Financial Penalty Reduced for Operating HMO Without License

OUTCOME: Allowed in Part

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : CAM/12UD/HNB/2025/0002 Property : 29 New Drove, Wisbech [POSTCODE] Applicant : [redacted] : n/a Respondent : [redacted] Representative : Mr [COUNSEL], counsel Type of [NAME] : Appeal against financial penalties – section 249A & schedule 13A to the [NAME] 2004 Tribunal members : First-tier Tribunal Judge K Neave Tribunal Member [NAME] : Remote hearing by CVP Date of decision : 27 November 2025

DECISION

2 Decisions of the tribunal (1) The tribunal is satisfied beyond reasonable doubt that during the period 12 September 2024 to at least 7 November 2024, the Appellant was a person managing an HMO which was required to be licensed but was not so licensed, and accordingly committed an offence under section 72(1) of the [NAME] 2004. (2) The tribunal varies the Respondent’s notice imposing a financial penalty. The total financial penalty is varied to: £5,000.00. The [NAME]

1. By an [NAME] received by the tribunal on 19 February 2025, the Appellant appeals a financial penalty issued by the Respondent on 20 January 2025 in the sum of £11,000 in respect of an offence under section 72(1) of the [NAME] 2004 (“the 2004 Act”) of having control of or managing a HMO which is required to be licensed but is not licensed. The background 2. The subject property is a four-bedroom detached house located in Wisbech. The Appellant is the registered freehold owner of the property. Neither party requested an inspection of the property and the tribunal did not consider that an inspection was necessary, and nor would it have been proportionate to the issues in dispute.

3. The background to the appeal is set out in the Appellant’s bundle of 127 pages, the Respondent’s bundle of 240 pages, the Respondent's skeleton argument, and the further documents submitted by the Appellant on the morning of the hearing, referred to in more detail below. We have considered these documents in detail.

4. The Respondent’s case is, in summary, that its officers visited the property on 24 April 2024 and ascertained that it was being occupied as an HMO. At the time, the property was let by the Appellant to [APPELLANT] under the terms of a lease dated 17 April 2024. In or around 10 September 2024, the Appellant took possession of the property from GJ [APPELLANT] and became the direct landlord of the occupants of the property. The Appellant did not apply for an HMO licence despite the Respondent’s requests that he do so.

Accordingly, the Respondent elected to issue a financial penalty of £11,000.

5. The Appellant accepts that he terminated the lease held by [APPELLANT], though he asserts that this took place on 15 October 2024 (see paragraph 14 of his statement of case). He says that he took steps to obtain vacant possession of the property thereafter, and that he achieved this by 10

3 January 2025. He asserts that he did not create the HMO and the Respondent acted too hastily in issuing a financial penalty. The hearing 6. On 28 October 2025, the Appellant wrote to the Respondent stating that he felt that his poor health would prevent him attending the hearing on 4 November 2025. The email was not copied to the tribunal as the Appellant used an incorrect email address. On 3 November 2025, the Respondent made the tribunal aware of the Appellant’s email.

7. The tribunal emailed both parties that day stating that the hearing would commence as planned on 4 November 2025 and that the Appellant could join the hearing by remote link so that the tribunal could decide how to proceed, including considering whether it could take measures that would assist the Appellant to take part in the hearing notwithstanding his poor health. The Appellant was warned that if he did not attend the hearing or apply for an adjournment the hearing was likely to proceed in his absence, but the tribunal would consider the Appellant’s documents in coming to its conclusions. The Appellant was informed that he must send any further documents to the tribunal and the Respondent no later than 2pm that day.

8. The Appellant in fact sent further documents to the tribunal shortly after 5am on the morning of the hearing, including his statement of 3 November 2025 and the documents attached to it. He did not attend the hearing and nor did he make any [NAME] for the hearing to be adjourned. The Respondent was represented at the hearing by Mr [COUNSEL], counsel.

9. Mr [COUNSEL] confirmed that he had had sufficient time to consider the Appellant’s documents filed that morning and was content for them to be admitted. In the circumstances, it was in our judgment in accordance with the overriding objective to admit the documents so that we could consider all the available information in the resolution of this appeal.

10. Mr [NAME] asked the tribunal to proceed with the hearing in the Appellant’s absence under rule 34 of the tribunal’s procedure rules. We were satisfied that the Appellant had been notified of the hearing for the reasons set out above. We were also satisfied that it was in the interests of justice to proceed in the Appellant’s absence – there was no [NAME] to adjourn the hearing, we were able to consider the Appellant’s documents, and it did not appear to us that the position would be any different if the matter were dealt with at a later date. We accordingly proceeded as Mr [NAME] suggested.

