First-tier Tribunal Cancels Financial Penalty for Unlicensed HMO Operation

OUTCOME: Allowed

Case Reference : MAN/00CH/HNA/2019/0020

[NAME_1] : [ADDRESS] [POSTCODE]

Applicants : [redacted]

Respondent : [redacted]

Type of Application : Appeal against a financial penalty –

Section 249A & Schedule 13A Housing Act 2004

Tribunal Members : Tribunal Judge [NAME_3], MBE FRICS

Date of Decision : 18 September 2019

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DECISION

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© CROWN COPYRIGHT 2019

DECISION: The Tribunal allows the appeal and the financial penalty is cancelled.

Introduction

1. The Applicants made application (the “Application”) dated 22 February 2019 to the Tribunal appealing a financial penalty imposed on them by the Respondent in the sum of £8,560 made under section 249A of the Housing Act 2004 (the “Act”), set out in a Notice dated 15 February 2019.

2. The Housing and Planning Act 2016 introduced Civil Penalties from 6th April 2017 as an alternative to prosecution for certain offences under the Act. The maximum penalty is £30,000. Local housing authorities are expected to develop their own policy on when to prosecute and when to issue a civil penalty and should decide which option it wishes to pursue on a case-by-case basis in line with that policy. The amount of the penalty is to be determined by the local housing authority in each case, which determination is subject to the right of appeal to the Tribunal.

3. The procedures for imposing financial penalties and appeals against them are set out in Schedule 13A of the Act. The appeal is by way of a re-hearing of the Respondent’s decision, as the relevant local housing authority, to impose the penalty. Statutory guidance under section 23(10) and Schedules 1 and 9 of the Housing and Planning Act 2016 (the “Guidance”) was issued in April 2018 by Ministry of Housing, Communities and Local Government. Local housing authorities must have regard to this guidance in the exercise of their functions in respect of civil penalties. The Guidance provides that in determining an appropriate level of penalty, local housing authorities should have regard to the Guidance at paragraph 3.5 which sets out the factors to take into account when deciding on the appropriate level of penalty. Only one penalty can be imposed in respect of the same offence. The actual amount levied in any particular case should reflect the severity of the offence as well as taking account of the landlord’s previous record of offending. While the Tribunal is not bound by it, it will have regard to the Guidance.

4. Directions were made by the Tribunal on 29 March 2019.

5. The Tribunal inspected the [NAME_1] on 9 July 2019 in the presence of the Applicants and their Counsel, [NAME_4] and from the Respondent [NAME_5], Environmental Health Officer. The Tribunal found the [NAME_1] to be a three-storey house, with 7 bedrooms, some ensuite. The bedroom occupiers otherwise shared 4 bathrooms and there was one kitchen for their use. The Tribunal noted that the bedroom doors were lockable, but none had identifying room numbers displayed.

6. A hearing took place on 9 July 2019 at SSCS Manorview House, Newcastle upon Tyne. [NAME_4] represented the Applicants, who gave evidence. The Respondent was represented by in-house Solicitor [NAME_6] and its witnesses were [NAME_5] and [NAME_7], a former occupier of the [NAME_1]. The Tribunal subsequently convened on 18 July 2019 to make its determination.

Facts and Law

7. The Applicants hold title absolute to the [NAME_1], subject to a registered charge in favour of the [COMPANY_8].

8. Following complaint to the Respondent in September 2018 by [NAME_7] about alleged disrepair to the [NAME_1], inspection of it took place, after which the Respondent issued an Improvement Notice (which subsequently was withdrawn by the Respondent once it became satisfied that its requirements had been complied with). Of relevance for this appeal was the further determination by the Respondent that the [NAME_1] came within the compulsory licensing regime for a house in multiple occupation (HMO). It was not disputed that no HMO licence was in place for the [NAME_1]. The absence of such a licence was relied upon by the Respondent to determine that a relevant housing offence had been committed by the Applicants.

9. In consequence, the Respondent determined to impose on the Applicants a financial penalty under s249A Housing Act 2004 ([NAME_9]). Section 249A(1) states:

“The local housing authority may 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.”

10. The “relevant housing offence” alleged is under s72 [NAME_9], which states:

“ (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…but is not so licensed.”

11. The parties agreed that the relevant definition of HMO is that contained in s254(1)(a) [NAME_9], which states:

“(1) For the purposes of this Act a building or a part of a building is a “house in multiple occupation” if—

(a) it meets the conditions in subsection (2) (“the standard test”)….”

