Financial Penalty Reduced for Unlicensed Hotel Operation

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference :

MAN/00BR/HNA/2022/0043 & 0044

Property : [COMPANY], 87-[ADDRESS], [NAME], [POSTCODE] Applicant: [redacted] Respondent : [redacted] : [NAME] [COUNSEL] (counsel) [NAME] [COUNSEL] (solicitor) Type of [NAME] : Appeal against a financial penalty – Section 249A & Schedule 13A of the Housing Act 2004 Tribunal member(s) : Judge J [NAME] (Valuer)

Venue : (CVP Video) Northern residential Property First-tier Tribunal, 1 floor, Piccadilly Exchange, 2Piccadilly Plaza, Manchester, [POSTCODE] Date of hearing : 31 March 2023

Date of decision : 9 June 2023

DECISION

© CROWN COPYRIGHT 2023

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The Order (1) The financial penalty of £18,000 in respect of the offence under section 72(1) of the Housing Act 2004 is reduced to £11,500. (2) The financial penalty of £8,500 in respect of the offence under section 234 of the Housing Act 2004 is reduced to £5,500 The Applications 1. [NAME] [APPELLANT] is the owner and landlord of, [COMPANY], 87- [ADDRESS], [NAME], [POSTCODE], the “Property” . He has made two applications against two financial penalties issued by [NAME] [NAME] ([NAME]) made under section 249A of the Housing Act 2004 (the 2004 Act).

2. On 19 April 2022, [NAME] [APPELLANT] made an [NAME] against the financial penalty notice dated 24 March 2022 in relation to failure to obtain a licence for [COMPANY] of £8500.

3. On the same day [NAME] [APPELLANT] made an [NAME] against the financial penalty final notice for £18,000, dated 24 March 2022 in relation to breach of management regulations [COMPANY].

4. On 12 August 2022, a procedural Judge decided to extend the time for [NAME] the appeals. On 17 August 2022 Directions were issued. In compliance with Directions both parties submitted bundles of documents as set out below.

The Hearing 5. This Tribunal convened 31 March 2023 to determine the matter by video hearing. The Applicant, [APPELLANT] appeared in person. The Respondent was represented by Counsel [COUNSEL]. The Respondent’s witnesses were in attendance and provided evidence as set out below. [NAME] [NAME] was unable to join by video, though was able to join by telephone and fully participate in the hearing.

6. [APPELLANT] had originally said he was going to represent himself. A few days before the hearing he asked for permission for a recently appointed direct access counsel [NAME] [COUNSEL] to represent him. [NAME] [COUNSEL] did not attend on the day and [APPELLANT] asked the Tribunal to proceed. [APPELLANT] had said that [NAME] [NAME] had contacted him to discuss the nature of the hearing and [APPELLANT] confirmed that [NAME] [APPELLANT] had already been booked on a hearing in the afternoon and had not appreciated that this hearing had been listed for a full day. [NAME] [APPELLANT] was keen to proceed.

7. Having regard to the overriding objectives in Rule 3 of the Tribunal Rules, we were satisfied that we could deal with the case fairly and justly. [NAME]

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[APPELLANT] had previously had solicitors acting for him, received legal advice and his two previous solicitors had made representations on his behalf. He had been able to represent himself in [NAME] written submissions and preparing for the hearing.

Law and Guidance 8. In summary section 249A of the Housing Act 2004 (“2004 Act”) inserted by the Housing and Planning Act 2016, enables a local housing authority to impose a financial penalty on a person if satisfied, beyond reasonable doubt, that the person’s conduct amounts to a ‘relevant housing offence’ in respect of premises in England.

9. Relevant housing offences are listed in section 249A(2). There are two relevant offences here. of houses under this Part:- (a) S (72)(1) 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 . (b) Breach of Management of Houses in Multiple Occupation (Additional Provisions) (England) Regulations 2006 (“Management Regulations”), contrary to Section 234(1) of the 2004 Act. Breach of the Management Regulation 4 Duty of manager to take safety measures.

10. Schedule 13A to the 2004 Act sets out the procedure which local housing authorities must follow in relation to financial penalties imposed under section 249A. Before imposing such a penalty on a person, the local housing authority must give him or her a notice of intent. Unless the conduct to which the financial penalty relates is continuing, that notice must be given before the end of the period of six months beginning on the first day on which the local housing authority has sufficient evidence of that conduct. That person may make written representations within 28 days. After the end of the period the Local Authority must decide whether to impose a financial penalty, and if a penalty is imposed the amount.

11. The Council must follow Government Guidance and adopt a Civil Penalties Policy (“the Policy”). The Guidance also sets out the following list of factors which local housing authorities should consider to help ensure that financial penalties are set at an appropriate level: (a) Severity of the offence. (b) Culpability and track record of the [NAME]. (c) The harm caused to the tenant. (d) Punishment of the [NAME]. (e) Deterrence of the [NAME] from repeating the offence. (f) Deterrence of others from committing similar offences. (g) Removal of any financial benefit the [NAME] may have obtained as a result of committing the offence.

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12. The Tribunal can set aside a penalty which is inconsistent with the decision maker’s own Policy, but it must do so without departing from the Policy, excepting any part of that Policy that does not comply with the Guidance. The burden is on the Applicant to persuade the Tribunal to depart from any Policy. (London Borough of [NAME] v [NAME] [2020] UKUT 0035 (LC) followed in [NAME] v Hussain [2020] UKUT 292 (LC)). The Applicant has not sought to do so. The Policy is in accordance with the Guidance as set out below.

13. In accordance with paragraph 10 of Schedule 13A the appeal is by way of a re-hearing of the local housing authority’s decision as opposed to a review of their decision [NAME]. We are required to remake the decision and reach our own conclusions.

