Nottingham City Council v Housing 35 Plus Limited

The exemption for a co-operative society in paragraph 2B of Schedule 14 to the Housing Act 2004 applies only where the society’s rules secure that all management decisions are made by members at a properly constituted general meeting. It is the rules, rather than the society’s actual practice, that must satisfy the statutory condition. A provision requiring members to discuss management decisions does not mean that they make those decisions. Unless reserved to the general meeting, day-to-day management decisions may be made by the management committee. The exemption therefore fails where the rules give the committee power to control and direct the society’s management.

Nottingham City Council imposed financial penalties on Housing 35 Plus Limited for managing or controlling two unlicensed houses in multiple occupation. The respondent appealed to the First-tier Tribunal, arguing that the properties were excluded from the HMO regime by paragraph 2B of Schedule 14 to the Housing Act 2004.

The First-tier Tribunal accepted that the respondent’s rules secured that all management decisions were made by members in general meeting. The Council appealed on the construction of the rules and on the factual management of the properties. The parties agreed that actual practice was irrelevant if the rules did not secure the statutory conditions. The central issue was whether the rules required the general meeting to make all management decisions, or merely to discuss decisions made or proposed by the management committee.

1. Appeal allowed. The First-tier Tribunal’s decision on the effect of the rules was set aside. The buildings were HMOs for the purposes of the licensing provisions, and the matter was remitted to the First-tier Tribunal to determine the respondent’s other seven grounds of appeal against the financial penalties.
2. The statutory question under paragraph 2B(2)(b) of Schedule 14 to the Housing Act 2004 is whether the society’s rules secure that all management decisions are made by members, or a specified quorum, at a general meeting to which all members are entitled and invited to attend. What happens in practice is irrelevant to that question.
3. On the ordinary meaning of rule 30, “discuss” does not mean “decide”. Rule 30 required general meetings to discuss management decisions arising since the previous meeting. It did not reserve those decisions to the general meeting.
4. Rules 48 and 69 were consistent with that construction. Rule 48 gave the management committee power to control and direct the day-to-day management of the society, while rule 69 gave it the powers not reserved to the general meeting. Those powers included management decisions. The distinction suggested between high-level and day-to-day management decisions was unworkable because paragraph 2B(2)(b) refers to all management decisions.
5. The general meeting retained decision-making powers expressly reserved to it, including electing the committee, appointing the auditor, expelling members and changing the rules. However, the committee made day-to-day management decisions and exercised powers not reserved to the general meeting. The rules therefore did not secure compliance with paragraph 2B(2)(b), so the paragraph 2B exemption did not apply.

• First-tier Tribunal (Property Chamber): determined as a preliminary issue that the two buildings fell within paragraph 2B of Schedule 14 to the Housing Act 2004 and therefore did not require HMO licences.
• Upper Tribunal (Lands Chamber): allowed the appeal, set aside the First-tier Tribunal’s decision on the rules, and remitted the remaining grounds of appeal.