Housing – Civil penalty order – Reasonable excuse – Respondent owning properties required to be licensed under appellant local authority’s selective licensing scheme – Appellant imposing civil penalties for offence of managing or being in control of unlicensed properties – First-tier Tribunal cancelling penalties – Appellant appealing – Whether respondent having defence of reasonable excuse – Appeal allowed
The respondent was a company owned by K for the purpose of buying and letting properties; he was the sole director and shareholder. In April 2020, the respondent bought 115 and 117 Westbourne Avenue, Gateshead. The properties were renovated and let to tenants.
The two houses were in an area designated by the appellant as an area of selective licensing, and therefore the respondent should have had a licence. The appellant became aware of the situation when the tenants registered for council tax and, on 26 November 2020, the respondent applied for a licence for each property. The licences were granted in December 2020.
In July 2021, final notices were served imposing financial penalties for the offence of managing or being in control of unlicensed properties contrary to section 95 of the Housing Act 2004. The respondent appealed to the FTT contending that it had the defence of reasonable excuse and so had not committed an offence.
The properties were bought at auction, and so an information pack for prospective purchasers was provided by the seller’s solicitor. It included a local land charges search on form Con 29 which included a question whether any additional HMO licensing requirements or selective requirements were in place for the property. The seller’s solicitor did not ask that question so there was no information about licensing in the seller’s pack.
The FTT concluded that the penalties should be cancelled finding that the respondent was a reputable landlord which had the defence of reasonable excuse. The appellant appealed to the Upper Tribunal (UT).
Held: The appeal was allowed.
(1) Part 3 of the Housing Act 2004 provided for selective licensing of areas designated for that purpose by the local housing authority, so that a licence was required when the house was let, even if it was not a house in multiple occupation.
The local housing authority had a choice; it might prosecute a person who had committed the offence under section 95 or it might impose a financial penalty, but not both. The requirement to be met before the imposition of a financial penalty was that the authority had to be satisfied to the criminal standard of proof, beyond reasonable doubt, that the offence had been committed.
Section 95(5) provided a defence of reasonable excuse. A person who relied upon that defence had to demonstrate to the civil standard of proof, on the balance of probabilities, that he had that defence: see IR Management Services Ltd v Salford City Council [2020] UKUT 81 (LC); [2020] PLSCS 47 considered.
(2) A landlord might have a reasonable excuse for not appreciating that a property required a licence but it was necessary for the landlord to take reasonable steps to keep informed. A landlord’s reliance upon an agent would rarely give rise to a defence of reasonable excuse. At the very least, the landlord would need to show that there was a contractual obligation on the part of the agent to keep the landlord informed of licensing requirements; there would need to be evidence that the landlord had good reason to rely upon the competence and experience of the agent; and in addition there would generally be a need to show that there was a reason why the landlord could not inform themselves of the licensing requirements without relying upon an agent, for example, because the landlord lived abroad: Thurrock Council v Daoudi [2020] UKUT 209 (LC); [2020] PLSCS 141 and Aytan v Moore and others [2022] UKUT 27 (LC) considered.
It was open to the respondent to instruct his solicitors to find out and advise him on the regulatory position about letting the property, without K being aware either of the selective licensing regime or of the workings of form Con 29, but it had never been the respondent’s case that any such instructions were given. Equally the respondent, through K, could have researched the regulatory and licensing position itself; or it could have instructed a letting agent to do so. It did none of those things. As a result, there was no basis upon which the respondent could establish the defence of reasonable excuse.
(2) The appellant’s enforcement policy detailed various levels of informal and formal enforcement processes, ranging from advice to warning letters to prosecution. The question before the FTT was not whether the local housing authority in imposing the penalty followed its own policy. It was not conducting a review of the local housing authority’s decision. There was nothing in the appellant’s actions in this case that was inconsistent with its policy, and the policy did not prevent the appellant from taking formal enforcement action. The extent to which the policy was followed was relevant only insofar as the FTT was, incorrectly, reviewing the appellant’s decision; it was irrelevant to the FTT’s own decision making process.
(3) In Thurrock Council v Daoudi, the FTT imposed no penalty on the landlord because he had applied for a licence after being made aware that one was necessary. On appeal to the UT, the deputy president said that 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.
If the respondent in the present appeal was a good landlord, as the FTT found, that went to mitigation when the level of penalty was considered, but it did not amount to the sort of exceptional circumstance that might justify a decision not to impose a financial penalty where it was proved beyond reasonable doubt that the offence had been committed and the respondent had failed to establish the defence of reasonable excuse.
Accordingly, the UT would substitute its own decision that a financial penalty should be imposed. It remained to decide the amount of that penalty. As the UT had no evidence of the respondent’s financial circumstances, the matter would be remitted to the FTT for a decision by a different panel on the level of penalty if the parties were unable to reach agreement.
Thomas Parsons-Munn (instructed by Gateshead Borough Council) appeared for the appellant; Nicholas Leviseur (instructed by DWF Law LLP) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Gateshead Borough Council v City Estate Holdings Ltd