14. The Tribunal may have regard to matters of which the authority was unaware. In [NAME] v [NAME], the Upper Tribunal considered the proper approach to remedial works undertaken after commission of offences and decided that in considering the amount of the penalty the Tribunal can only consider factors following the offence when it comes to considering mitigating and aggravating factors.

15. The Tribunal may confirm, vary, or cancel the final notice. However, the Tribunal may not vary a final notice so as to make it impose a financial penalty of more than the local housing authority could have imposed, which is a maximum of £30,000.

The Applicants Case 16. The Applicant relies on two bundles. They contain two submission statements (without a statement of truth), photos taken on 22 September 2022 following completion of the works, some documentary evidence set out elsewhere. At the hearing [NAME]. [APPELLANT] made oral submissions and gave oral evidence.

17. The Applicant’s oral and written submissions are summarised as follows: (a) The Applicant denies that [COMPANY] is a HMO. As it is not occupied as a main residence by many of the occupants, it does not meet the sole use test and consequently does not require a licence. The only time he had long time occupiers was during the pandemic lockdown, when they had government bookings only. They had notices in the window stating that the [COMPANY] was closed. On 2 April 2020, of 15 rooms, only 6 were occupied. On the 9 August 2021, 6 of the 8 occupiers had been booked in by the government. The government were instructing hotels to open their doors to homeless people and most of the bigger local hotels were full.

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(b) As a consequence, they do not need to comply with the management regulations. Any works that were required was started soon after notification, completed in a timely manner and to a good standard. It included additional works of renovation, redecoration, and new furniture at a cost of £20,000. (c) The appeal is also a challenge to the amount of the financial penalty. The Respondents case 18. The Respondent relies on two bundles containing a response, witness statements by [NAME] together with all documents served, photographs and notes of inspections that took place as well as email correspondence with the Applicant. Oral submissions were made at the hearing by [APPELLANT]. Their witnesses confirmed their statements and gave oral evidence.

19. Their arguments and evidence are set out below.

Findings: 20. The Applicant is the owner and landlord of [COMPANY].

21. We accept the facts contained in the witness statement of [NAME], Housing Standards Officer, [NAME], from the [NAME], [NAME] Practitioner. All attended the hearing and provided oral evidence. [APPELLANT] did not dispute the main facts found, though did dispute some conclusions reached.

22. The Applicant purchased [NAME] on 10 May 2008 as a [COMPANY]. It is two large, detached houses joined together at ground level by a corridor. The left hand side is three stories and the right hand side two stories. It consists of 15 ensuite bedrooms, a self-contained shared kitchen and 2 lounges, 2 toilets. He continued to operate it with a mix of occupiers. They included those placed in accordance with the no recourse to public funds scheme, local authorities homelessness and social service departments, and the NHS. There were also some private paying occupiers. Some who stayed long term. There were others who were more transient. Rent charged is £30 per night for single occupancy, £40 for double and £35 for occupiers who are placed there by a public sector body.

23. On 26 March 2020 [NAME] made it an offence to operate a [COMPANY].

24. On 2 April 2020, following complaints by a local councillor , trading standards and the police, made a visit to [COMPANY]. One resident

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had been refused re-entry for not paying his rent (£480 debt),and his belongs removed. [NAME] [APPELLANT] had also involved the police when another resident refused to leave after [COMPANY] decided they no longer had a duty towards him and so his rent was not covered (£3,600 debt). During that visit a person, identified as an onsite manager, said it was not operating as a [COMPANY] or B&B and there were no short term guests. There were 15 ensuite bedrooms, with 17 occupiers in 8 bedrooms. Maximum occupation is 18 people. They were shown a “logbook” identifying a number of long term [NAME]. We have not been provided with a copy. We find that at this date all 17 were occupying [NAME] as their main residence.

25. On 6 April 2020 [NAME] wrote to [NAME] [APPELLANT] stating that he required an HMO licence. On 21 April 2020, [NAME] [APPELLANT] spoke to [NAME], Private Sector Housing Lead Practitioner and agreed to apply for a Licence. He informed her that he housed people who were placed there by the Local Authority who were homeless. On 23 April 2020 [NAME] followed this up with an email and a link to the Homelessness Code of Guidance relating to the requirement that homelessness B&B accommodation should be licenced. On 17 June 2020, a warning letter was sent as no [NAME] had been received.

26. On 6 July 2020, [NAME] [APPELLANT]’s solicitor refuted that [NAME] was an HMO. They stated it had all the characteristics of a [COMPANY]. On 7 July 2020 [NAME] sent a response stating why they considered it to be an HMO.

27. On 4 August 2020 [NAME] sent a final warning letter.

28. COVID restrictions for hotels were lifted on 17 May 2021.

29. On 9 August 2021 [NAME] inspected with Greater Manchester Fire and Rescue Service (GMFRS). 17 people occupied on that date. Three were children. Of those, 8 were at home in 6 rooms. On this date, we find that all persons occupied [NAME] as the main residence:

(a) Ground floor Room 1 was occupied by [NAME] [NAME] [NAME]. [NAME] [NAME] had resided at [NAME] for approximately 7/8 years and had been referred there by the mental health team at [NAME]. [NAME] [NAME] referred any issues he had in relation to the accommodation he would refer to [NAME]. [NAME] [NAME] was due to move out of this accommodation on 12th August 2021. (See Exhibit GC1)

(a) Ground floor Room 2 was occupied by [NAME] [NAME] [NAME]. [NAME] [NAME] confirmed he had been residing at [NAME] since October 2019. [NAME] arranged for him to be placed in this accommodation, paying his rent, and providing support. (See Exhibit GC2)