12. Further, subsection (2) states:

“A building or a part of a building meets the standard test if—

(a) it consists of one or more units of living accommodation not consisting of a self-contained flat or flats;

(b) the living accommodation is occupied by persons who do not form a single household (see section 258);

(c) the living accommodation is occupied by those persons as their only or main residence or they are to be treated as so occupying it (see section 259);

(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 of the households who occupy the living accommodation share one or more basic amenities or the living accommodation is lacking in one or more basic amenities.”

Subsection (8) states:

“In this section—

.

“basic amenities” means—

(a) a toilet,

(b) personal washing facilities, or

(c) cooking facilities…………..”

13. The Licensing of Houses in Multiple Occupation (Prescribed Described) (England) Order 2018 (SI 2018/221) became effective on 1 October 2018. It provides (paragraph 4):

“An HMO is of a prescribed description for the purpose of section 55(2)(a) of the Act if it—

(a) is occupied by five or more persons;

(b) is occupied by persons living in two or more separate households; and

(c) meets—

(i) the standard test under section 254(2) of the Act….”

Prior to 1 October 2018 the [NAME_1] in question had to have three or more storeys, which in any event the [NAME_1] has.

14. The Applicants maintained that the [NAME_1] was run as a guest house and that no HMO licence was required. The Respondent’s position was that the [NAME_1] was subject to mandatory licensing as an HMO because of the use of the premises. The Respondent elected not to make an HMO declaration (which it could make under s255(b) as its view was that there is no doubt as the use of the whole of the [NAME_1] as an HMO.

15. Although there were issues raised before the Tribunal as to whether the Respondent’s notices complied with the requirements as to content set out in Schedule 13A [NAME_9], the first substantive question for the Tribunal to decide was whether the relevant housing offence alleged had been proved beyond reasonable doubt. Therefore, the issue was whether the Respondent could show that the occupation of the [NAME_1] at the time of the decision to impose the penalty fell within the definition of a HMO so as to require a licence.

Evidence and submissions

16. The Tribunal here records pertinent information on the first question and is grateful to both representatives for their written statements of reasons.

17. It was agreed that unrelated persons from time to time occupied individual bedrooms at the [NAME_1]. They were issued with separate licence agreements for their bedroom. The Tribunal was asked to note that the overseas origin of certain occupiers was not on the facts to give any of them the status of migrant workers, which may have had a bearing upon whether they would be deemed to be occupying as a main residence.

18. The parties took the Tribunal through (a) – (f) of the conditions for satisfying the standard test (see paragraph 12). Paragraphs (a), (b), (e) and (f) were not at issue for the Tribunal, for reasons which do not need to be recorded for this decision. For determination by the Tribunal was whether the occupiers were using the living accommodation as their only or main residence, or were to be treated as so occupying it (c) and/ or whether the occupation of the living accommodation constituted the only use of that accommodation (d).

19. Detailed analysis was considered during the hearing of each occupier between 9 September 2018 (commencement of occupation by [NAME_10] and [NAME_12] - as a couple occupying one room) through to 31 December 2018, when [NAME_13] and [NAME_14] (as a couple occupying one room) ceased to occupy. In that time there were three periods when the number of occupiers was less than 5 (meaning no HMO status for the [NAME_1] in those periods) – 09/09/18- 11/09/19 (inclusive); 03/11/18 – 07/11/18 (inclusive) and 30/12/18 – 31/31/12/18 (inclusive).

Applicants

20. Counsel for the Applicants referred the Tribunal to the following evidence so as to show that two or more occupiers never occupied the [NAME_1] as their only or main residence.

21. As to the Applicants’ assertion that paragraph (c) of the standard test was not made out, their evidence was:

22. [NAME_11] and [NAME_12] maintained their main residences in Salzburg and Hamburg respectively throughout their 53 day stay. The Second Applicant stated that both were undertaking elective work placement at [COMPANY_15], as newly qualified doctors

23. The [NAME_16] maintained their main residence in Croatia throughout their 51 day stay while they worked on a fixed term contract at [NAME_17] over the Christmas 2018 period.

24. [NAME_18] gave a home address in Quito-Tumbaco to which she returned following her 80 day stay. [NAME_18] returned to his home address in Amman, Jordan. The evidence of the Second Applicant was that these occupiers had completed a one year MBA Master’s degree in August 2018 and took a room together while holidaying and looking for work (unsuccessfully) before intending to return to their respective home countries when their visas expired on 28 January 2019. They wanted the flexibility of short-term occupation with 4 weeks’ notice and both departed UK on 26 December 2018.

25. [NAME_7] stayed 3 days per week commuting throughout his 70 day stay on a weekly basis between the [NAME_1] and an address in Carlisle, which he had given to the Applicants as his main residence. 4 weeks into his stay [NAME_7] deposed to the [NAME_1] as his “permanent place of residence” which Counsel described as “….. a surprising claim when occupying no more than 3 days per week, particularly on the basis of a 4 week rolling licence.”

