk of harm … associated with the occurrence of any of the matters or circumstances listed in Schedule 1" of the Housing Health and Safety Rating System (England) Regulations 2005. Both carbon monoxide and electrical hazards are listed in the relevant part of those Regulations. There is no dispute between the parties that carbon monoxide and/or electrical hazards are capable of constituting "hazards" under Part 1 of the 2004 Act: it is plain and common ground that they both are.

The questions to be answered and the approach of the FTT and UT

37. Thus, the issue in this appeal falls to be determined according to:

(1) whether the powers of "management" conferred by sub-section (1) of section 90 extend to works which improve or change the condition of the property or add new facilities and equipment which were not already present; and if so,

(2) whether in light of sub-section (5)(a) it was open to the Respondent to impose conditions under its licensing powers to address hazards if it could have addressed them by exercise of its Part 1 functions.

38. The FTT determined, as regards Condition 6, that the power to impose conditions for the "management…of the house concerned" did not extend to imposing conditions to install equipment by providing a carbon monoxide detector, though that power did extend to allocating responsibility for such equipment after its installation. Similarly as to Condition 8, the FTT determined that the power did not extend to obliging a landlord to carry out improvements to the property, including electrical testing. Any further question as to the interplay between section 90(1) and (5) and Part 1 functions did not therefore arise.
39. The UT took a wider view of the concept of "management". Judge Gerald concluded that the management of a house can involve having some sort of system for routine inspection, testing and maintenance of gas appliances and electrical installations to ensure their proper and safe operation; and thus could embrace both Condition 6 and Condition 8. The learned judge put it this way in paragraphs 44 and 45 of his judgment:

"44. Putting it slightly more generally, whatever can properly be regarded as concomitant with the proper and safe management of a house by a landlord falls with the ambit of what the local housing authority can consider when deciding whether to regulate that management by imposing any discretionary conditions additional to those mandated by Parliament. That is the whole purpose of section 90 (1): to vest the local housing authority with power to regulate, which in some respects is to reinforce, that which should, or could, properly be regarded as part of the management of the house concerned by the landlord. To regulate, or reinforce, that which a landlord should, or could, be doing by way of managing the house including his responsibilities in relation to its maintenance) is to do no more than create a clear structure or framework for the management of the house concerned.

45. In my judgment, it can be said that the provision of a carbon monoxide detector and regular (in fact only five-yearly) inspection and testing of electrical installations is anything other than the perfectly normal, straightforward and sensible management of a house which is to be let out to third parties. Indeed, in this case it would seem that both respondents themselves accepted and recognised this as both had installed carbon monoxide detectors and carried out EICRs. On analysis, therefore, all the local housing authority was doing was regulating, or reinforcing, that which was already in place. Had neither been in place, there could have been no sensible objection to the imposition of conditions that both be provided to ensure that the management of the house was properly regulated."

40. Judge Gerald addressed also whether there is anything in section 90 or the 2004 Act more generally which could be said to cut down what he regarded as the wide ambit of the powers granted by section 90. He focused especially on the argument that the mandatory conditions imposed by section 90(4) and the provision for further conditions to be included in a licence pursuant to section 90(3) defined the extent of the power to impose conditions relating to facilities and equipment, and in particular, the installation of safety equipment; and that since no regulations had been created pursuant to section 90(3), and section 90(4) and Schedule 4 made no mention of any of the matters in the disputed conditions, it was outwith the powers of the Respondent to impose conditions of that nature. He did not find the arguments convincing or in any way persuasive and rejected them.
41. On that basis, the question as to whether or not the imposition of the conditions conflicts with the requirement in section 90(5)(a) to remove or reduce "hazards" in the house by the exercise of Part 1 functions and not by means of licence conditions became the determinative factor before the UT. Indeed, the learned Judge described this as "the centre-piece of the Respondents' [in this Court, the Appellants'] arguments". He rejected the argument as misconceived.
42. His reasoning was that Part 1 powers to take enforcement action only apply where pursuant to its obligations under section 3 to keep housing conditions under review the authority is actually on notice of the actual existence of a category 1 or category 2 hazard. He also distinguished between, on the one hand, the power and duty of the authority itself to keep housing conditions under review and to intervene upon becoming aware of a relevant hazard, and on the other hand, the imposition of conditions to regulate the landlord's future management. He put it as follows:

