City council wins appeal over houses in multiple occupation and rules of co-operative society

A dispute over whether two houses in Nottingham are ‘houses in multiple occupation' (HMO) has turned on the meaning of the word ’discuss’ in the rules of the co-operative that owns them.

Nottingham City Council brought an appeal to the Upper Tribunal (Lands Chamber) against a decision of the First-Tier Tribunal (Property Chamber).

Upper Tribunal Judge Elizabeth Cooke said the two homes were owned by Housing 35 Plus and paragraph 2B of Schedule 14 to the Housing Act 2004, said a house was not an HMO - and so did not need to be licensed - if it was managed or controlled by a co-operative society where "all management decisions of the society are made by the members at a general meeting which all members are entitled to, and invited to, attend”.

The First-Tier Tribunal (Property Chamber) had found for Housing 35 Plus when it appealed against Nottingham’s imposition of financial penalty notices, each of £15,000, for failing to licence an HMO.

The two sides’ disagreement was on whether the properties were HMOs. Nottingham argued among Housing 35 Plus’s rules was one that said a general meeting of residents should discuss but not take management decisions, and therefore paragraph 2B did not apply and the buildings were HMOs.

It said another rule enabled the management committee to exercise “all such powers as may be exercised by the co-operative in accordance with its objects an exercised these rules and are not by these rules or by statute required to be exercised by the co-operative in general meeting", which also did not satisfy paragraph 2B.

Housing 35 Plus said the general meeting took all the management decisions and the management committee merely implemented them.

Judge Cooke said: “The appeal turns on the construction of rules…does ‘discuss’ mean ‘discuss’, as the appellant says, or something else?

“Does ‘to discuss all management decisions of the co-operative that have arisen since the last general meeting’ mean that the general meeting discusses what the committee has decided since the last meeting, or does it mean to take all management decisions that have become necessary since the last meeting?”

She said Nottingham’s construction of the rules was ”obviously correct”.

This was because the plain meaning of ‘discuss’ was not the same as ‘ decide’. She said had the rules wanted the general meeting to take management decisions they would have said so.

Interpreted this way, this rule was also consistent with another that provided for the committee to “control and direct the management of the day-to-day business of the co-operative”. 

Judge Cooke said: “And what it controls and directs is the day-to-day ‘management'; I do not understand how that does not mean that the committee takes management decisions. That is why it is called a management committee.”

She concluded: “The management committee, as its name implies, is empowered to make management decisions. They might be described as day-to-day management decisions, but they are management nonetheless.

“The function of the general meeting is to discuss those decisions so that the members all have a voice in what is happening and can make their views known to the committee, both about decisions already made and about future decisions.”

This meant Housing 35 Plus’s rules did not mean all management decisions were made by members at a general meeting and so the houses were HMOs and the FtT had been wrong.

She remitted the case to the  FtT to decide on a further seven grounds of appeal.

Mark Smulian