Housing – Civil penalty – Mitigation – Appellant landlord accommodating tenants in HMO at respondent local authority’s request – Respondent serving improvement notices on appellant – Respondent imposing civil penalties for failure to comply with notices and HMO offences – First-tier Tribunal upholding penalties – Appellant appealing – Whether FTT erring by failing to allow mitigation in respect of offences – Whether penalties just and proportionate – Appeal allowed
The appellant was an experienced landlord who owned large properties in Bradford, including 2 Laisteridge Lane, a large four-storey house converted (without planning permission) into eight self-contained flats. It was a house in multiple occupation (HMO) because the conversion did not comply with building regulations. The appellant had housed there several tenants at the respondent’s request, who would otherwise have been homeless.
In June 2021, the respondent inspected the property and served eight improvement notices on the appellant requiring work to be completed by a specified date. The appellant did not appeal any of the notices.
Section 30(1) of the Housing Act 2004 provided that failure to comply with an improvement notice was an offence.
Regulation 5 of the Licensing and Management of Houses in Multiple Occupation (Additional Provisions) (England) Regulations 2007 required the person managing an HMO to put in place certain safety measures. Under section 234 of the 2004 Act, it was an offence to fail to comply with a regulation made under that section, and section 234(4) provided a defence of reasonable excuse.
Section 249A of the 2004 Act enabled a local housing authority to impose a financial penalty as an alternative to prosecution. The respondent imposed civil penalties on the appellant in respect of offences under section 30 and breach of the HMO Regulations. The First-tier Tribunal (FTT) determined that the total payable by the appellant was £49,290.31. The appellant appealed.
Held: The appeal was allowed.
(1) Where the decision of a lower court or tribunal involved evaluation or the exercise of a discretion, an appellate court or tribunal should interfere only if it considered that the judge of first instance had exceeded the generous ambit within which reasonable disagreement was possible.
A tribunal’s decision as to what civil penalty to impose for either a breach of the 2007 Regulations or failure to comply with an improvement notice involved both evaluation and discretion. An appellate court/tribunal was not entitled to overturn a penalty just because it would have imposed a different one. To interfere, the court/tribunal had to conclude that the decision under appeal was unreasonable or wrong because of an identifiable flaw in the judge’s reasoning, such as a gap in logic, a lack of consistency, or a failure to take account of some material factor, which undermined the cogency of the conclusion: Sutton v Norwich City Council [2020] UKUT 90 (LC); [2020] UKUT 90 (LC); [2021] EWCA Civ 20; [2021] PLSCS 7 applied.
It was not inconsistent for the respondent to ask a landlord to accommodate a homeless person, to approve the property for the tenant’s initial entry, and then to serve improvement notices. Housing standards were for all tenants. However, problems caused or exacerbated by the tenants might provide a defence to the offence. They were at least a very significant item of mitigation.
The FTT had exceeded the generous bounds of its discretion by failing to allow mitigation in respect of all three offences on the basis of the tenants’ contribution to the state of the property and adhering to the respondent’s inexplicable 5% limit upon the effect of mitigation. Accordingly, all three civil penalties would be set aside.
(2) A guiding principle of civil penalties was that they should remove any financial benefit that the landlord might have obtained because of the offence. When determining any gain as a result of the offence the respondent would take into account: the cost of the works required to comply with the legislation; any licence fees avoided; rent for the full period of non-compliance; other factors resulting in a financial benefit such as the potential cost of rehousing any tenants by the respondent; and, as a deterrent, the cost to the respondent of the investigation: see Civil penalties under the Housing and Planning Act 2016, Guidance for Local Housing Authorities.
The FTT had to start from the respondent’s enforcement policy but should depart from it if it was irrational or unjustifiable. In this case, in following the policy of setting the cost of the works as a minimum for the penalty the FTT acted irrationally, because that policy did not achieve the objective it was supposed to achieve, and unlawfully fettered its discretion. The house remained an HMO and the regulations still applied. Accordingly, the appeal succeeded on that point.
(3) All courts, when sentencing for more than a single offence, should pass a total sentence which reflected all the offending behaviour before it and was just and proportionate; and it was usually impossible to arrive at a just and proportionate sentence for multiple offending simply by adding together notional single sentences (the totality principle).
In the context of housing offences, the local housing authority, and the FTT on appeal, would be looking at financial penalties, often of similar amounts, none exceeding £30,000, so that there was no single stand-out offence which might well reflect the overall criminality of the landlord. The respondent had a choice as to whether to impose one civil penalty or two, and here it chose to impose two. It also had a choice whether to impose one penalty or several for the breaches of HMO regulations; it chose to impose one.
(4) The UT had enough material before it to substitute its own decision as to the appropriate penalty to be imposed, exercising its own discretion about mitigating factors and totality.
The starting point for each section 30 offence was £15,000. A discount of 25% would be applied to each penalty. In addition, each penalty should be mitigated by the role the tenants played in either causing the disrepair or making it difficult to do the work. A further discount of 20% would be applied to each penalty.
No further step was necessary to ensure that the appellant did not profit from the offences as he still had to do the work. There was no double-counting because these were two separate flats and two separate offences. Accordingly, the penalty for each of the two offences stood at £8,250.
The starting point was also £15,000 for the section 234 offence. Taking into account some double-counting and elements of mitigation, a penalty of £10,000 would be imposed in respect of that offence.
None of the offences were trivial; and there was no reason to regard the total as a disproportionate penalty for the bad state of the property. Accordingly, no further adjustment would be made under the totality principle. The total penalty would be reduced to £26,500.
Nick Peterken (of NP Legal Service) appeared for the appellant. The respondent did not appear and was not represented.
Eileen O’Grady, barrister
Click here to read a transcript of Kazi v Bradford Metropolitan District Council