"52. If, as here, the duty to inspect has not been engaged, there can be no question of any of its functions being exercisable under Part 1 of the Act from which it follows that the imposition of these two conditions is nothing more than regulation of management of the house concerned. In this respect, it must be borne firmly in mind that all these two conditions do is regulate that which a landlord should, or could or might do as part of its routine management of the house concerned. It is not seeking to use or cause the landlord to carry out its own functions. Indeed, in this case, the fact that both properties already had carbon monoxide detectors installed and provided EICRs demonstrates that, as a matter of fact, there was in existence no category 1 or 2 hazard without which the local housing authority's Part 1 functions could not be engaged. Equally, it demonstrates that the provision of both were as a matter of fact regarded by these respondent landlords as part of their proper and sensible management of the premises in question from which there really can be no criticism of the appellant seeking to regulate, or reinforce, that management."

43. The UT accordingly allowed the Respondent Authority's appeal and ordered that Conditions 6 and 8 be reinstated in their original form.

The Grounds of Appeal

44. The Appellant relies in this Court on three grounds of appeal, which (though expressed at greater length in the Grounds of Appeal) may I think be summarised as follows:

(1) Ground [1]: The judge failed to construe section 90(1) in the context of the section as a whole and failed properly or at all to consider the impact of sub-sections (3), (4) and (5). In consequence he wrongly rejected the argument that those sub-sections, by defining the circumstances in which a licence could (under sub-section (3)) or was required (by sub-section (4)) to include conditions requiring facilities and equipment to be made available, in effect dictated a restricted ambit to be given to the meaning of "management" in section 90(1). Further, he failed to appreciate the restricted ambit of any residual discretion remaining available to a local authority under section 90(5). He accordingly misdirected himself as to the correct construction and application of section 90 of the 2004 Act in finding that conditions requiring the installation and maintenance of a carbon monoxide detector and/or the carrying out of an EICR fell within the definition of "management" and were permissible notwithstanding the general rule in section 90(5) and the absence of any meaningful reasons advanced by the Respondent Authority for departing from that general rule.

(2) Ground [2]: The judge failed to construe section 90(1) in accordance with the statute as a whole, and to appreciate that the scheme of the 2004 Act is that housing standards are intended (as emphasised by section 90(5)) to be addressed primarily by Part 1, not Part 3. The objective of Part 3 and the selective licensing of properties which it provides for is to address problems of low housing demand and/or anti-social behaviour in the designated area; and any residual discretion to include conditions in a licence should, or at least should generally, be limited to the inclusion of conditions with that objective, rather than the properties' general upgrading.

(3) Ground [3]: The judge erred in his construction of Part 1 of the 2004 Act and the powers conferred on a local authority under it to take enforcement action in the case of relevant hazards. He wrongly concluded that such powers were only available in the event of it (a) having become aware of matters making it appropriate to inspect the house, and (b) determining after such inspection that it was obliged to take (see section 5 in the case of Category 1 hazards) or in its discretion should take (see section 7 in the case of Category 2 hazards) enforcement action. In any event, the Appellant contended that the judge's conclusion in paragraph 52 of his judgment that if no duty to inspect under Part 1 of the 2004 Act had been engaged, it followed that the imposition of the two disputed conditions was permissible under Part 3 was simply a non sequitur.