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(b) First Floor Room 1 was occupied by [NAME]. [NAME] with his grandson. He had lived there for 12 month. (c) First Floor Room 2 was occupied by Ms [NAME] and her young daughter. She had been placed in accommodation in June 2021 by [NAME] who also paid the rent. They were hoping this would be temporary whilst they await more suitable accommodation. (See Exhibit GC4) (d) Second Floor Room 5 was occupied by [NAME] [NAME]. had been residing at [NAME] for just over a [NAME]. The rent of £120 per week was paid in cash by himself to the landlord [NAME] [APPELLANT]. [NAME] stated that if [NAME] [APPELLANT] were ever away, he would take care of [NAME]. He does not have a written agreement. He is [NAME] and he describes it as his permanent accommodation. (e) Second Floor Room 6 was occupied by [NAME] [NAME]. [NAME] [NAME] had been in occupation for approximately 2 years and paid his rent direct to the landlord, at £120 per week. (See Exhibit GC6)

30. At the same time, the inspection found the following defects:

(a) In the event of a fire, [NAME] did not have a protected escape route, as none of the fire doors inspected were fitted to the correct specifications. The fire doors had sections of the fire door frame missing, the door frames were in a poor-quality condition, fire doors did not close correctly into their frames, fire doors remained in the open position when opened and released, hinges missing and sections of intumescent strips and cold smoke seals missing. (b) The final exit doors were not fitted with a thumb-turn lock locks. (c) The stairs spandrel (the triangular area under the stairs) that separates the kitchen area from the protected escape route, upon inspection, was not thought to provide the required 30 min separation in the event of a fire.

31. On 13 August 2021, [NAME] sent a written PACE interview questionnaire to [NAME] [APPELLANT]. On 19 August 2021, a 28 day extension was agreed. On 17 [NAME] [APPELLANT]’s solicitor asked for another extension.

32. On 24 [NAME] [APPELLANT]’s solicitor said he had obtained a fire Risk Assessment and requested an extension of time for the works until the end of November 2021.

33. On 8 October 2021, the solicitor wrote explaining why they considered it not to be an HMO, including that it was mixed used. On 8 October 2021, [NAME] set out their position. On 12 October 2021, [NAME] [APPELLANT]’s solicitor

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asked [NAME] to review its position. [NAME] [APPELLANT] did not complete the PACE questionnaire for either offence.

34. On 30 November 2021, [NAME] [APPELLANT]’s solicitor asked for another extension to complete the works. On 21 December they sent a list of outstanding works as requested by [NAME] on 1 December 2021.

35. On 6 January 2022 [NAME] sent two Notices of Intent to the Applicant. On the same day [NAME] [APPELLANT]’s solicitor stated that all work had been completed.

36. On 20 January 2022, [NAME] [NAME] inspected the works. There were only 7 occupiers. Neither party has provided evidence with sufficient particularity, about who those occupiers were. Between the two inspections, there had been complete replacement of fire doors and their frames, renovation, and decoration and new furniture, in the bedrooms. [NAME] [NAME] had not interviewed or made any note of who the occupiers were. Neither did [NAME] [APPELLANT] provide their details.

37. There were four defects remaining.

(a) Bedroom 4, the fire door needed adjusting at the bottom as it failed to close correctly. (b) Bedroom 8, the fire door failed to close onto the latch. (c) The kitchen door is not fitted with a latch. A latch will need to be fitted. (d) Both the final exit doors had not been fitted with a thumb-turn latch. Both need to have these fitted.

38. On 26 January 2022, [NAME] [APPELLANT]’s solicitor confirmed the remaining defects would be remedied by 17 February 2022 and the penalty notices were premature, as [NAME] had not adequately responded to their contention that it was not an HMO. On 27 January 2022 [NAME] sent a copy of the email dated 8 October 2021 setting out their position.

39. On 17 February 2021, [NAME] [NAME] inspected to confirm that there were no longer any defects relating to fire safety. It is accepted that all defects were remedied.

40. On 24 March 2022, [NAME] sent the two final Notices to the Applicant. One contained an erroneous date of 7 April 2021, though the covering letter was dated correctly. The Penalty for the s72(1) offence was £8,500. The Penalty for the s234 offence was £18,000.

Reasons

Overall Factors

41. The Tribunal found that [NAME] [APPELLANT]’s evidence was vague, not supported by specifics and contradictory, particularly as his arguments were not

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supported by documentary evidence. He provided no explanation as to why he had not supported his contention that [NAME] was a [COMPANY] in substance, as well as name. Though, when asked, he said he agreed with the findings of fact set out by [NAME], he contested that the main residence test was satisfied by people placed by local authorities and there were also private paying short term guests. He did not say when he stopped accepting transient private guests and when he restarted accepting them again.

42. The Respondents case was largely cogent, credible, and substantiated by other evidence, though they had failed to address the possibility of the mixed use test, despite [NAME] [APPELLANT]’s stated case. Neither did they set out fully every stage of their decision [NAME] in their own Policy and did not explain fully their reasoning, saying that as [NAME] [APPELLANT] had not answered the PACE questions, they could not go on a fishing expedition. They did not go beyond step 3, in particular assessing proportionality.

43. As this is a rehearing, we had the benefit of evidence and submissions from [NAME] [APPELLANT]. We could take this into account when deciding the level of penalty and these factors went some way to reducing the penalties.

