Gaskin, R (On the Application Of) v Richmond Upon Thames London Borough Council & Anor

Factual and Procedural Background

This claim concerns whether the owner of a house in multiple occupation ("HMO") provides a "service" for the purposes of Directive 2006/123/EC on services in the internal market ("the Services Directive"). The issue arises from criminal proceedings brought by the local authority ("the Council") against the Plaintiff for managing an unlicensed HMO, contrary to Part 2 of the Housing Act 2004 ("the 2004 Act"). The Plaintiff refused to pay the Council's application fee for renewal of his HMO licence, arguing that the fee contravened the Services Directive as it was an unlawful charge. The Council contended that the Plaintiff was not providing a "service," so the Services Directive did not apply.

The proceedings before the court addressed solely the lawfulness under EU law of the fee demanded by the Council. Other grounds of judicial review under domestic law were considered by a different court constitution, which found the Council was not entitled to require certain tenant information and adjourned the fee issue to allow the Crown to be notified. The Crown did not intervene, and the current hearing was argued only by the Plaintiff and the Council. The criminal proceedings against the Plaintiff are stayed pending resolution of this claim.

The Plaintiff owns four HMO properties and manages them personally without letting agents. One property, the subject of this claim, had a licence granted in 2009 and varied in 2013 to increase occupiers. When applying for renewal in 2014, the Plaintiff declined to provide tenant information requested by the Council and objected to paying the full fee demanded, submitting a lower fee instead. The Council rejected the application as incomplete, returned the lower fee, and demanded the full fee. The Council served a notice requiring further information under section 16 of the Local Government (Miscellaneous Provisions) Act 1976, which the Plaintiff did not comply with, leading to prosecution for managing an unlicensed HMO and failing to comply with the notice. The Plaintiff pleaded not guilty and brought judicial review challenging the Council's refusal to process the renewal application due to refusal to provide tenant information and to pay the fee.

The judicial review initially was refused permission but later allowed on appeal. The Divisional Court ruled the Council unlawfully required tenant information and refused to process the application on that basis but adjourned the fee issue for this court to decide under EU law. Other grounds, including the lawfulness of the section 16 notice, were dismissed by the Divisional Court.

Legal Issues Presented

1. Does the owner of an HMO provide a "service" within the meaning of Directive 2006/123/EC (the Services Directive) and the UK Services Regulations 2009?
2. If the owner is providing a "service," was the fee demanded by the local authority for the renewal of the HMO licence lawful under Article 13(2) of the Services Directive and Regulation 18(4) of the Services Regulations?

Arguments of the Parties

Plaintiff's Arguments

• The Plaintiff, by letting and managing private residential accommodation for profit, is providing a "service" as defined broadly by the Services Directive as any self-employed economic activity normally provided for remuneration.
• The activities performed include purchasing, converting, repairing, advertising, letting, and managing properties in accordance with contractual, statutory, and regulatory obligations, which fall within the scope of the Services Directive.
• The fee demanded by the Council was unlawful because it included costs for management and enforcement beyond the application procedure, contrary to Article 13(2) of the Services Directive and Regulation 18(4) of the Services Regulations, as established in the CJEU decision in Hemming.
• Domestic taxation status, registration as a business, or the nature of the tenants' activities do not affect whether the Plaintiff is providing a "service."
• Supporting materials, including government guidance and statistical classifications (NACE and SIC), indicate that letting and managing real estate is considered a service under the Directive.