45. I turn to discuss each of these three grounds in turn.

Discussion of Ground 1

46. At first blush, the powers conferred on the local authority by section 90(1) to include conditions it considers appropriate for "regulating the management, use or occupation of the house concerned" appear broad. As the learned judge reasoned, in ordinary parlance, the management of a house includes ensuring that its facilities, such as gas appliances and electrical installations are and continue to be in proper and safe working order. As already noted, there is no express definition of the term "management" as used in the 2004 Act; and the learned judge's approach that in such circumstances it should be taken to include such matters is understandable.
47. However, it seems clear that the learned judge had not the benefit that we have had of a detailed exposition of the preceding Parts of the 2004 Act and its overall architecture. It appears from that exposition that in Parts 1 to 3 a distinction is drawn between (a) conditions regulating the management, use and occupation of the house concerned, and (b) conditions regulating its condition and contents.
48. Section 67(1) in Part 2 of the 2004 Act, in conferring powers to include conditions in the case of HMOs both (a) regulating the management, use and occupation of the house concerned, and (b) its conditions and contents, illustrates the distinction apparently drawn. That provision contrasts with section 90(1), which provides only for conditions regulating the management, use or occupation of the house concerned: unlike section 67(1), it does not go on to refer to and expressly empower the inclusion of conditions to regulate "its condition and contents".
49. I think the assumption must be that the difference is intentional. That conclusion is strongly fortified by the further consideration that whereas section 67(2) goes on in sub-paragraphs (c) to (f) expressly to refer to conditions requiring the making available and maintenance of "facilities and equipment" in exercise of the powers conferred by section 67(1), section 90(2) is confined to two sub-paragraphs (relating to conditions imposing restrictions in respect of use and occupation). In section 90, provision is made for the inclusion of conditions requiring facilities and equipment, but only in sub-sections (3) and (4), which (respectively) refer to standards prescribed by regulations made by the appropriate national authority and conditions mandatorily required by Schedule 4 to the 2004 Act.
50. Put another way, whereas in section 67 in Part 2 of the 2004 Act, the power to include conditions relating to facilities and equipment is an aspect of the power conferred by section 67(1), in section 90, section 90(1) confers no such power: the power to include or the mandatory requirement for conditions is as expressly defined in sub-sections (3) and (4), and is additional to the limited power in section 90(1).
51. That conclusion is also fortified by the consideration that the powers conferred by section 90(3) for a licence also to include conditions described in sub-paragraphs (a) to (c) would be otiose or unnecessary if like conditions could be included under section 90(1).
52. It is true that section 90(5) appears to be premised on the local authority having powers under section 90 (without further specification) to remove or reduce category 1 or category 2 hazards, whilst at the same time requiring the authority to seek to identify, remove or reduce such hazards by the exercise of its Part 1 powers. But in my view, the premise relates to the additional powers under section 90(3): it does not connote that a power is conferred by section 90(1) to include conditions regulating the "condition and contents" of the relevant house.
53. I have therefore been persuaded that ground 1 of the appeal is well founded.

Ground 2

54. Ground 2 is only engaged if the conclusion that section 90(1) gives no power to include conditions regulating a house's condition and contents is wrong. Ground 2 allows for the possibility that the local authority is given such power or has it from other source; but it is based on the proposition that any such power would have to be exercised only for the purpose for which it is conferred. In the context of Part 3 of the 2004 Act, the purpose for which powers are conferred is to enable the local authority to address the problems which justified the designation of a selective licence area.
55. It has never been part of the Respondent Authority's case that the disputed conditions were intended to ameliorate such problems. Its case has always been, and remained before this Court, that (to quote from paragraph 34 its skeleton argument) "there is no link between the statutory test for the designation of a selected licensing area and the imposition of conditions to regulate the property in that area."
56. I consider that the learned Judge fell into error in accepting this. I cannot agree with his conclusion that it was not material that neither of the disputed conditions is necessarily or obviously directed at ameliorating the conditions which have given rise to the perceived need for the creation of a selective licensing area. I agree with Mr Manning that "it goes much too far, and is contrary to the principles of public law, to say that the statutory purpose of selective licensing does not cut down the ambit of the local authority's discretion to impose conditions".
57. Further, I accept the Appellant's submission that though it is not necessary that there should be demonstrated a direct and unequivocal link to the statutory purpose, and it suffices if the local authority has reached the conclusion that a particular condition is appropriate as a means of addressing the statutory purpose of selective licensing, the powers conferred are confined to including conditions for that purpose.
58. That again accords with the structure of the 2004 Act. The improvement of housing standards is primarily a matter for Part 1 and in the case of HMOs Part 2, and not Part 3. Licensing under Part 3 is to address the management, use or occupation of private sector accommodation as it affects others in the locality, with a view to ameliorating the problems of low housing demand and anti-social behaviour which occasioned designation as a selective licence area.
59. Accordingly, I have been persuaded that ground 2 of the appeal is also established.