The First Offence: Failure to obtain a licence

44. The Tribunal is satisfied beyond reasonable doubt that the Applicant has committed an offence under section 72(1) of the Housing Act 2004 (the 2004 Act). We are satisfied that: (a) Between 2 April 2020 (the date of the first inspection) and 9 August 2021 (the second inspection), [NAME] was an HMO falling within the definition of the “standard test” as defined by section 254(2) of the 2004 Act. The offence continued until at least 22 January 2022 (the date of the penultimate inspection). In particular (my emphasis added): a. it consists of one or more units of living accommodation not consisting of self-contained flats; b. the living accommodation is occupied by persons who do not form a single household; c. the living accommodation is occupied by the occupiers as their only or main residence or they are to be treated as so occupying it; d. their occupation of the living accommodation constitutes the only use of that accommodation; e. rents are payable or other consideration is to be provided in respect of at least one of those persons occupation of the living accommodation; and f. two or more households who occupy the living accommodation share one or more of the basic amenities” (defined by (8) as a toilet, personal washing facilities, or cooking facilities). (b) The Applicant failed to obtain a licence the HMO as required by section 61(2) of the 2004 Act. In consequence [NAME] [NAME]

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committed the offence of control or management of an unlicenced HMO under section 72(1). He had no reasonable excuse.

Applicant’s case: Failure to obtain a licence

45. On 8 October 2021 [NAME] [APPELLANT]’s then solicitor contended that [NAME] cannot be an HMO as it did not satisfy the main residence test or only use test as required by s254 of the 2004 Act. [NAME] [APPELLANT] further contends that [COMPANY] cannot be an HMO as it is a [COMPANY] and as such has distinct characteristics. These include a weekly rent, no tenancy agreement or deposit, no minimum term and people stay for a day or more. All rooms are ensuite, with a microwave, TV, bed linen, towels, toilet roll, and toiletries included.

46. [NAME] pay privately, and others are homeless and placed by local authorities, NHS, the police, or have no recourse to public funds. More recently he has housed women fleeing domestic violence.

47. He was restricted to non-private guests during COVID. He should not be penalised for continuing to take in people placed by the government during the lockdown. Otherwise, he has a variety of private paying guests. During the weekends and summer most, guests book in for a day or two. They come for sport, festivals, or other events. Others come for temporary work such as, construction, teaching, mobile DJs.

48. In oral evidence he did not dispute the facts in the witness statements, confirmed in oral evidence by the local authority officers. He did say the [NAME] may have the length of stay slightly wrong and one [NAME] goes home to Scotland every weekend when not working. [NAME] were placed there as temporary accommodation similar to other hotels, such as the Premier Inn. He had no control over the length of stay. As they were placed there on a temporary basis, it could not be their main residence. He should not be treated differently to [COMPANY].

49. I note there is some dispute whether [NAME] [APPELLANT] had started to complete an [NAME] for a licence. He vehemently denies that he did so. We do not need to decide this fact for the purpose of reaching a decision. There is no dispute that [NAME] [APPELLANT] did not obtain an HMO licence.

Respondent’s case: Failure to obtain a licence

50. The Respondents contend that when they inspected there were only long term [NAME] in occupation. This had been the same at the initial visit on 4 April 2020. [NAME] interviewed 5 [NAME] and saw a logbook showing long term [NAME]. The main residence test was clearly met. There were fridges, and some [NAME] had microwaves in their rooms and there was evidence that people were preparing some food in their rooms. There was a shared kitchen that had full kitchen facilities, including a cooker.

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51. If people are placed in homelessness B&B accommodation the government guidance states it will be an HMO. Despite enquires, they could not say which local authority department placed people at [NAME], why and for how long. [NAME] [NAME] accepts that local housing officers may not have checked whether accommodation was licenced before placing a person who they had accepted as homeless and they had a duty towards.

52. [NAME] [APPELLANT] had not supported his contention that people did not stay long term, with evidence of logbooks for example. It clearly had all the characteristics of an HMO and so must be an HMO.

53. One occupier was a [NAME]. s259(a) of the Housing Act applies when a person is treated as occupying a building or part of a building as their only or main residence as a person’s residence for the purpose of undertaking a full time course. [NAME] [APPELLANT] cannot rely on reasonable excuse, as set out below. They rely on their Penalty Notices that set out the penalty amount.

Reasons: Failure to obtain a licence

54. We find beyond reasonable doubt that the standard condition is met as required by s 254(2) of the 2004 Act. As a consequence, [NAME] [APPELLANT] committed the offence of control or management of an unlicenced HMO for the following reasons:

55. It is clear that the 6 conditions are met between 4 April 2020 and 9 August 2021, the date of offence. It continued until at least 22 January 2022, the date of the penultimate inspection. [NAME] [APPELLANT] did not dispute the facts in the witness statements. Their statements are supported by documentary evidence. Consequently, we accept the facts set out in each statement. In particular:

56. The bundles did not make clear whether there were shared cooking facilities, or the [COMPANY] lacked basic facilities as required by (2)f) and (8). [NAME] provided oral evidence that there was a shared kitchen and so it is clear that two or more households who occupy the living accommodation share one or more of the basic amenities” (defined by (8) as a toilet, personal washing facilities, or cooking facilities).

57. [NAME] [APPELLANT] set out how the [COMPANY] had all its distinguishing features, there is no specific legal definition of a [COMPANY] and many of those distinguishing features do not take us much further. However, [NAME] [APPELLANT] is right in saying that we have to decide whether the living accommodation is occupied by the occupiers as their only or main residence. We cannot find that he is correct in asserting that it is not a HMO as some guests were placed their as temporary accommodation and so it could not be their main residence.