11. We heard oral evidence from [NAME] (a [NAME] enforcement/HMO Licensing officer), [NAME] (a [NAME]

4 [NAME] Manager) and [NAME] (Assistant Director, Communities). All three witnesses are employed by the Respondent. They confirmed the content of their witness statements dated 10 July 2025 and 11 July 2025. Mr [NAME] made submissions. We reserved our decision. The issues 12. Mr [NAME] agreed that the following issues remained in dispute and required determination: (i) Whether the Appellant has committed an offence under section 72(1) of the 2004 Act. (ii) Whether the financial penalty of 20 January 2025 ought to be varied. Legal framework 13. By section 72(1) of the 2004 Act “A person commits an offence if he is a person having control of or managing an HMO which is required to be licensed under this Part (see section 61(1)) but is not so licensed”.

14. By section 263 of the 2004 Act: (i) a “person having control” means the person who receives the rack-rent of the premises (whether on his own account or as agent or trustee of another person), or who would so receive it if the premises were let at a rack-rent. (ii) A “person managing” means the person who, being an owner or [NAME] of the premises– (a) receives (whether directly or through an agent or trustee) rents or other payments from– (i) in the case of a house in multiple occupation, persons who are in occupation as tenants or licensees of parts of the premises; and (ii) in the case of a house to which Part 3 applies (see section 79(2)), persons who are in occupation as tenants or licensees of parts of the premises, or of the whole of the premises.

15. By section 249A(1) of the 2004 Act, “the local [NAME] authority may impose a financial penalty on a person if satisfied, beyond reasonable

5 doubt, that the person's conduct amounts to a relevant [NAME] offence in respect of premises in England”.

16. An offence under section 72 of the 2004 Act is a “relevant [NAME] offence”.

17. By paragraph 10 of schedule 13A of the 2004 Act, a person upon whom a financial penalty is imposed may appeal to the tribunal. The appeal is to be a re-hearing of the local authority’s decision. The tribunal may confirm, vary or cancel the final notice. Findings 18. Having heard the evidence and submissions and considered all of the documents referred to above, we make determinations on the various issues as follows. Has the Appellant committed an offence under section 72(1) of the 2004 Act? 19. The Respondent’s case is that the Appellant has committed a criminal offence. We must accordingly be satisfied beyond reasonable doubt of all of the elements of the alleged offending under section 72(1) of the 2004 Act.

20. We start by considering the evidence of Ms [NAME], Ms [NAME] and Mr [NAME]. We found them all to be helpful and credible witnesses. Their evidence was given in a clear and straightforward manner and it was clear to us that they had detailed knowledge of this property, its history and the circumstances that gave rise to the imposition of the financial penalty in this case.

21. The unchallenged evidence of Ms [NAME] and Ms [NAME] was that when they visited the property on 24 April 2024 there were seven tenants occupying the property and that the property met the standard test for an HMO. Ms [NAME] also reports that she visited the property on 31 October 2024 and found that there were 6 people living there. Her contemporaneous note of the visit was exhibited to her statement at JE18. Indeed, the Appellant’s own evidence set out in his statement of 3 November 2025 was that the tenants placed by [COMPANY] remained in the property when he “took over” in October 2024 and that he did not obtain vacant possession of the property until 10 January 2025. He also stated in his letter to Ms [NAME] dated 7 November 2024 that the “current situation at the property” was that “there are 6 persons rent paying lodgers in the property”.

22. We accept the clear, straightforward and unchallenged evidence of Ms [NAME] and Ms [NAME] and find that from 24 April 2024 to at least 7 November 2024, the property was occupied by between 6 and 7 people

6 and met the standard test for an HMO. There is no dispute, and we are satisfied beyond reasonable doubt, that an HMO licence was required in those circumstances and that no HMO licence was in place in respect of the property in the period 24 April 2024 to 7 November 2024.

23. The next question is whether the Appellant was in that period a person having control of or managing the HMO. There is no dispute that the Appellant was at the material time the registered freehold owner of the property under title number CB279550 and, having seen the official copy of the register of title, we find that he was the owner of the property at all material times.

24. The Appellant will accordingly fall within the definition of a “person managing” the HMO if he received rents or other payments from persons who were in occupation as tenants or licensees of parts of the premises.

