Housing – House in multiple occupation (HMO) – Civil penalty – Respondent landlord operating HMO without required licence – First-tier Tribunal failing to impose penalty – Appellant local authority appealing – Whether FTT entitled to treat ignorance of need for licensing as mitigation – Appeal allowed
The respondent owned a property at 440 London Road, Grays, Essex, a six-bedroom semi-detached house on three floors. It was his family home until about 2008 when the family moved but the respondent retained ownership of the property. In June 2018, he began letting rooms as bed-sitting rooms with shared use of the cooking, washing and sanitary facilities to individuals with no connection to each other. As a result, the house became a house in multiple occupation (HMO) and required a licence under article 3(2) of the Multiple Occupation (Prescribed Descriptions) (England) Order 2006.
Following a complaint from one of the occupiers, officers of the appellant council visited the house and discovered that there were ten people in occupation. A notice requesting information was served on the respondent with a warning that he appeared to have committed a criminal offence by failing to license the property. The respondent then applied for an HMO licence for six separate bed-sitting units. However, the appellant imposed a financial penalty of £10,000 on the respondent for an offence, under section 72 of the Housing Act 2004, of failing to licence an HMO.
The First-tier Tribunal (FTT) allowed the respondent’s appeal against the financial penalty, deciding that, although the elements of the offence were made out, it was not reasonable or appropriate to impose any financial penalty in the circumstances: The respondent had cooperated fully and taken all the steps required once he was aware of the need for a licence; he had genuinely been unaware of the requirement to obtain a licence; the threat of prosecution or penalty had served its purpose by procuring compliance with the law; and the stress suffered by the respondent in the process was sufficient punishment. The appellant appealed.
Held: The appeal was allowed.
(1) There might be cases in which ignorance of the facts which gave rise to the duty to obtain a licence might provide a defence of reasonable excuse under section 72(5) of the 2004 Act. Short of providing a defence, ignorance of the need to obtain a licence might be relevant to the issue of culpability. Although a landlord was running a business and ought to be expected to understand the regulatory environment in which that business operated, not all businesses were the same. A decision maker might reasonably take the view that a landlord with only one property was less culpable than a landlord with a large portfolio. Tribunals should consider whether any explanation given by a landlord of an HMO amounted to a reasonable excuse for the relevant offence. In the present case, the FTT could not properly have found the defence to be made out. No matter how genuine a person’s ignorance of the need to obtain a licence, unless their failure was reasonable in all the circumstances, their ignorance could not provide a complete defence. By making the respondent’s ignorance of his responsibilities the foundation of its conclusion that it was not reasonable or appropriate to impose any financial penalty, the FTT effectively allowed him the benefit of the defence without explicitly addressing it: I R Management Services Ltd v Salford City Council [2020] UKUT 81(LC); [2020] PLSCS 47 considered.
(2) Securing compliance with the law in an individual case was only part of the purpose of the civil penalty regime. The Government’s Guidance on Civil Penalties issued under the Housing and Planning Act 2016 identified a number of factors relevant to the scale of civil penalties including punishment of the offender and deterrence of others from committing similar offences. The deterrent effect, at least as far as it applied to first offences committed by landlords with only one or two properties, would be seriously diminished if securing compliance with the law in relation to one property was regarded as a sufficient achievement of the statutory objective to justify waiving any penalty.
If the respondent’s ignorance of his responsibilities, and the achievement of compliance as a sufficient outcome in itself, were left out of account, the only factors tending towards leniency were the speed with which the respondent complied with his responsibilities when they were pointed out to him and his personal circumstances. The steps taken by the respondent after he became aware of the need for a licence, and after he had been served with notice of the works required to bring the property up to a standard consistent with the Management of Houses in Multiple Occupation (England) Regulations 2006, were obviously relevant to the appropriate penalty. They demonstrated his willingness to comply with his obligations, which was a mitigating factor. However, there had to be a limit on the extent to which belated compliance with an obligation could mitigate the punishment appropriate to the original non-compliance. Eventually doing what the law required could not justify a decision to impose no penalty at all, although it had a bearing on the level of punishment. Where parliament had provided for penalties of up to £30,000 for offences which it clearly intended to be treated as serious, a substantial justification would be required based on more than sympathy for the personal circumstances of the offender. Accordingly, the FTT took into account considerations which were legally irrelevant in reaching its decision.
(3) It fell to the Upper Tribunal to consider whether a penalty ought to be imposed for the breach of the duty to obtain an HMO licence, and if so, what that penalty should be. It was appropriate, when undertaking that exercise, to have regard to the objects of the civil penalty legislation and the appellant’s policy. By ignoring the figure produced having regard to harm and culpability, the appellant had not applied its own policy. The formulation of policy was a matter for the appellant, but where the result was an impenetrable policy, as here, the better approach was to apply such parts of the policy as made sense and ignore the rest. In all the circumstances, the decision of the FTT would be set aside and a penalty of £4,000 imposed under section 249A of the Housing Act 2004: London Waltham Forest Council v Marshall [2020] UKUT 35 (LC) and Sutton v Norwich City Council [2020] UKUT 90 (LC); [2020] PLSCS 53 considered.
Ryan Thompson (instructed by Thurrock Council) appeared for the appellant; The respondent appeared in person.
Eileen O’Grady, barrister
Click here to read a transcript of Thurrock Council v Daoudi
