Local authority power to take over management of HMOs

Interim and Final Management Orders are to be used when the licensing regime fails. They allow the local authority to take over the management of a house in multiple occupation (HMO) where there is no fit and proper person available to manage it.

A local authority may make an Interim Management Order (IMO) to ensure that immediate steps are taken to protect the health, safety or welfare of occupiers and adjoining occupiers/owners and any other steps are taken to ensure the proper management of the house pending further action.[1]

A local authority must make an IMO where the property is an HMO that should be licensed (or house to which selective licensing applies) but is not, and either:[2]

• there is no reasonable prospect of it being licensed

• the health and safety condition is satisfied

An IMO must also be made where the house or HMO is licensed, and either the:

• licence has been revoked but the revocation is not yet in force, and once revocation is in force there is no foreseeable prospect of a licence being granted

• health and safety condition is satisfied

The local authority has discretion to make an IMO [3] if the property is a non-licensable HMO, and the First-tier Tribunal (Property Chamber) authorises the making of the IMO, which it can only do if the health and safety condition is satisfied.[4]

Health and safety condition

The health and safety condition is that the making of an IMO is necessary to protect the health, safety or welfare of occupiers or adjoining occupiers/owners.[5] If there is a threat to evict persons occupying the house in order to avoid the house being required to be licensed, this may constitute a threat to the occupiers' welfare.[6]

The health and safety condition is not satisfied where there is a category 1 hazard requiring the local authority to take enforcement action and where such action would adequately protect the health, safety and welfare of the people in question.[7]

After an IMO is made

An IMO lasts for as long as is specified in the order, up to a maximum of 12 months.[8] Normally, the order comes into force as soon as it is made, however if the order is made as a consequence of revoking an HMO licence, it does not come into force until the revocation takes effect.

The order may extend beyond 12 months where there is an appeal pending against the making of a Final Management Order.

After making the order, the local authority must serve on the occupiers and relevant persons a copy of the order and a notice that gives the:

• reasons for making the order

• date on which it was made

• effect of the order, and

• date it ceases to have effect[9]

This must be done as soon as is practicable on the occupiers, and within seven days on relevant persons. Relevant persons include the landlord, any person with an interest or estate in the property, or any person who would be managing or have control of the property (if it were not for the order).

A relevant person can appeal to the First-tier Tribunal (Property Chamber) against the decision to make the order or the terms of the order.[10]

The local authority's first duty after making the IMO is to take immediate steps necessary to protect the health, safety or welfare of occupiers and the adjoining occupiers/owners.[11] It must take such other steps as appropriate for the proper management of the house pending either the grant of a licence or the making of an FMO if it is a house that should be licensed. Where the house is not subject to a licensing regime, the local authority must consider whether it should make an FMO or revoke the IMO and take no further action.

These decisions must be made as soon as practicable.

Effect of an IMO

A local authority can appoint another body (for example, registered social landlord or managing agent) to carry out the management functions under an IMO on its behalf.

Under an IMO the local authority (or agent appointed by it) takes possession, collects the rents, deals with arrears, and makes repairs as a landlord might.[12] The local authority can do anything that a person who has an estate or interest in the house could do, were it not for the order.

The local authority can only create a new tenancy with the written permission of the landlord.

The landlord is not entitled to receive any rents and may not exercise any management functions, nor create any lease or licence to occupy the property. The owner is permitted to sell the property.[13]

The local authority may use rents received to meet relevant expenditure (for example repairs or insurance),[14] and may deduct its administrative costs and any compensation payable to third parties. It must pay any surplus to the landlord.[15] Where the rent received is less than expenditure, the authority can recover the difference from the landlord. The local authority must keep accounts of relevant expenditure and income.

Varying or revoking an IMO

IMOs can be varied or revoked and the provisions, including on appeals, are similar to those for the variation and revocation of HMO licences.[16]

FMOs follow IMOs, where necessary. A local authority must make an FMO if the property should be licensed by the date of expiry of the IMO, but the authority consider that a licence cannot be granted by that date. An authority may make an FMO for a house not subject to licensing where the IMO is ending and the authority considers it necessary. An FMO can exclude part of a house occupied by the owner.[17]

Making an FMO

Before making an FMO the local authority must serve a copy of the proposed order, together with a notice setting out the reasons for the order, the main terms (including of the management scheme), and the end of the consultation period within which representations can be made. The consultation period shall be not shorter than 14 days (or seven days if the order has been modified once in the light of representations).[18]

An FMO comes into force when the period for appeal has expired (28 days from the date the order was made), or if there is an appeal the date on which it is confirmed. The order lasts for five years unless the order itself provides for an earlier date.[19]

Effect of an FMO

Once an FMO is in force, the local authority must secure the proper management of the house through a management scheme.

The effect of an FMO is largely the same as an IMO, except that under an FMO the local authority does not require the landlord's consent to grant occupation rights, although the terms of any occupation cannot extend beyond the expiry of the order.[20]

All FMOs must contain a management scheme, setting out how the local authority plans to manage the property under the order. The management scheme comes into force once the appeal period has expired or the terms are agreed.

Schemes have two parts:[21]

• Part 1 deals with income and expenditure, proposed works, and compensation

• Part 2 describes how the authority intends to address the matters that caused it to make the FMO

Varying or revoking an FMO

FMOs can be varied or revoked, and the provisions, including on appeals are similar to those for the variation and revocation of HMO licences.

A local authority can apply to the First-tier Tribunal (Property Chamber) for a Special Interim Management Order for properties that are not HMOs but could be licensable were the local authority to make a designation under Part 3 (selective licensing). The appropriate national authority may prescribe when this power can be used, but it must relate to combating antisocial behaviour.

The circumstances prescribed are:[22]

• the area in which the house is located is experiencing significant and persistent antisocial behaviour

• there is a significant and persistent problem of antisocial behaviour at the house

• the landlord is a private sector landlord

• the landlord is failing to take action to combat the problem

• the effect of the order, in combination with other measures by the local authority, will reduce or eliminate the problem

The management provisions for Special Interim Management Orders are the same as for other IMOs.