26. [NAME_19] maintained his main residence in Leeds throughout his 41 day stay, to which he has returned. He extended his stay on two occasions.

27. The Second Applicant stated that [NAME_13] and [NAME_13] (a couple) were both from the [NAME_20] and arrived on 12/9/18. They have been seeking to establish a permanent residence elsewhere, but their stay had been unexpectedly extended.

28. In addition it was argued that where couples in a relationship occupied one room, they were “members of the same family”, which in accordance with s258(2) [NAME_9] meant that they would be regarded as forming a single household

29. As to the Applicants’ assertion that paragraph (d) of the standard test was not made out their argument was that if one or more of the occupants throughout the relevant period is not a qualifying occupier, the “only use” has not been occupation as main residence: it is at most mixed use.

30. S259(2)[NAME_9] was addressed. This states that:

“A person is to be treated as so occupying a building or part of a building [as their only or main residence] if it is occupied by the person—

(a) as the person’s residence for the purpose of undertaking a full-time course of further or higher education…….”

It was stated that only [NAME_18] and [NAME_18], who had occupied one room as a couple from 9 September 2018 had previously been students, ceasing full-time study in August 2018. It is understood that [NAME_18] may have been had a further one month extension to submit her dissertation, which it was submitted, was not occupation “for the purpose of undertaking a full-time course of further education” because finalisation of a dissertation is not (i) undertaking a course; (ii) full-time; (iii) occupation for the purpose of undertaking the course: completion of a dissertation does not require attendance and is not location-sensitive.

31. Counsel for the Applicants represented that the 4 week security of occupation recorded in the licence agreement, which the Applicants accepted they issued to each occupier, was a limited security. Visitors were not permitted. These facts were contrary indications of a person’s permanent residence.

Respondent

32. It asserted that paragraph (c) of the standard test was made out because there was no evidence to suggest that during their periods of occupancy of the [NAME_1] the occupants were in fact resident anywhere else. “They were working, studying for work and otherwise carrying on with their lives whilst living at the properties. Regardless of the applicant’s descriptions of the occupants motivations, it is clear that none of the occupants were using the properties in a way which suggested that it was not their main residence” (paragraph 15 of the Respondent’s Note on Application).

33. A witness statement had not been presented from [NAME_5]. However, he was permitted to give oral evidence as to the investigations he had undertaken regarding the [NAME_1] and the process followed leading to the imposition of the financial penalty.

34. The basis on which it said that paragraph (c) applies was principally for the following reasons.

35. Paragraph 12 of the Respondent’s Note on Application records: “[NAME_11] and [NAME_11] were medical students from Germany who were carrying out an elective placement in Newcastle as part of their training. They lived at the [NAME_1] for the purpose of attending their elective placement in Newcastle. There is no evidence that they lived anywhere else during their occupation of the premises.

[NAME_16] were working at the Metro Centre. They were residing at the [NAME_1] in order to work at the Metro Centre.

[NAME_13] and [NAME_13] moved into the [NAME_1] in 12/09/18 and were still residing in the [NAME_1] as of 12/05/19. They are looking for other accommodation but have not found anywhere better.

[NAME_18] and [NAME_21] were students from Venezuela and Jordan respectively who were in the UK on student visas. Their courses had finished and they occupied the [NAME_1] whilst [NAME_18] finished her dissertation. They were in search of employment in the UK.

[NAME_19] stayed at the [NAME_1] on an initial 4 week agreement and extended it by a further week before moving out.”

36. [NAME_7] worked as a radiographer in Newcastle. He lived at the premises while he worked in Newcastle. He found the accommodation from an online advertisement and considered the [NAME_1] as his main place of residence, albeit that he visited family in the north west from time to time. He differentiated the housing from his previous transitory [NAME_22] accommodation, which he did not regard as his permanent residence.

37. The Respondent accepted the Applicants’ interpretation that rooms occupied by couples meant that the room comprised one household, but stated that under s254(2) the “living accommodation” to be occupied by 2 or more households is the [NAME_1].

38. It asserted that paragraph (d) of the standard test was satisfied in that each occupant was occupying the [NAME_1] as their main or only residence. It was submitted that “……the [NAME_1] is self-evidently not a hotel, evidenced by the 4 week duration of the licence, the typically period of occupation being in months rather than days and the occupants clearly not being tourists. The agreement itself is entirely unlike the terms of a bed and breakfast or a hotel and is capable of being construed as a tenancy agreement” (paragraph 17 of the Respondent’s Note on Application). It was noted that the minimum occupation period in the licence agreement which the Applicants confirmed was issued to occupiers was 4 weeks and the licence fee payable was for a whole week’s occupancy, not part thereof.

