Private letting of accommodation held to be a “service” in EU law

August 3, 2018

Alexander Campbell considers the judgment in The Queen on the application of Mr Peter Gaskin v LB Richmond Upon Thames [2018] EWHC 1996 (Admin). In that decision the Administrative Court decided that the Claimant, Mr Peter Gaskin, was providing a service within the meaning of EU law by the private letting of accommodation. Accordingly the fee charged by the local authority for him to apply for an HMO licence (in order for him to let out accommodation) had to be structured in a way which complied with EU law.

Alexander Campbell was led as junior counsel for the Claimant, Mr Gaskin.

The background

Mr Gaskin let out rooms in various properties, including a property within the London Borough of Richmond Upon Thames. The property in LB Richmond met the legal definition of a house in multiple occupation (“HMO”) in the Housing Act 2004. Accordingly Mr Gaskin required a HMO licence from LB Richmond in order to be able to let out rooms in the property.

When Mr Gaskin came to renew his HMO licence, LB Richmond asked him to pay a fee which was designed to cover not only the costs of processing his application but also to contribute towards the costs of LB Richmond running its HMO licensing scheme more generally.

Mr Gaskin declined to pay LB Richmond the total fee being demanded. He offered a lower amount but that was rejected and he was subsequently prosecuted in the Magistrates’ Court for operating an HMO without a licence.

In December 2017, the Administrative Court gave judgment on the domestic law aspects of Mr Gaskin’s claim: http://www.bailii.org/ew/cases/EWHC/Admin/2017/3234.html.

The Administrative Court adjourned the question of whether LB Richmond’s fee breached EU law to a later hearing so that the Government could be invited to take part in the claim (which the Government ultimately chose not to do).

The EU law issue

EU Directive 2006/123/EC (“the Services Directive) provides in its article 13(2) that where a charge is imposed for a person to apply to have access to a service activity, the charge must not exceed the cost of the authorisation procedures. The effect of this is that if the private letting of accommodation amounted to a service (and was thus covered by the Services Directive), then LB Richmond would not be allowed to charge an application fee which covered not just the cost of the authorisation procedures but also the costs to LB Richmond of managing its HMO licensing scheme more generally.

The Services Directive is implemented into English law by the Provision of Services Regulations 2009 (SI 2009/2999) (“the Regulations”). Regulation 18(4) is in materially identical terms to article 13(2) of the Services Directive.

Mr Gaskin argued that by letting out private residential accommodation, he was providing a service within the meaning of EU law, therefore his applying for an HMO licence was subject to regulation 18(4) of the Regulations and LB Richmond’s fee was unlawful.

LB Richmond defended the case, arguing that the private letting of accommodation was not a service within the meaning of EU law.

The judgment

The Administrative Court handed down judgment on 31 July 2018, holding that Mr Gaskin, in letting out private accommodation in his HMO, was providing a service within the meaning of EU law.

The Administrative Court had regard to the definition of “service” in article 4 of the Services Directive (and regulation 2 of the Regulations): “any self-employed economic activity normally provided for remuneration…” The Administrative Court held that Mr Gaskin, in purchasing, converting, extending the property, in managing it himself rather than using letting agents and in carrying out tasks such as arranging for insurance and maintenance work, was engaged in a self-employed economic activity provided for remuneration. The Court held that the term “self-employed economic activity” was intended to include the broadest range of activity.

The Court rejected LB Richmond’s arguments that whether Mr Gaskin was providing a service was affected by the fact that he paid council tax rather than business rates, and that whether Mr Gaskin was registered as a business was at all relevant.

The Court noted that the Services Directive (and the Regulations) expressly exclude social housing provided by the state from being a service. The Court held that if the letting of accommodation were not a service, then there would have been no need for the Services Directive expressly to exclude one subset of letting, namely the letting of social housing.

Although not forming part of its decision, the Court noted that its conclusion – that the private letting of accommodation constitutes a service – appeared to be supported by an impact assessment which was carried out by the UK Government when the Services Directive was being implemented in domestic law. That impact assessment made reference to EU statistical analyses which considered the letting of accommodation to form part of the service sector.

Having concluded that the private letting of accommodation amounts to a service within the meaning of the Services Directive (and, therefore, the Regulations), the Court held that LB Richmond’s fee for an HMO licence was unlawful because it was not strictly limited to the costs to LB Richmond of processing the licence application. Accordingly LB Richmond had not been entitled to demand the fee which it had demanded.