Interim and Final Management Orders

All in a day

Most of my writings derive from discussions or incidents that I have engaged with during the course of my working week, usually when rowing with a landlord in a front garden.

Either a weird bit of law comes up that’s worth clarifying or just some nonsense statement made by somebody, occasionally me.

This article is a typical example, prompted by a warning I gave to a rogue agent last week that the council could take over the property if he didn’t bring it up to standard and his huffing dismissal of the suggestion, to which he gnomically replied:-

“Possession is nine tenths of the law my man”.

This got me thinking

On the tube going back home, I pondered on this phrase I had heard hundreds of times in my life but confess that I don’t actually know what it means, or what use it is when applied to rogue landlords running dangerous, unsanitary and overcrowded properties.

What I was trying to impress upon the man, was that in certain prescribed circumstances a local authority can step in and take control, through the imposition of Interim and Final Management Orders.

Both of which prevent the landlord from receiving the rent or having any management control over their property for a set period of time.

The fact is

Part 4 of the Housing Act 2004 gives local authorities both the power and sometimes the duty to take over management from the owner in certain circumstances.

That’s right. A “Duty”, meaning if the council did not do it they would, in fact, be breaking the law themselves.

So how do they work?

When a management order is in place the council steps into the shoes of the landlord and will collect rent from the existing tenants and even create new tenancies during the life of the order.  Which

• In the case of Interim Management Orders (IMO’s) is up to 12 months and
• In the case of Final Management Orders (FMOs) up to 5 years.

The monies received from the tenants is taken by the council and used to discharge the local authority’s property management expenses, including money having to be spent on making the place safe and habitable.

And it doesn’t end there

Any money that may be left after the various functions have been discharged should be given back to the landlord.

But if upon expiry of the order the rental income did not meet the costs of management – then the council will register a land charge against the title and could even force a sale to recover the money.

The council is under a ‘Statutory duty’ to make an IMO in the following circumstances:-

1. Where the property is an HMO or is otherwise licensable but has not been licensed and the council consider that there is no reasonable prospect of it being licensed in the near future, or
2. Where the HMO was licensed but it has been revoked and the revocation is not yet in force and once it is in force there would be no prospect of it regaining a licence in the foreseeable future, or
3. Where an IMO is necessary to protect the health, safety and well-being of the occupants or
4. adjoining occupiers, which includes threats to evict, made in order to avoid the requirement of having a licence.

The council also has the ‘Power’ to apply an IMO in the following circumstances:-

• The property is a non-licensable HMO and
• Condition 3 above is satisfied.

IMO’s have to be registered

To register an IMO on non-licensable properties an application must be made to the First Tier Tribunal.

As soon as practicable after making the order, a copy has to be served on relevant parties (including freeholders where there is a long leasehold underneath) setting out

• the reasons for making the order,
• the date it was made,
• the effect of the order and
• the date it ceases to have effect.

Once the IMO has expired or been challenged and set aside, the control by the council is relinquished but upon expiry of an IMO they do also have the ‘Power’ (not duty) to apply for an FMO, retaining management control for a further 5 years under the same kind of financial arrangement.

FMO’s require a financial plan as well

For an FMO the council have to not only set out the reasons for it but also create a management plan for the FTT to consider, detailing how they will be managing the property and the expected financial expenditure in doing so.

If the council fails to live up to their plan the owner can apply to have the order set aside.

Also throughout the period of time that the FMO is running the council must carry out reviews on whether the order is still the most effective way of dealing with the problem.

So much for the regulatory side of it – but what about the practicalities?

I’m a particularly zealous pursuer of rogue landlords and often get frustrated in arguments with other enforcement officers who don’t readily jump to the same conclusions as me that a property might fit the bill for an IMO.

To my mind a huge amount do, especially when it comes to threats of eviction to avoid obtaining a licence but then I work across a range of different London boroughs now and I work with councils, not for them.

So at the end of the day I’m not the one having to do the paperwork, or having my will to live sapped by the inevitable fight with the reluctant, internal legal teams.  So its easy for me to be Citizen Smith (apologies to anyone under 45 there).

Resource issues

One of the most common things I hear is that the authority doesn’t have the staff, the machinery or the skills to manage the property.

However, there is nothing in the legislation that says the council have to be the ones doing the day to day stuff. That task can and sometimes is, punted out to a local letting agent, whose management fees are taken out of the rent.

Given the procedural hoops that have to be jumped through though, I entirely understand the reticence. If I was the one jumping through them I would probably groan as well but the prospect of losing control of their property and being denied any rental income for a considerable time does a lot to focus the mind of the rogue landlord, for whom it is all about the money.

In reality

Given the time and effort it takes to get an IMO arranged, only the really committed rogues find themselves on the wrong end, having failed to clean up their act and their property despite numerous warnings and opportunities.  So normal landlords would never find themselves being subject to one by accident.

I just wish more councils would be as keen to issue them as I am to see someone else do the paperwork.