58. It is not clear which local authorities were [NAME] the placements, nor whether this included discharge of homeless duties. Neither party

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addressed this point satisfactorily. Only or main residence is not defined. The Only or Principal Home test under the Housing Act 1996, is a different test and there to identify which of two dwellings is the principal home. If [NAME] were placed in [COMPANY] as interim accommodation as a homeless person under Part 7 of the Housing Act, it is beyond doubt that it will be their main residence. Again, people placed there with no recourse to public funds will not have accommodation elsewhere that would be their main residence. On the other hand, those leaving hospital, are perhaps more likely to have a main residence elsewhere. However, as no additional support was being provided, they could only be people without a home elsewhere. Unfortunately, neither party has provided any specific factual evidence or supporting documentary evidence of the general nature of any local authority placements.

59. We also have regard to the requirement that in accordance with S254(d) their occupation of the living accommodation must constitute the only use of that accommodation. In accordance with s260, there is a presumption that the condition is met unless the contrary is shown. [NAME] [NAME] provided no specific legal argument or submissions at all on this point, choosing instead to say it was beyond doubt an HMO and that [COMPANY] and others v LB Hounslow and others [2022] UKUT 259 (LC) followed [COMPANY] v Jimenez [2022] UKUT 50 (LC)in saying that given the purpose and intent of Part 2, the actual usage of the premises takes precedence over the landlord’s contractual intentions when allowing people to occupy the building.

60. [NAME] referred to previous cases reminding us of the statutes purpose, including protecting quality and safety of the living conditions of often vulnerable people. At 15 the Deputy Chamber President found that “Effective regulation and action by local housing authorities to reduce risks to the health and wellbeing of [NAME] of repurposed or converted living accommodation is as important an objective as it has ever been. The limits of effective regulation are set by the definition of “house in multiple occupation” in section 254 and it is important that this definition is not interpreted so narrowly as to frustrate the achievement of the statutory purpose”.

61. However, the Deputy Chamber President said there was no definition, or stated purpose of the sole use requirement and went on to suggest at 51 that “If a house consisted of four rooms with shared kitchen and bathroom facilities, two of the rooms being let to [NAME] for whom it was their only or main residence and the remaining rooms being used by the landlord for the provision of bed and breakfast accommodation, it would be likely that the living accommodation would properly be treated as having more than one use, and in consequence that the sole use condition would not be satisfied”. He did not have to decide the point.

62. Conversely, I note the Government Homelessness Code of Guidance at 17.29 which states that “A property is an HMO if it satisfies the conditions set out in sections 254(2) to (4), has been declared an HMO under section 255 or is a converted block of flats to which section 257 applies. Privately

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owned bed and breakfast or hostel accommodation that is used to accommodate a household pursuant to a homelessness function, and which is the household’s main residence, will fall within this definition of an HMO.” It does not, however, refer to mixed use accommodation.

63. [NAME] [APPELLANT] has merely asserted that living accommodation is not the only use of [NAME]. He has not provided any particularity, including supporting documentary evidence, that there were people staying at [COMPANY] as transient guests. He has had every opportunity to do so, including through his solicitors. For example, there are no logbooks, receipts, booking information, or accounts supplied. He did not complete his PACE questionnaire, again despite repeated time extensions being requested and granted. Since then, he has just listed the different types of private paying guests he may have. He has not pinpointed dates, or any other specifics or documentary evidence. Taking a purposive approach, and that the only people in occupation at the relevant time were mainly vulnerable people, these assertions do not overturn the presumption that S254(d) is met.

64. In any HMO type accommodation, there is always likely to be a more transient population. We find that at the relevant time, the people interviewed were living there as their only or main residence and this reflects the nature of its use. There is not persuasive evidence that casts sufficient doubt on the presumption of the sole use requirements. We have no reasonable doubt.

65. In oral evidence we heard from [NAME] that there was a shared kitchen with full facilities. [NAME] [APPELLANT] did not dispute this fact. The photos and oral evidence supported the fact the premises were lived in with belongings, signs of cooking and laundry. There was general clutter and detritus in the shared kitchen. In addition, [NAME] have provided a credit check search showing, between December 2020 and August 2021, there were 10 searches of people using [NAME] as their main address.

66. There were only 8 people of 6 households present at the time of the inspection. There were 17 adults and 3 children residing there at the time. [NAME] interviewed 5 people. Her Witness Statement is supported by brief statements of the occupiers. [NAME] [APPELLANT] does not dispute these findings in his written submissions [15], though in oral evidence stated that one [NAME] went home to Scotland at weekends. We accept as fact that each household occupied [COMPANY] as their own or main residence.

67. In addition, at the date of the initial visit in April 2020, [NAME] [APPELLANT] had said that [NAME] closed, and 8 rooms remained occupied. Five were government bookings, either asylum seekers or people who had come out of hospital. Three were private paying guests, one was the [NAME] in room 5. and one was [NAME] in room 6 who was semi-retired and went home to Ireland when there was not work, one

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was in room 15 who was a [NAME] who had returned to [NAME] after living in Blackpool for a few years. He did not take any more private bookings, though he accepted more placements. 68. [NAME] [APPELLANT] goes on to say in both written and oral evidence that after the pandemic he started to take new private paying guests. He does not state on what date he did so or provide any particulars. As at the date of the 9 August 2021 inspection, [NAME] [APPELLANT] does not say there were any [COMPANY] type private guests, we find that at the date of inspection all occupied as their main residence This was the date of the offence. Any change after the date of the offence may only go some way to mitigation, as opposed to a reasonable excuse.