Council's Arguments

• Letting rooms in an HMO is not a "service" for the purposes of the Services Directive as it lacks the characteristics of a business service provided for remuneration, such as expert performance or internal service processes.
• The licence under Part 2 of the 2004 Act is a property licence, not a personal licence, focusing on the property’s suitability rather than the person providing the service.
• The Council contended that the Plaintiff's activities fall outside the scope of the Services Directive.
• However, the Council conceded that if the Plaintiff is providing a "service," the fee demanded was unlawful because it included non-refundable management and enforcement costs charged upfront.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
R (Hemming trading as Simply Pleasure Limited) v Westminster City Council (Case C-316/15)	Article 13(2) of the Services Directive precludes charging fees at application stage that include management and enforcement costs of the licensing scheme.	The court applied Hemming to conclude that the Council could not lawfully require the Plaintiff to pay a fee covering management and enforcement costs upfront at the licence renewal application stage.
Eric Libert v Gouvernement Flamand (Case C-197/11)	Restrictions on freedom to provide services include limitations on property transactions affecting service providers.	The court found this precedent of limited assistance since it concerned different facts and focused on business undertakings, not individual property owners like the Plaintiff.
J Harmsen v Burgemeester van Amsterdam (Case C-341/14)	Operation of window prostitution businesses with authorisation conditions falls within the scope of the Services Directive.	The court held that the facts differed and that the applicability of the Directive was accepted in Harmsen, but it did not address the precise issue here. It supported the principle that the provider’s activity defines the service, not the recipient’s.
Cura Anlagen GmbH v Auto Service Leasing GmbH (Case C-451/99)	Leasing of vehicles constitutes a service under Article 50 EC (now Article 57 TFEU).	The court noted this precedent confirmed leasing as a service but found it did not assist in resolving the dispute over HMO management.
Erich Ciola v Land Vorarlberg (Case C-224/97)	Restrictions on renting moorings to non-residents violate freedom to provide services.	The court found this precedent not on point as the question of whether renting moorings was a service was not disputed there, and the facts were different.

Court's Reasoning and Analysis

The court began by construing the Services Directive’s definition of "service" as broadly encompassing any self-employed economic activity normally provided for remuneration. It found that the Plaintiff’s activities—purchasing, converting, managing, and letting properties—constitute such an economic activity and thus a "service" under the Directive and UK Regulations. The court rejected the Council’s argument that letting rooms in an HMO is not a service, emphasizing that the Directive’s wide scope includes activities like estate and letting agents and that it would be illogical to distinguish the Plaintiff’s self-management from a letting agent’s services.

The court noted that the licensing regime under the 2004 Act concerns not only the property but also its management, as evidenced by statutory provisions requiring the licensing authority to consider the fitness of the licence holder and manager and to impose conditions relating to management. This supported the conclusion that the economic activity of managing the HMO falls within the authorisation scheme regulated by the Council.

The court further observed that exclusions in the Directive for social housing relate only to services provided by the State or mandated bodies and do not exclude private commercial letting activities.

On the legality of the fee, the court relied on the CJEU’s decision in Hemming, which held that fees charged at the application stage must be limited to the costs of the authorisation procedure itself and cannot include management and enforcement costs. The Council conceded that charging upfront for management and enforcement costs was unlawful. The court distinguished the present case from Hemming (No 2), where fees were repaid after a successful challenge, noting that here the Plaintiff was refused a licence due to refusal to pay an unlawful fee upfront.

Regarding the section 16 notice requiring further information, the court held that the Divisional Court’s earlier dismissal of the challenge to that notice was binding and that the issue could not be re-opened in these proceedings.

Holding and Implications

The court ALLOWED the claim for judicial review and granted the declarations sought by the Plaintiff, namely:

• The Plaintiff, by letting the Property, engages in a service activity for the purposes of the EU Services Directive 2006/123/EC and the UK Services Regulations 2009.
• The licensing provisions of Part 2 of the Housing Act 2004 constitute an authorisation scheme under the Services Directive and Services Regulations.
• The Council was not entitled to demand payment of the full application fee of £1,799 at the time of licence renewal because it infringed Article 13(2) of the Services Directive and Regulation 18(4) of the Services Regulations by including costs beyond the application procedure.

The direct effect of this decision is that the Council’s fee regime, insofar as it demands upfront payment of fees covering management and enforcement costs at the licence application stage, is unlawful in this context. No broader precedent beyond the application of the Services Directive to HMO licensing fees was established.