Ground 3

60. The Respondent Authority accepted in this Court (correctly, in my view) that the opening sentence of paragraph 52 of the UT's judgment is a non sequitur. As it was put in the Appellant's Skeleton Argument for this appeal, "even if it were the case that the authority had, in the case of a specific property, no basis for taking action under Part 1, that would not of itself, provide power to impose a licence condition under Part 3 requiring steps to be taken by the landlord".
61. However, the Respondent Authority submitted that in the particular circumstances of this case, the converse equally applies, and that even if a local housing authority did have a basis for taking action after an inspection of a specific property under Part 1 for reasons relating to carbon monoxide or electrical installations, that does not prevent the authority from imposing general licence conditions calculated to prevent dangerous situations arising in properties in relation to carbon monoxide and/or electrical faults. The Council submitted that what it described as the "residual discretion afforded by section 90(5)" applies not only in respect of hazards in any individual property, but also more widely where it considers that in the circumstances a particular hazard would be better addressed through the use of licensing conditions than Part 1 functions.
62. The Council submitted that this case provides just such an example. A potential (and potentially fatal) build-up of carbon monoxide might well be related to a sudden and undetectable failure or misuse of equipment, and there might be no warning that could reasonably be expected to be flagged up by a Part 1 inspection. Part 1 powers would be of limited utility in guarding against such a hazard; whereas the use of a licence condition requiring the installation and maintenance of a Carbon Monoxide detector would be proportionate and effective, and a legitimate exception to the general rule that Part 1 hazards will generally be addressed by Part 1 powers. Similarly in the case of a property's electrical installations, faults might not easily be detected on inspection but result in fire and fatal hazard: this might far more effectively and efficiently be met by the imposition of licence conditions, rather than by the exercise of Part 1 powers.
63. I must admit that my initial inclination was to sympathise with the Council's notion that the legislature cannot sensibly have intended to confine its powers to addressing a problem after inspection when there is such a risk that inspection may not reveal the problem. There appeared to me force in the Respondent Authority's contention that it should be entitled to impose conditions (to quote from paragraph 39 of its skeleton argument) "under section 90(5) if it considers them to be appropriate, they are not irrational, and they are not intended as a general duplication or replacement for the performance of its Part 1 functions, but rather as a justifiable exception to the Part 1 regulatory regime".
64. However, in the end I have been persuaded that this instinctive reaction is not correct, and is inconsistent with section 90 read as a whole, and with the architecture and detail of the 2004 Act.
65. Contrary to the premise of this part of the Respondent Authority's argument, I do not read section 90(5) as conferring a residual discretion. The sub-section addresses the relationship between Part 1 functions and the power of a relevant local housing authority to identify, remove or reduce relevant hazards by means of licence conditions; but it is not itself a source of any power, residual or otherwise, to include such licence conditions.
66. Its true purpose is to re-emphasise (in section 90(5)(a)) the importance of the local housing authority's Part 1 functions and the primacy to be accorded to seeking to identify, remove or reduce relevant hazards by constant review and inspection, and exercise of enforcement powers, whilst at the same time ensuring (in section 90(5)(b)) that the authority is not prevented from imposing (in accordance with section 90(3)) licence conditions requiring the installation or maintenance of facilities and equipment prescribed by regulations if and when made by the appropriate national authority (as envisaged in section 90(3)(a)).
67. I appreciate that on the view I have taken that section 90(1) does not empower a local housing authority to include conditions in a licence to regulate the conditions and contents of a house, and in particular the availability and maintenance of facilities and equipment, it is difficult to see any overlap between Part 1 functions and Part 3 powers except in relation to the imposition of licence conditions pursuant to section 90(3)(a). It might be thought that section 90(5) might seem to assume some greater overlap. However, I do not consider that this is any sufficiently firm basis for interpolating some broader power, even if described as a residual discretion.
68. Accordingly, I have concluded that Ground 3 is also established and provides a further basis for allowing this appeal.
69. I would add only in this context that there was discussion before us as to the factual circumstances in which an authority's powers under Part 1 can be invoked. The Appellant contended, by way of increasing the prospect of relevant hazards being discovered by the exercise of such powers and muting the siren call for a broad discretionary power under section 90(5), that the section 4 power "is in the widest possible terms" and would permit a local authority to inspect premises to ascertain the existence of hazards "simply because it was aware that the accommodation was residential accommodation and it wished to inform itself as to the existence of any hazards." However, the Respondent Authority did not substantively rise to this, and we did not hear detailed submissions on the point. In those circumstances, I prefer to express no definitive view on the scope of an authority's powers in this regard.