25. In considering this point, we take into account the Appellant’s notice to the occupiers of the property dated 10 September 2024, exhibited to Ms [NAME] statement at MP10. There is no dispute, and we find, that this document was drafted and signed by the Appellant. It states that he has “lawfully re-entered and repossessed the property as from today, 10 September 2024” and that, “as from this Friday of 13 September 2024 you become obligated and liable to pay your future rent to me, your landlord and the owner of this property…for this week only the rent will be collected in cash or a cheque on Thursday 12 September…”. We find, having considered this notice, that the Appellant terminated the [NAME] lease and became the direct landlord of the occupiers of the property on 10 September 2024, and not 15 October 2024 as he asserts in his statement. The notice of 10 September 2024 is a contemporaneous document written by the Appellant himself and we place significant weight on it as evidence of his actions and intentions.

26. The notice is a clear demand for rent to be paid to the Appellant by the occupiers of the rooms in the HMO and notice of the Appellant’s intention to personally collect rents a few days after the notice.

27. Further, the Appellant does not deny that he collected rents from the occupiers of the HMO – indeed, he says in his statement of 3 November 2025 that “the respondent’s wrongly perceives that as I was receiving or collecting rent from the tenants during my take over the property as a care taker on both occasions then I was also the creator of the HMO occupancy at the property” (emphasis added). This appears to us to be an admission that the Appellant did indeed collect rent from the occupiers. It is not in our judgment relevant at this stage that the Appellant did not create the HMO – the material point is whether, notwithstanding who created the HMO, the Appellant was at any material time an owner of the HMO who received rent from the occupiers.

7 28. We have also considered the contemporaneous correspondence, which in our judgment indicates that the Appellant did receive rent from the occupiers of the HMO. This includes: (i) The Appellant’s letter to Ms [APPELLANT] dated 7 November 2024 which states “there are 6 persons rent paying lodgers in the property”. (ii) The Appellant’s letter to Ms [APPELLANT] and Ms [APPELLANT] dated 30 January 2025 in which he stated that he had not received “any rent from the property since from…10 January 2025”. This in our judgment suggests that he did receive rent before 10 January 2025. (iii) The email from [NAME], an occupier of the HMO, sent to the Appellant on 23 September 2024 stating that he had paid his rent by bank transfer (exhibit JE15).

29. Having considered all of this evidence, we are satisfied beyond reasonable doubt that the Appellant did receive rent from the persons who were in occupation as tenants or licensees of parts of the property, and we so find.

30. We are accordingly satisfied beyond reasonable doubt that during the period 12 September 2024 (when the Appellant said that he would collect rents from the occupiers of the HMO) to at least 7 November 2024, the Appellant was a person managing an HMO which was required to be licensed but was not so licensed, and accordingly committed an offence under section 72(1) of the 2004 Act in that period.

31. Though we have considered the Appellant’s assertion that the Respondent acted too hastily in imposing a financial penalty in this case, we do not agree. Ms [APPELLANT] told the Appellant that he needed to apply for an HMO licence on 23 September 2024 and 23 October 2024 but he failed to do so. Should the penalty be varied? 32. The Appellant’s case, in asserting that the penalty of £11,000 is excessive, can be summarised as follows: (i) He did not place the tenants in the property – that was the responsibility of [COMPANY]. (ii) He has not committed any [NAME] related offences in the past, and the issues described in Ms [NAME]

8 statement relating to inspections that she carried out in 2019 and 2020 were not his fault but the fault of a rogue tenant who breached the terms of his tenancy agreement and absconded, leaving the property occupied by multiple sub-tenants. (iii) It was always the Appellant’s intention to bring about a situation in which no licence was required by obtaining vacant possession of the property. He communicated this intention to the Respondent and achieved vacant possession within 4 months, on 10 January 2025. Indeed, by 28 December 2024, he informed the Respondent that there were only three tenants in occupation of the property.

33. The Respondent, in applying its civil penalty policy, assessed the Appellant’s offending as “very high culpability” and “negligible harm” resulting in a level 5 fine. The starting point for a level 5 fine is £9000.00. The Respondent added £2000 to the starting point because it considered that there were aggravating factors present, namely the fact that the Appellant was fully aware of the need to obtain an HMO licence, having been informed of this on numerous occasions by the Respondent. We bear in mind the decision in [NAME] v Marshall [2020] UKUT 35 (LC) and give weight to the decision under appeal.

