Let's start with the basics. What is a management order? When might the council use one? Put simply, these are legal devices enabling a council to take over the running of a property. There are a number of different management orders and the type used depends on the situation.
Empty Dwelling Management Order (Edmo)
The first is very rarely used and is called an empty dwelling management order. It can be used by the local housing authority (the local council) to bring empty dwellings back into use.
It tends to be used when the property has remained empty for a period of time but is in reasonable condition. They aren't usually the first choice as they are complicated and can be easily revoked. In fact, according to a news report in 2015, only one such management order was made in London in 2014.
Interim Management Order (IMO)
More commonly used, but still relatively rare, is the interim management order (IMO). A number of conditions have to be met before an IMO is issued by a tribunal:
- There must be a health and safety or welfare concern: The making of an IMO is necessary to protect the health, safety or welfare of occupiers or adjoining occupiers/owners. Note that if there is a threat to evict persons occupying the house in order to avoid the house being required to be licensed, this may constitute a threat to the occupiers’ welfare, thus meeting this condition.
An IMO may also be used if an anti-social behaviour condition is met. This condition is met when the landlord is unable to evict a criminal gang or troublesome tenant from the HMO. They may be scared or simply not capable of serving the eviction notice. In this situation, neighbours are left fearing for their lives and possessions.
- Failure to license an HMO (or house to which selective licensing applies) with no reasonable prospect of it ever becoming licensed. To fail to license an HMO is a criminal offence.
It could be that there is a legal wrangle over the property, possibly following a death, and nobody with an interest wants to deal with the situation. Sometimes there's been a family breakdown or relationship breakdown and this can all be at the heart of the reasons for the order. If after being caught operating without a licence the landlord or person in control is still not applying for a licence and continues letting the property anyway. the council may apply for an IMO.
The application for an order is made by a council at the First-tier Tribunal. If the First-tier Tribunal authorises the IMO, the council can take over the running of the property. Sometimes, a council may not have in-house property management capability. They could hire a social landlord or managing agent and outsource the letting and even management of the property. The agent would then arrange all necessary repairs and take the cost of this and the reasonable costs of managing it from the rent. The landlord would receive the remainder of the rent amount. Be warned - there’s usually not much left after all the expenses.
When the landlord is unable to carry out the necessary eviction and the council gains an IMO and takes over control, the landlord faces a huge financial risk. They may not receive any or enough rental income to fulfill mortgage payments. The council is likely to be paying itself for the management and time procuring an agent, a property manager and contractors.
The Interim Management Order can be revoked by the tribunal if the necessary licence has been obtained and confidence is gained in the new licence holder. It lasts for up to 12 months.
Once authorised, the landlord and any relevant person with an interest in the property can appeal the decision, or the terms of the order.
Special Interim Management Order (SIMO)
If a property required a selective licence but isn’t an HMO, then another kind of management order called a special interim management order may apply.
According to the Housing (Interim Management Orders) (Prescribed Circumstances) (England) Order 2006 SI 2006/369, the circumstances prescribed for England are:
the area in which the house is located is experiencing significant and persistent antisocial behaviour
there is a significant and persistent problem of antisocial behaviour at the house
the landlord is a private sector landlord
the landlord is failing to take action to combat the problem
the effect of the order, in combination with other measures by the local authority, will reduce or eliminate the problem.
Final Management Order (FMO)
The local authority can make a management order final if a licence is not granted by the date of expiry of the IMO or SIMO. The council can apply for the initial IMO to be made final. This is, surprisingly, a final management order. When necessary, FMOs can also be made for houses not subject to any licencing requirements.
Banning Orders and Management Orders
If a landlord is subject to a banning order the council will likely make an application for an IMO at the same time as the banning order. This prevents the landlord from holding a licence or passing their property to others to manage.
While relatively rare in occurrence, when levied, management orders come with grave financial consequences for landlords and anyone with an interest in the property. Getting property licencing right will significantly lower your chances of being served a management order. HMO Services provide low-cost advice through consultation and assistance with applying for a property licence.
DISCLAIMER: This article is intended for information only and does not constitute legal advice. If you have any questions related to issues in this article, we strongly advise contacting a qualified professional.