The relevance of (a) subsequent delegated legislation, and (b) non-statutory guidance as aids to the construction of primary legislation

70. For completeness I should record that Counsel also referred the Court, to assist the process of interpretation, to (a) delegated legislation in the form of the Selective Licensing of Houses (Additional Conditions) (England) Order 2015 ("the 2015 Order") and (b) non-statutory guidance in the form of a 'Guide for local authorities' ("the Guide", dated March 2015) on the criteria for making a selective licensing scheme and what a local authority would expect such a scheme to promote and deliver.
71. The 2015 Order includes as being amongst the criteria for making a selective licensing designation that

"making a designation will, when combined with other measures taken in the area by the local housing authority, or by persons together with the local housing authority, including any licence conditions imposed under section 90 of the 2004 Act, contribute to an improvement in general housing conditions in the area."

72. The Guide includes two paragraphs (39 and 40) as follows:

"39. Local housing authorities must also ensure that selective licensing complements other measures. It should only be used where existing measures alone are not sufficient to tackle the underlying housing problems of a specific area. Local authorities should also carefully consider any potential negative economic impact that licensing may have on their area – particularly the risk of increased costs to landlords who are already fully compliant with their obligations. These additional costs can reduce further investment and are frequently passed on to tenants through high rents.

40. The selective licensing scheme must be consistent with the overall housing strategy and co-ordinated with procedures for homelessness, empty properties, anti-social behaviour in the private rented sector, and housing market renewal activity."

73. It was submitted on behalf of the Respondent Authority that both the 2015 Order and the Guide suggest that a broad ambit should be accorded to section 90(1) management powers. The contrary was argued for the Appellant.
74. At the Court's direction, Counsel provided, after the hearing, an 'Agreed Note on Aids to Statutory Construction'. Although I have found the Note useful, the long and the short of it (at least as it appears to me) is that subsequent delegated legislation many years after the main Act is unlikely to be taken to be a guide to what Parliament intended by the language used in the main Act (see Diamond v Lovell [1999] 3 All ER 1); and that whilst non-statutory guidance may be of some persuasive authority on the legal meaning of the relevant statute, it carries no more weight than that, and does not enjoy any particular legal status (see Chief Constable of Cumbria v Wright [2006] EWHC 3574 (Admin); [2007] 1 WLR 1407). It is the words of the Act as construed by the Court which must provide the basis for ascertaining Parliament's intention (see R (Westminster CC) v National Asylum Support Service [2002] UKHL 38; [2002] 1 WLR 2956), and their interpretation remains of course a matter for the Court.
75. I have reached and prefer to base my conclusions by reference to the words of the statute itself. But there is nothing in either the 2015 Order or the Guide which has unsettled my own view as to the correct interpretation of the relevant provisions.