34. All of the Respondent’s witnesses were asked questions by the tribunal about the level of fine imposed in this case. Ms [NAME] said that, in her view, the offence was a very high culpability offence and there were aggravating factors present because she had met with the Appellant in 2019 and provided him with information about the need to obtain an HMO licence and hyperlinks directing him to the appropriate websites where he could start the process. She accepted that no harm had been caused to the tenants. Mr [APPELLANT] said that he considered that the Appellant was well aware of the need to apply for a licence and that this was a key factor in imposing a fine of £11,000, at the top of the level 5 range. He accepted that the mere fact that the Respondent’s civil penalty policy identified a failure to licence an HMO as an example of a “very high culpability offence” did not mean that all failures to licence [NAME] necessarily fell under the very high culpability band.

35. We are not satisfied that the Appellant’s offending can properly be characterised as very high culpability. The Respondent’s civil penalty policy defines “high culpability” offending as offending which involves “actual foresight of, or wilful blindness to, risk of a breach but nevertheless taken”, whereas “very high culpability” refers to offending involving an individual who has “seriously breached, or seriously and flagrantly disregarded, the law”.

9 36. We accept that the Appellant had actual foresight that he would be at risk of breaching the law if he accepted rent from the occupiers of the HMO after 10 September 2024 but that he nevertheless did so. We accept Ms [NAME] clear, straightforward and unchallenged evidence that she provided advice and guidance to the Appellant in October 2019 about the circumstances in which the property would require an HMO licence and that the situation that the Appellant found himself in in September 2024 was not dissimilar to what happened in 2019, when he had to take possession of the property from his [NAME]. He would in our judgment have known in September 2024 that he would need to obtain an HMO licence if he were to terminate [NAME]’ tenancy agreement and accept rent from the occupiers of the property directly.

37. In order for offending to fall within the very high culpability band, there must be more than actual foresight by the landlord. That much is clear from the Respondent’s civil penalty policy which requires a serious breach or serious and flagrant disregard for the law. There is in our judgment nothing in this case which merits such a finding.

38. First, the Respondent accepts that no or negligible harm has been caused by the offending, which in our judgment leans against a finding that this was a serious breach of the law.

39. Secondly, we are not satisfied that the Appellant is guilty of a serious and flagrant disregard for the law. Indeed, on the evidence before us, we find that the Appellant had no desire to continue to operate the property as a HMO, in breach of the law. He intended, as his actions demonstrated, to bring the multiple occupancy of the property to an end so that he could sell or re-let it. He did not ignore the Respondent’s communications, but rather kept in contact with Ms [NAME] and Ms [NAME] and provided updates about the property and how it was occupied. He informed the Respondent before the financial penalty was issued that there were only 3 tenants living in the property. It was not suggested that the property was in a dangerous condition during the Appellant’s management of it, nor that he would not have been granted a HMO licence had he applied for one. Indeed, on the facts as we have found them to be, the Appellant could have applied for a temporary exemption from the requirement to licence the property under section 62 of the 2004 Act. He did not do so, and there is no question that he has committed an offence under section 72(1) of the 2004 Act, but the availability of a temporary exemption in the circumstances is in our judgment material to the seriousness of the offending and indicates that the Appellant’s offending was not particularly serious.

40. Thirdly, as the Appellant says, this is his first offence as the Respondent did not take enforcement action against him in 2019. The Appellant did not place the tenants in the property himself – he was put in the unfortunate situation of having to deal directly with the property when [NAME] did not comply with its own lease. The Appellant had been

10 expecting to have no direct involvement with the property for a period of 5 years (being the length of the [NAME] lease).

41. In our judgment, for the reasons set out above, the Appellant’s offending ought properly to have been categorised in the high (rather than very high) culpability band. Applying the Respondent’s civil penalty policy, this results in a penalty banding of level 4. The starting point for a level 4 penalty is £5000.00.

42. There are in our judgment no aggravating factors that justify an upwards adjustment within the banding. The aggravating factor identified by the Respondent was that the Appellant knew of the need to obtain a HMO licence but failed to do so. This is already accounted for in the designation of the offending in the high culpability banding. To find that this also amounts to an aggravating factor would in our judgment amount to a “double counting” in respect of the Appellant’s culpability.

43. It follows that we vary the Respondent’s notice imposing a financial penalty to reflect our findings set out above. The total financial penalty is varied to: £5000.00. Name: Judge K Neave Date: 27 November 2025

Rights of appeal By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written [NAME] for permission must be made to the First- tier Tribunal at the regional office which has been dealing with the case. The [NAME] for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the [NAME]. If the [NAME] is not made within the 28-day time limit, such [NAME] must include a request for an extension of time and the reason for not complying with the 28-day time limit; the tribunal will then look at such reason(s) and decide whether to allow the [NAME] for permission to appeal to proceed, despite not being within the time limit. The [NAME] for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party [NAME] the [NAME] is seeking.

11 If the tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).