69. It may be the case that it was mixed use historically and following the renovation works. We are mindful that it was possible, as [NAME] [APPELLANT] contends on 11 March 2022, that the makeup of [NAME] was different during COVID than his usual [NAME]. However, when during an initial visit by trading standards and the police on 2 April 2020, a person identified as an onsite manager said it was not operating as a [COMPANY] or B&B and there were no short term guests. There were 15 rooms, 17 occupier. They were shown a “logbook” identifying a number of long term residence. We have not been provided with a copy. On 21 April 2020, following notification that he required an HMO Licence, [NAME] [APPELLANT] contacted [NAME] and agreed to apply for a Licence. This was over a [NAME] before the offence. He had changed his position on 6 July 2020, when a solicitor refuted that [NAME] was an HMO. The inspection, and date of offence, was over a [NAME] later on 9 August 2021. [COMPANY] was open during this period, though those operating as hotels were required to close. COVID restrictions for hotels had been lifted on 17 May 2021. 17 rooms were also occupied on that date. We also note that renovations of the whole [COMPANY] were being undertaken soon after the inspection and not completed after the 22 January 2022 inspection, when only 6 rooms were occupied. We, therefore, conclude that as at the inspection on 22 January 2022 it was still an HMO.

70. We note that where there is doubt [NAME] could have served a declaration that [NAME] was an HMO under s255(2) where they are able to substitute the sole use condition with a reasonable belief that [NAME] has “significant use” as an HMO.

71. For the above reasons [NAME] [APPELLANT] as owner of [NAME] committed the offence in Section 72 (1) of the Act of having Control of or managing an HMO which is required to be licenced under Part 2 of the 2004 Act but is not so licenced. [NAME] is an HMO as defined by the standard test set out in s 254(2) of the 2004 Act. In particular it contains two or more households who occupy the living accommodation share one or more of the basic amenities (kitchen, bathroom, or toilet) and the living accommodation is occupied by the

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occupiers as their only or main residence or they are to be treated as so occupying it is occupied. The presumption of sole use has not been rebutted. The Second Offence: Breach of Management Regulations

72. [NAME] [APPELLANT] as an owner, landlord and manager of [COMPANY] is in breach of S234 of the 2004 Act and Regulation 4 of the Management Regulations, due to inadequate fire safety measures including inadequate fire doors creating easy smoke ingress into bedrooms, and inadequate fire safety routes.

Reasons: Breach management Regulations

73. The relevant parts of Regulation 4 are: “(1) The manager must ensure that all means of escape from fire in the HMO are—(a) kept free from obstruction; and (b) maintained in good order and repair. (2) The manager must ensure that any ... fire alarms are maintained in good working order. (4) The manager must take all such measures as are required to protect the occupiers of the HMO from injury, having regard to—(a)the design of the HMO; (b)the structural conditions in the HMO; and (c)the number of occupiers in the HMO. (5) In performing the duty imposed by paragraph (4) the manager must in particular—(b)in relation to any window the sill of which is at or near floor level, ensure that bars or other such safeguards as may be necessary are provided to protect the occupiers against the danger of accidents which may be caused in connection with such windows.”

74. We remind ourselves that the Upper Tribunal held in [COMPANY] v [NAME] [NAME] [2020] UKUT 81 (LC), at [27], that “the offence of failing to comply with the relevant regulation is one of strict liability, subject only to the statutory defence.”

75. [NAME] v [NAME] of Westminster Council [2022] UKUT 238 (LC) held that Regulation 4 and 7 required the achievement of an outcome or the bringing about of a state of affairs rather than the implementation of policies and the First-tier Tribunal had been entitled to find that, in the absence of a reasonable excuse, the existence of defects within the HMO in question had been sufficient to prove breaches of the Regulations.

76. The Applicant, as manager on 9 August 2021 was in breach of these regulations having regard to his duty as contained in the LACORS fire safety guide for landlords. In the event of a fire, [NAME] did not have a protected escape route, as none of the fire doors inspected were fitted to the correct specifications. The fire doors had sections of the fire door frame missing, the door frames were in a poor-quality condition, fire doors did not close correctly into their frames, fire doors remained in the open position when opened and released, hinges missing and sections of intumescent strips and cold smoke seals missing. The final exit doors were

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not fitted with a thumb-turn lock locks. The stairs spandrel (the triangular area under the stairs) that separates the kitchen area from the protected escape route, did not provide the required 30 min separation in the event of a fire.

77. [NAME] [APPELLANT] contended in oral evidence that there had been an inspection a number of years previously and no issues were raised. The photographs, supported by the Witness Statement and oral evidence of [NAME], clearly showed the defective doors, surrounds, furniture, with multiple inadequate repairs. This resulted in ill-fitting doors, with numerous large gaps where smoke could ingress. Repairs were completed between 20 January and 17 February 2022 when [NAME] made a final inspection. [NAME] informed [NAME] [APPELLANT] of the requirements on 13 August 2021, when they also sent the written PACE interview.

78. Thus, the relevant defects found on 9 August 2021, the date of inspection, were sufficient to establish the offence of Breach of Management Regulation 4, of the Management of Houses in Multiple Occupation (England) Regulations 2006. The facts were not in dispute. The manager must take all such measures as are reasonably required to protect the occupiers of the HMO from injury, having regard to the design of the HMO. The Applicant raised a defence of a reasonable excuse, having stated that he did not require a Licence. His reasons went to the level of penalty only and did not amount to a reasonable excuse.

Reasonable excuse

79. [NAME] [APPELLANT] said in oral evidence that he did not apply for a licence as he was convinced that he did not require one. He equated his [COMPANY] to a Premier Inn that may also have been used to house people by a local authority, or with no resource to public funds. The [COMPANY] was not meant to be a person’s long term residence and there was no contract. He said in oral evidence that he had told his solicitors that people stayed for a short time.