Conclusion

76. In the result, I would allow this appeal and restore the order of the FTT.

Lady Justice King:

77. I agree that the appeal should be allowed.
78. I have had the benefit of reading the judgments of both Hildyard J and Underhill LJ and am grateful to Hildyard J for his exegesis of the legal backdrop to the appeal. I would only add in relation to Ground 1 that I am in complete agreement with Underhill LJ that the natural reading of the phrase "regulating the management, use or occupation…" does not allow the application of conditions that regulate the "condition and contents" of a house or what "facilities and equipment" should be available within it.
79. I am reinforced in that view not only by the comparison performed by Underhill LJ of section 90 with section 67 (para. 84 of his judgment) with which I agree, but also by the fact that such an interpretation dovetails with the Guidance issued by the Department of Communities and Local Government in January 2010 (para. 86 of Underhill LJ's judgment) which, whilst not being determinative, says in relation to section 90:

"…..This is less wide than the scope of HMO licensing conditions under section 67(1) because it does not allow a licence under Part 3 to impose conditions relating to the condition or contents of the house…"."

80. Having reached the conclusion I have in relation to Ground 1 it is not therefore necessary to consider the remaining two grounds of appeal. I do however agree with Hildyard J's view found at paras.55 and 56 of his judgment (Ground 2) and that section 90(5) does not confer any power on an authority not conferred by another provision (Ground 3).

Lord Justice Underhill:

81. I agree that this appeal should be allowed. Since the issue is one which has implications for other cases I will give my reasons in my own words, though I can do so quite shortly thanks to Hildyard J's thorough exposition of the background.
82. The primary question is whether section 90 (1) of the 2004 Act conferred the power to impose the two disputed conditions in this case – that is, conditions requiring the installation of a carbon monoxide monitor and (broadly) that the electrical installations meet a prescribed standard. That depends on whether such conditions fall within the scope of the phrase "the management, use or occupation of the house concerned": in practice the relevant word in that triad is "management".
83. As to that, my starting-point is the structure of section 90, which is set out so far as is relevant at para. 33 of Hildyard J's judgment. In my view that can be analysed as providing for three kinds of licence condition, as follows:

(1) Sub-section (1) confers a general power to impose conditions regulating "management, use or occupation". Sub-section (2) identifies "in particular" two instances of such conditions.

(2) Sub-section (3) confers a power to include conditions about what "facilities and equipment" should be available in the house. These are not a sub-set of the conditions falling under sub-section (1): they are prefaced not by the phrase "in particular" but by "also".

(3) Sub-section (4) imposes an obligation to include the specific conditions identified in Schedule 4. Those conditions might otherwise fall within the terms of sub-sections (1) or (3), but they are treated separately because their inclusion is mandatory.

It follows that conditions requiring that facilities and equipment be available do not fall under sub-section (1).

84. That analysis is confirmed, and can be taken a little further, by a comparison with section 67 which is the equivalent section in Part 2 of the Act. Section 67 (1) is set out at para. 28 of Hildyard J's judgment. Sub-sections (2)-(3) read as follows:

"(2) Those conditions may, in particular, include (so far as appropriate in the circumstances) —

(a) conditions imposing restrictions or prohibitions on the use or occupation of particular parts of the house by persons occupying it;

(b) conditions requiring the taking of reasonable and practicable steps to prevent or reduce anti-social behaviour by persons occupying or visiting the house;

(c) conditions requiring facilities and equipment to be made available in the house for the purpose of meeting standards prescribed under section 65;

(d) conditions requiring such facilities and equipment to be kept in repair and proper working order;

(e) conditions requiring, in the case of any works needed in order for any such facilities or equipment to be made available or to meet any such standards, that the works are carried out within such period or periods as may be specified in, or determined under, the licence;

(f) conditions requiring the licence holder or the manager of the house to attend training courses in relation to any applicable code of practice approved under section 233.

