Unlicensed HMO and Service of a Section 21 Notice

If a house is let as an HMO and the HMO requires a licence but does not have one, a section 21 notice may not be served on any of the occupiers of the HMO as a penalty (amongst other penalties). Here we discuss what actions need to be taken by a landlord to be able to serve a section 21 notice.

Requirement for mandatory licence

Section 61 Housing Act 2004 provides the requirement that an HMO licence is required if it meets The Licensing of Houses in Multiple Occupation (Prescribed Descriptions) (England) Order 2006. However, section 61 contains an exclusion where a temporary exemption notice is in force.

61 Requirement for HMOs to be licensed 

(1) Every HMO to which this Part applies must be licensed under this Part unless— (a) a temporary exemption notice is in force in relation to it under section 62, or (b)…

Application for a licence

If a landlord is operating an unlicensed HMO, a licence should be applied to serve a section 21 notice. Specific regulations are in force which allows a section 21 notice to be served during this application process (see below). 

This will be the most common action of a landlord wishing to serve a section 21 on an unlicensed HMO, but it may be that a landlord wishes to apply for a temporary exemption notice instead.

Temporary Exemption Notice (TEN)

A temporary exemption notice (TEN ) is where a landlord intends to take specific steps to secure that the house is no longer required to be licensed. A local authority can give a TEN for three months, after which a landlord can apply again, and in exceptional circumstances, the local authority can grant a further three months. No more applications can be made, though. 

An application for a TEN is made by section 62(1) Housing Act 2004 and may be granted by the local authority [section 62(2)] or refused [section 62(6)].

62 Temporary exemption from licensing requirement 

(1) This section applies where a person having control of or managing an HMO which is required to be licensed under this Part … but is not so licensed, notifies the local housing authority of his intention to take particular steps with a view to securing that the house is no longer required to be licensed. 

(2) The authority may, if they think fit, serve on that person a notice under this section (“a temporary exemption notice”) in respect of the house. … 

(6) If the authority decide not to serve a temporary exemption notice in response to a notification under subsection (1), they must without delay serve on the person concerned a notice informing him of— 

(a) the decision, 

(b) the reasons for it and the date on which it was made, 

(c) the right to appeal against the decision under subsection (7), and 

(d) the period within which an appeal may be made under that subsection.

Restriction on serving a section 21 notice

Section 75 Housing Act 2004 provides that no section 21 notice may be given concerning an unlicensed HMO:

75 Other consequences of operating unlicensed HMOs: restriction on terminating tenancies 

(1) No section 21 notice may be given in relation to a shorthold tenancy of a part of an unlicensed HMO so long as it remains such an HMO. 

(2) In this section— … “unlicensed HMO” has the same meaning as in section 73 of this Act.

However, importantly, the definition of unlicensed HMO is not the same as the criminal offence of operating an unlicensed HMO but is defined by section 73 Housing Act 2004 

Section 73 deals with rent repayment orders, but the definition of unlicensed HMO is the same for when section 21 can or can’t be served.

(1) For the purposes of this section an HMO is an “unlicensed HMO” if— 

(a) it is required to be licensed under this Part but is not so licensed, and 

(b) neither of the conditions in subsection (2) is satisfied. 

(2) The conditions are— 

(a) that a notification has been duly given in respect of the HMO under section 62(1) and that notification is still effective (as defined by section 72(8)); 

(b) that an application for a licence has been duly made in respect of the HMO under section 63 and that application is still effective (as so defined).

This section, therefore, provides that if a landlord makes an application for an HMO licence, then, once the application is with the local authority, a section 21 notice may be given [s.73(2)(b)] (even if the licence has not yet been granted). 

Alternatively, as long as a landlord has notified the local authority that he intends to take specific steps to secure that the house is no longer required to be licensed (TEN) and that notification is still effective, then a section 21 notice may be given in connection with the HMO [s.73(2)(a)].

When an application or notification is “effective.”

An application for an HMO licence or notification asking for a TEN is effective if the local authority considers whether or not to grant the licence or TEN. Or, if they have decided not to grant the licence or TEN, then a section 21 notice may still be given if the appeal process is correctly followed [section 72(8) Housing Act 2004].

Section 72 

(8) For the purposes of subsection (4) a notification or application is “effective” at a particular time if at that time it has not been withdrawn, and either— 

(a) the authority have not decided whether to serve a temporary exemption notice, or (as the case may be) grant a licence, in pursuance of the notification or application, or 

(b) if they have decided not to do so, one of the conditions set out in subsection (9) is met. … 

(9) The conditions are— 

(a) that the period for appealing against the decision of the authority not to serve or grant such a notice or licence (or against any relevant decision of a residential property tribunal) has not expired, or 

(b) that an appeal has been brought against the authority’s decision (or against any relevant decision of such a tribunal) and the appeal has not been determined or withdrawn. 

(10) In subsection (9) “relevant decision” means a decision which is given on an appeal to the tribunal and confirms the authority’s decision (with or without variation).

What if an application is sought and then refused before the notice expires?

The restriction contained in section 75 is a restriction on giving a section 21 notice, and it does not refer to any penalty once the notice has expired or court proceedings are commenced. 

Therefore, as long as when it is given, an application for a licence or TEN has been made, section 21 will remain valid.

 A landlord would be well advised to leave several days from the date of application (for a licence or TEN) and the service of the section 21 notice so there can be no doubt that an application had been made before the section 21 notice was given.

A temporary exemption is a discretionary power of the local authority.

 In our view, if a landlord has been unlawfully letting an unlicensed HMO and applies for a TEN so a section 21 notice can be served, the local authority will most likely refuse the request and require an application for a licence to be completed. 

If the landlord fails to apply for a licence, they will continue to commit a criminal offence, although the section 21 notice will probably remain valid. 

If the local authority decided to prosecute, it would most likely have no bearing on the section 21 possession case as they are two separate issues.