80. [NAME] [COUNSEL] submitted that relying on the advice of a solicitor may equate to reasonable excuse in certain circumstances but following the principles of [COMPANY] v [NAME] [NAME] [2020] 81 (LC) It is for [NAME] [APPELLANT] to establish an arguable reasonable excuse and he has not done so. He has chosen not to set out the advice he had received from his solicitors, and this cannot be inferred from the correspondence. [NAME] were solicitors with a legal aid housing contract. Though these types of cases are not covered by legal aid, it would be expected that they had knowledge of housing law. However, in their letter of 3 July 2020, they asked [NAME] why they thought it was an HMO. [NAME] provided a detailed response on 7 July 2020, providing details of the standard test and links to guidance, including guidance for temporary accommodation providers under Part 7 of the Housing Act. There was no further response. It couldnot therefore, without further evidence be inferred that [NAME] [APPELLANT] provided incorrect legal advice, relied on by [NAME] [APPELLANT]. He

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instructed new solicitors who wrote to [NAME] following the NOI, which was after the offence and did not address the substantive issue of whether it was a HMO.

Our Findings

81. [NAME] [APPELLANT] has not shown that he has a reasonable excuse. Though it may be a reasonable excuse to rely on the advice of his solicitor, we have to take the whole period before the offence into account and the basis of the instructions to the solicitor. By his own account [NAME] [APPELLANT] provided his solicitor with [COMPANY] information. The first solicitor did not address the key test of main residence in their letter, [NAME] were clear in their response, providing information on the main residence test and providing links to guidance, the solicitor did not write back. [NAME] [APPELLANT] did not say why he later changed solicitor and has not disclosed his instructions to that solicitor or their advice. However, [NAME] [COUNSEL] is wrong that they do not address the test. In the initial email dated 8 October 2021 RHF solicitors says the main residence test and sole occupation test is not met. When the local authority writes back, RHF respond on 12 October 2021 that they disagree and are going to seek Counsel’s opinion. There is no further substantive correspondence from RHF on this point. We cannot, therefore, conclude that [NAME] [NAME] was wrongly advised.

82. It is also clear from The Borough Council of Gateshead V [NAME] [COMPANY] [2023] UKUT 35 (LC) that [NAME] [NAME] had a responsibility to find out what the position was when the use changed, during COVID and to provide his solicitor with full instructions . It appeared that [NAME] [APPELLANT] may not have given [NAME] or RHF all the relevant facts to be properly advised, so convinced, that he ran a [COMPANY] and not a HMO. He clearly fixated that it should not be a HMO, just because vulnerable people were placed there until more permanent accommodation was found. He did not seek legal advice when Covid rules prevented the use of hotels. Only, after the offence did RHF start to address the legal test and that the type of use could not be predicted. From at least 2 April 2020 until the inspection on 9 August 20221 it had not operated as mixed use, and up until 17 May 2021 it had been prohibited from operating as a [COMPANY].

83. We do need to consider whether the sudden COVID restrictions constituted a reasonable excuse. [NAME] [NAME] was informed as early as 2 April 2020 that he required a licence if he were to continue to only house people as their main residence. The inspection and date of offence did not occur until 9 August 2021, some 15 months later and after the restrictions were lifted. It was not until after the Notice of Intent, did [NAME] [APPELLANT] state that he had reverted to mixed use accommodation and then did not supply any detailed particulars of when this change happened or precise details, with supporting documents of his [COMPANY] guests. He was given every opportunity to do so.

84. [NAME] [APPELLANT] would have been required to operate within fire safety standards as a [COMPANY] and his only reason was that he had not was that there

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had been no fire safety inspection for a number of years. Though he said he undertook regular checks, he could not say what these consisted of, beyond checking the fire alarms. He was unable to answer questions relating to records and admitted to ad hoc repairs to doors after occupiers damage. Though he said he had spent £20,000 on upgrading doorways and other measures, this was in January 2022, after the offence.

The Notices

85. The Tribunal was satisfied that, in respect of the Notices of Intent and the Final Notices, the Respondent had complied with the following procedural requirements as required under Schedule 13A to the Act: (a) the offences on 9 August 2021 were within 6 months of the Notice of Intent and were continuing as at the date of the Notices of Intent. (b) the Notice of Intent and the Final Notices contained the information as required under paragraphs 3 and 8 of Schedule 13A to the Act; and, (c) the Notices of Intent contained information about the right to make representations.

The Penalty

Local Housing Authority Policy on Civil Penalties

86. The Respondent’s Policy sets out a number of steps. Each step lists a number of factors to consider. As follows:

Step 1. Assess the seriousness of the offence and level of harm as high, medium, or low. Step 2. Assess the culpability and track record of the [NAME] as high, medium, or low. Step 3. Use the matrix to determine the band with a mid-level starting point Step 4. Assess whether the penalty is fair and proportionate in all the circumstances, ensuring that the penalty acts as a deterrent and remove any gain. (a) The penalty will increase or decrease by £1000 for every aggravating or mitigating factors with regard to sentencing guidelines. (b) The penalty will increase or decrease on a sliding scale to max or minimum level taking into accounts assets and income (c) The penalty may be reduced up to 30% where corrective action taken

Step 1. The nature and severity of the offence and risk of harm:

87. In considering the penalty the Tribunal has to have regard to the seriousness of the offence in accordance with [NAME] v Sheffield at 46: -

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“…An assessment of the seriousness of the offence should therefore focus on the circumstances of the offence itself and should take into account matters as they were at the date of the offence.

47. That is not to say that matters which occur after the offence has been committed are necessarily irrelevant to its seriousness. The longer an offence continues the more serious it may become, and the decision maker, whether the authority or the FTT, may take into account what has happened between the time the offence was first committed and the date of the decision. But an offence of long duration does not become less serious by being remedied; it does not get any more serious, but nor does it become less serious.”