(3) A licence must include the conditions required by Schedule 4."

It will be seen that, whereas section 90 (1) refers only to regulating the "management, use and occupation" of a house², section 67 (1) refers separately to regulating "its condition and contents". Further, in section 67 the conditions relating to "facilities and equipment" are brought into the "in particular" provisions of sub-section (2), and there is no equivalent to section 90 (3). Those differences between the two sections are plainly intentional, as Hildyard J says, and they only make sense on the basis that regulating the "condition and contents" of a house – which includes what "facilities and equipment" should be available in it – is to be treated as distinct from regulating its "management, use or occupation".

85. That means that the phrase "regulating the management, use or occupation …" cannot be read so widely as to apply to conditions that regulate the "condition and contents" of a house or what "facilities and equipment" should be available in it. I am inclined to think that that would be the natural reading of the phrase even if read in isolation. Judge Gerald in the UT understandably emphasised the potential width of the term "management" when used in the landlord and tenant context; but it is necessary to read it as part of a composite phrase coupled with "use or occupation". In my view when it is read with those companions, and in the knowledge that it excludes "condition and contents" and "facilities and equipment", "management" connotes what Mr Manning described as "operational" matters – what actually happens at and to the property. Both the particular examples given in sub-section (2) are of that character. It is true that they might be thought to relate more to "occupation or use" than "management" (though the three terms overlap), but examples relating more particularly to "management" were suggested by Mr Manning in his oral submissions, such as conditions regulating arrangements to ensure that rubbish was properly binned for collection or that fire-escapes were kept clear. An example which Mr Charalambides mentioned as being of particular concern to local authorities in selective licensing areas is that broken windows be promptly re-glazed rather than remaining boarded-up. I am inclined to think that routine non-structural maintenance of that kind is indeed an aspect of "management", though it may come close to the boundary with "condition"; but that is not something that we need to decide in this appeal.
86. I have reached that conclusion by reference to the words of the statute alone. But it is reinforced by the terms of the "Guide to the Licensing and Management Provisions in Parts 2, 3 and 4 of the Housing Act 2004" issued by the Department of Communities and Local Government in January 2010³. Paragraph 315, which is headed "Licence Conditions" reads:

"Section 90 of the 2004 Act requires an LHA to impose certain conditions in a licence and permits it to require other conditions which it considers appropriate for 'regulating the management, use and occupation of the house concerned'. This is less wide than the scope of HMO licensing conditions under section 67(1), specifically because it does not allow a licence under Part 3 to impose conditions relating to the condition or contents of the house. This is, of course, because selective licensing is primarily concerned with regulating the management of the private rented sector in areas where it applies and not the condition of the stock. However, it is clearly a management function that landlords keep their properties in repair and clean and tidy, so generic conditions can be imposed for those purposes e.g. conditions can be imposed to require landlords (licence holders) to do what is expected of them such as routine repairs, replacement of worn or dangerous furniture or fittings etc, but not to carry out improvements, alterations or adaptations to the house."

I need not endorse every word of that Guidance but the substance of it is entirely consistent with the approach which I would take to the scope of section 90 (1).

