A case in the High Court could have major implications for landlords, letting agents and for every single local authority licensing scheme.

It could also trigger demands from landlords for refunds for payments to local authority licensing schemes.

In the case the landlord Peter Gaskin challenged the cost of the HMO licensing scheme run by the London borough of Richmond on Thames.

He claimed that under a EU directive, the fee could only cover the cost of processing the actual application, and not the cost of running and enforcing the scheme.

Gaskin was renewing his HMO licence, when the council asked him to pay a fee covering not only the costs of processing his application, but also contributing towards the authority’s costs of running the HMO licensing scheme.

Gaskin refused to pay the amount requested for the HMO licence, offering the authority a lower amount, which was rejected.

The landlord was subsequently prosecuted in the Magistrates’ Court for operating an HMO without a licence, before the issue went before the High Court.

This found that the letting of private accommodation was provision of a service that would fall under EU Directive 2006/123/EC.

This says that  that where a charge is imposed for a person to apply to have access to a service activity, the charge must not exceed the cost of the authorisation procedures.

In this case, the question of whether the private letting of accommodation amounted to a service, would determine whether the London Borough of Richmond Upon Thames would be allowed to charge an application fee covering both authorisation procedures and the costs of managing their HMO licensing scheme.

The court handed down judgment stating that Gaskin was providing a service within the meaning of EU law.

The court therefore held that the London Borough of Richmond Upon Thames’s fee for an HMO licence was unlawful because the charge covered costs that extended beyond the cost of processing the licence application.

It was ruled that the council had therefore not been entitled to demand the fee which it had demanded.

It was irrelevant that council tax and not business rates were paid on the property.

The fact that social housing was expressly excluded from the directive also indicated that other types of housing were included.

Writing about the case in Nearly Legal, Giles Peaker says: “There will no doubt be an appeal. No doubt at all.

“This does severe damage to the fee planning and setting of many, many council’s licensing schemes and effectively means that the licensing fees cannot assist in paying for enforcement costs.

“This is not to say that an appeal will be successful, just that it is inevitable.”

Andrew Turner, chief executive at buy-to-let mortgage broker Commercial Trust, said: “This is an interesting case which may set a precedent for some landlords and could have the potential to save HMO landlords hundreds of pounds, if some local authorities have been charging more than they were legally entitled to for HMO licences.

“This is a matter of law and I would urge any HMO landlords that believe they may have been overcharged, to seek professional legal advice.”

The case has come as more and more local authorities seek to introduce their own licensing schemes.

It also comes shortly before new HMO rules come into effect on October 1, when properties of any height with five or more sharers must be mandatorily licensed.