88. [NAME] states that the S72 offence is Low Harm. We have also found that the level of harm is low. There is no evidence of actual harm. A failure to obtain a licence does not itself pose a risk, though the conditions and any failures in management may, and it could also be said that the rigours of licencing conditions would help prevent any risks.

89. The Council states the Section 234(1) offence defects exposed occupants to medium levels of risk as fire alarms were working.

90. The Tribunal determines that the severity of the offence and risk of harm is medium as it poses a serious risk of harm primarily due to gaps in the doors that would allow smoke ingress. The dwelling is two double fronted houses over three floors, with 20 rooms, and two exits. The nature and extent of the fire risk is clearly a material factor to its seriousness as is envisaged by Regulation 4 and LACROS. This reduces the risk from high to medium. The fire alarms and other fire safety aspects were adequate and still working.

Steps 2 culpability and track record:

91. The Policy sets out four levels dependant on intention from deliberate, to reckless, negligence or low/no fault. We determine that the level of culpability for s72 offence is medium, and s234 offence is medium reduced from high for the following reasons:

(a) History of noncompliance: There is no evidence of previous offences. (b) Failure to comply: The Applicant did not obtain a licence despite being given over a [NAME] to do so. However, the unusual situation in relation to COVID restrictions on the operation of hotels and [NAME] not addressing the single/mixed use issue in their correspondence, does amount to a situation that is negligent as opposed to reckless. However, it could not be said there was little or no fault. [NAME] [APPELLANT], continued not to accept that if a person is placed in accommodation by a [NAME], that accommodation was in every likelihood their main residence. Like other business at the time, he had some difficult choices to make and could have chosen to close if he did not want to operate a HMO. He took no proactive actions in relation to fire safety measures as set out above.

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(c) Experience of the landlord: Though the Applicant had been the owner since 2008, he was previously running it as a [COMPANY]. He should have been aware of fire safety measures. (d) Longstanding defects: the fire safety breaches were clearly long standing, and he had not been undertaking regular full fire safety risk assessments. Any damage to internal doors had just been patch repaired with no regard for safety breaches. (e) Lack of checks and systems This clearly amounted to a failure to take reasonable care to put in place or enforce proper systems as set out in the policy.

Step 3 conclusions:

92. Using the Respondent’s matrix, for the S72 offence the low level of harm and medium level of culpability is Band 2 giving a range of £5000-£9,999. The mid-point is £7500.

93. For the s234 offence, the medium level of harm and medium level of culpability is in Band 4 giving a range of £15,000-£17,999. The mid-point is £16,500.

Step 4 (a) aggravating or mitigating factors:

94. Each adjustment either increases or decreases the level by £1000. The Tribunal may take account of factors up to the date of the hearing. The Respondent has added £1000 for breach of s72 due to a refusal to apply for a licence and deducted £1,500 for the s234 offence due to [NAME] [APPELLANT] engagement and remedying the defects.

95. For the s72 offence we find there are no aggravating factors, and two mitigating factors, as the local authority did not engage with him in regard to how to deal with the COVID environment or issues of mixed use. Though at the time, it was clear there was an offence, it was not so clear whether this would continue into the future if [NAME] [APPELLANT] started to take [COMPANY] guests who did not occupy [NAME] as their main residence. They did not make a s255 [NAME] relating to significant use. The Policy sets out that we deduct £1000 for each factor from the midpoint of £7,500 giving us a figure of £5,500.

96. For the s234 offence we do not find any aggravating or mitigating factors, due to the requirements applying to hotels. This leaves the midpoint of £16,500.

Step 4 (b) Is the civil penalty fair and proportionate but act as a deterrent and remove any gain as a result of the offence? The Policy also requires us to consider whether the assets and

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income (not just rental) are such that it is just and appropriate to increase or reduce the penalty.

97. The Tribunal determines that the penalties should not be increased or reduced for these considerations. [NAME] [APPELLANT] had not provided any documentary evidence or justification relating to his assets and income. In oral evidence he stated that he had to borrow the £20,000 for the works. He is repaying this at £340 per month and currently as £12,489 left to repay. He has no other business or assets, though owns his own home. He has £11,000 in his business account. The [NAME] end he had a £90,000 turnover and made £30,000 in profit. We note that this is likely to increase for the [NAME] end 2023 due to increased occupancy.

98. We determine that it is not proportionate, so not just, or appropriate to reduce the penalties. They are high enough to be a deterrent.

Step 4 (c) Should there be a reduction of up to 30% if corrective action is taken before the final notice.

99. This only relates to the s234 offence. The main work was completed before the final notice and additional works undertaken by [NAME] [APPELLANT], improving the overall standard of fire safety measure and more than the bare minimum. [NAME] [APPELLANT] said that he started engaging people to undertake the work as soon as he was notified what was required and continued to communicate with [NAME] through his solicitors. The maximum of 30% is allowed (£4,950). This gives a final penalty of £11,550.

100. The totality principle: If issuing a financial penalty for more than one offence the Tribunal must consider whether the total penalties are just and proportionate to the offending behaviour. Taken together and given the levels of profits from the rent they are proportionate.

Conclusion

101. The offences have been committed beyond reasonable doubt.

102. The procedural requirements have been followed.

103. Taking into account guidance and following the Respondents own Policy the Tribunal determines the level of the penalties as £5,500 and £11,500.

104. The Applicant must pay the penalty within 28 days of service of this determination.

Judge J White 9 June 2023

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RIGHTS OF APPEAL

1. 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.

2. 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].

3. 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.

4. The [NAME] for permission to appeal must identify the decision of the Tribunal to which it relates (i.e., give the date, [NAME], and the case number), state the grounds of appeal, and state the result the party [NAME] the [NAME] is seeking.