87. If section 90 (1) is construed in that way, it did not in my view empower the Council to impose either of the disputed conditions. I take them in turn.
88. As regards condition 6, a condition requiring the installation of a carbon monoxide detector appears to me to involve the provision of new facilities and equipment and to relate to the "condition and contents" of the house rather than to its management. The FTT did regard providing for an explicit allocation of responsibility for the maintenance of any carbon monoxide detector installed as an aspect of management, and it imposed a condition requiring such an allocation: see para. 12 (1) of Hildyard J's judgment. The Appellant has not challenged that decision and it seems to me entirely legitimate.
89. As regards condition 8, the primary obligation sought to be imposed is to ensure that an EICR stating that the electrical installations at the premises are satisfactory is in force. What, however, that means in substance is that it should be a condition of the licence that the electrical installations at the property should be of a "satisfactory" standard – and therefore that they should be improved so far as necessary to bring them up to that standard. Mr Manning made it clear that it was the possibility that a landlord might be required to undertake the entire re-wiring of the house, even where the system posed no hazard within the meaning of Part 1, that was of real concern to the Appellant. Such a condition is indeed in my view unlawful because it seeks to regulate the condition or contents of the house – or, it could be said, its equipment. The FTT was accordingly right to hold that it falls outside the scope of the power conferred by section 90 (1). If the system is unsafe the authority can of course use its powers under Part 1.
90. There is nothing in that outcome which is contrary to the policy of the Act. Hildyard J has set out in full the provisions of section 80 of the Act which identify the purpose of licensing under Part 3. Part 3 is aimed at combating the problem of the development of areas of "low housing demand" and/or areas where anti-social behaviour is prevalent. The imposition of conditions regulating the "management, use or occupation" of houses in the more limited sense that I believe to be correct is conducive to that purpose: the better the management of what happens at and to a house, the less the risk of it attracting vandalism or other anti-social behaviour, with a consequent tendency towards the improvement of "social and economic conditions" in the area. No doubt the imposition of conditions designed to achieve a minimum standard of safety in gas and electrical installations, or other facilities and equipment, in houses subject to licensing would also conduce to the purpose of Part 3: indeed both sub-sections (3) and (4) of section 90 (3) contemplate or require the imposition of such conditions. All that I say is that the policy behind Part 3 does not compel a wider reading of sub-section (1) than its language, read in the context of the other provisions of the Act, justifies. On the contrary, sub-sections (3) and (4) demonstrate that there are more specific means by which the draftsman could have used, or the Secretary of State could still use, section 90 to allow for the use of licence conditions to enforce minimum standards of this kind⁴. It is important not to lose sight of the fact that the specific job of ensuring fitness for habitation, including minimum safety standards of this kind, is done by Part 1; and that very point is made explicitly by section 90 (5).
91. Mr Charalambides contended that if section 90 (1) were construed in that way there would be no scope for the operation of sub-section (5). But I agree with Hildyard J that its provisions are sufficiently accounted for by the undoubted potential for overlap with sub-section (3), which is the specific sub-section identified in sub-section (5) (b).
92. That conclusion renders it unnecessary to consider either of the Appellant's other two grounds. Nevertheless, in relation to ground 2, I fully agree with what Hildyard J says at paras. 55 and 56 of his judgment. As to ground 3, I also agree with him that section 90 (5) does not confer any power on an authority which is not conferred by some other provision.

Note 1   See also the Secretary of State’s HHSRS Operating Guidance issued under s.9 of the 2004 Act, ODPM February 2006, which gives guidance about inspections and the assessment of hazards.    [Back]

Note 2    In fact in section 67 (1) the phrase is “use and occupation”, whereas in section 90 (1) it is “use or occupation”. But it was not suggested that that was a material distinction for our purposes. So far as I can see, it simply reflects the slightly different structure of the two sub-sections arising from the fact that section 67 (1) covers two kinds of condition.    [Back]

Note 3    The copy with which we were supplied was marked “Draft”, but we were told that it is nevertheless the final version (and that appears to be confirmed by the fact that the same “draft” version appears on the “gov.uk” website).    [Back]

Note 4    In fact, the Smoke and Carbon Monoxide Alarm (England) Regulations 2015 do introduce, for England, a new paragraph 4A into Schedule 4, requiring the inclusion in any licence under Part 2 or Part 3 of condition that a carbon monoxide alarm be installed in any room used as living accommodation which contains a solid fuel burning combustion compliance. The Regulations post-date the period with which we are concerned, and the condition in question is in any event different from that imposed by the Council in this case, which would apply wherever there was a gas supply to the house. The amendment was made pursuant to powers in the Energy Act 2013: we were not taken to the specific provision, and I do not know whether it would have been open to the Secretary of State to introduce a condition in broader terms.     [Back]