In Sutton and another v Norwich City Council [2020] UKUT 90 (LC); [2020] PLSCS 53, the Upper Tribunal (Lands Chamber) (UT) had to consider whether a local authority had correctly levied financial penalties on the director and manager of an “aparthotel” for breach of housing standards.
The statutory provisions
The Housing Act 2004 (the Act) empowers local authorities to regulate houses in multiple occupation (HMOs) and enforce housing standards. Under section 257 of the Act, blocks converted into self-contained flats where fewer than two-thirds are owner-occupied are designated as HMOs (section 257 HMOs). The Licensing and Management of Houses in Multiple Occupation (Additional Provisions) (England) Regulations 2007 (the Regulations) impose additional obligations to maintain housing standards on persons managing section 257 HMOs.
Failure to comply with an improvement notice or a breach of the Regulations are both criminal offences under sections 30 and 234 of the Act. Financial penalties can be levied by local authorities as an alternative to prosecution under section 249A of the Act.
A hotel or section 257 HMO?
Faiths Lane Apartments Ltd (FLAL) was the owner of Max House in Norwich. Nicholas Sutton was the sole director of FLAL. In breach of building regulations, Max House had been converted from a former office block into an aparthotel.
During 2017 and 2018, Norwich City Council received complaints from long-term occupiers at Max House in respect of poor housing standards. The council had designated Max House as a section 257 HMO. Further, inspections by the council uncovered a number of health and safety hazards and breaches of the Regulations. It served improvement notices on FLAL and ordered that the breaches of the Regulations be remedied. FLAL failed to comply. The council imposed civil penalties totalling £236,000 on both FLAL and Sutton. They appealed.
FLAL and Sutton argued that Max House was a hotel and not a section 257 HMO. The UT approached the issue by having regard to the definitions describing the physical characteristics and facilities of a section 257 HMO in sections 257(1), 254(8) and 262(6) of the Act. The UT derived particular assistance from the definition of “self-contained flats” in section 254(8) of the Act, which referred to facilities that must be available for the exclusive use of its “occupants”. Section 262(6) defined “occupants” as meaning persons who occupy premises “as a residence”. The UT noted that other types of HMOs required the relevant premises to be occupied “as a residence”. Although this expression was absent from the definition of a section 257 HMO, it was probable that it was a necessary requirement.
On the assumption that the definition of a section 257 HMO required occupation as a residence, a hotel did not fall within that definition. Max House’s planning status as an aparthotel was an irrelevant criterion in determining whether it was a hotel or a section 257 HMO. The relevant factor was how Max House was occupied. The evidence before the UT was that at least 30 of the 47 flats and studios were occupied as residences. Although described in the written agreements as licensees, the majority of the residents had exclusive occupation of their flats and were, as a matter of law, assured shorthold tenants. The UT found that Max House fell within the definition of a section 257 HMO.
Validity of the notices and penalties
In finding that Max House was a section 257 HMO and not a hotel, the UT dismissed FLAL and Sutton’s challenges to the validity of the service of the improvement notices.
FLAL and Sutton had also argued that the improvement notices were tainted by illegality. They argued the council had served multiple notices for the improper purpose of maximising revenue and circumventing the rule that only a single penalty could be applied to a single offence of failing to comply with an improvement notice. The UT found that this contention was not supported by the evidence. The council had served multiple notices because of the substantial number of hazards found at Max House and the works needed to remedy them.
The UT also rejected Sutton’s challenge to the council’s authority to levy personal fines on him for FLAL’s non-compliance. The UT found that Sutton’s capacity as a director rendered him liable. Under section 251(1) of the Act, the council had only to prove that FLAL, a body corporate, had failed to comply with the improvement notices and those offences were committed with the “consent or connivance” of a director. Further, FLAL was a manager of Max House by virtue of regulation 2 of the Regulations and section 263(3) of the Act because it received the rents. FLAL did not have a reasonable excuse for its non-compliance and the offences and breaches were committed with the consent or connivance of Sutton as a director.
Having regard to the need to avoid double punishment of directors when levelling fines and having regard to how much Sutton could pay, the UT reduced the total penalty to £174,000.
Elizabeth Dwomoh is a barrister at Lamb Chambers