39. It refuted the Applicants’ belief that the [NAME_1] was a guest house because no meals were provided for occupiers by the Applicants and the lengths of stay were in excess of normal bed & breakfast duration. The [NAME_1] does not have planning consent for use as a bed & Breakfast establishment, or as a HMO.

Decision

40. The same criminal standard of proof is required for a civil penalty as for prosecution. This means that before taking formal action, a local housing authority should satisfy itself that if the case were to be prosecuted in the Magistrates Court, there would be a realistic prospect of conviction. In order to actually achieve a conviction in the Magistrates Court, the local housing authority would need to be able to demonstrate beyond reasonable doubt that a relevant offence has been committed. Similarly, where a civil penalty is imposed and an appeal is subsequently made to the Tribunal, the local housing authority needs to be able to demonstrate beyond reasonable doubt that the offence had been committed.

41. The Applicants did not deny that they did not hold a HMO licence for the [NAME_1]. Prima facie there is the commission of a relevant housing offence, but only if the [NAME_1] was a HMO during (or at any time) in the period relied upon by the Respondent for the commission of the offence, being 9 September to 31 December 2018 (here described as the relevant period).

42. While the standard of proof as to whether an offence has been committed is the criminal standard, the determining of HMO status in accordance with s254(1)(a) [NAME_9] (the “standard test”) is on the balance of probabilities. It was not in dispute that the standard test was the relevant one to apply in this case. The Tribunal also was asked to find that the [NAME_1] had been occupied by five or more persons, living in two or more separate households.

43. By reference to the unchallenged schedule of occupation prepared by the Respondent in evidence, on a balance of probabilities, the Tribunal found that in the relevant period (save as mentioned in paragraph 19) there were two or more households (couples occupying one room being one household) comprising five or more occupiers in the [NAME_1].

44. The disputed points from the standard test of HMO status are those referred to in paragraph 18. Firstly as to paragraph (c) – was the occupation the only or main residence of the occupiers or are they to be treated as so occupying it? As to the latter, the issue of student status for s259(2)(a)[NAME_9] (deeming the accommodation occupied as the main residence of a person undertaking a full-time course of further or higher education) was relevant only to [NAME_18], whose course had ended but she had been granted additional time to complete a dissertation. The Tribunal found on the limited information available, which did not include any direct evidence from [NAME_18], that she had ceased her full time study. Therefore, the Tribunal found that she was not deemed by law to be occupying the [NAME_1] as her main residence.

45. It was noted that prospective occupiers tended to provide to the Applicants addresses that were current or most recent for them immediately prior to signing up. That is not uncommon and is merely indicative but not persuasive evidence of intention not to occupy the [NAME_1] as the person’s usual or main residence.

46. [NAME_7] was the only occupier to give direct evidence. He stated that he regarded his occupation of the [NAME_1] as his main residence. The Tribunal was informed that he had been dissatisfied with the condition of the [NAME_1] and had not hesitated to refer his complaint to the Respondent. In cross-examination [NAME_7] indicated that he felt “ripped-off” by the Applicants, because of conditions at the [NAME_1]. The Tribunal found that there was some resentment on the part of [NAME_7] towards the Applicants. The Tribunal therefore found that no particular weight should be given to the indication from this witness of intention or belief on his part about the residence point.

47. The Tribunal found that [NAME_7] was engaged on a fixed-term contract of work and stayed at the [NAME_1] 3 out of 7 days each week for the majority of his period of occupation of the [NAME_1]. The Tribunal found this evidence to be indicative of a lack of permanency in his residence at the [NAME_1].

48. Indirect evidence about the other occupiers was that they were in transit, post-education, seeking work, or on temporary employment contracts. The Tribunal thought carefully about the information provided about each occupier. The Tribunal found it persuasive that certain occupiers ([NAME_19] and [NAME_13] and [NAME_13]) had extended their initial stays, availing themselves of a flexible arrangement and this suggests that their intention on residence was unsettled. As to [NAME_11] and [NAME_12] undertaking elective placement, this was of a fixed period as part of medical training and the evidence did not indicate that they were planning to relocate to UK. Weighing the totality of the evidence the Tribunal found on a balance of probabilities that the occupiers did not occupy the [NAME_1] as their only or main residence.

49. The effect of the Tribunal’s finding in the previous paragraph is that the standard test of HMO status is not made out in that paragraph (c) of s254(2) is not satisfied. The burden of proof of commission of a relevant housing offence is 'beyond all reasonable doubt' and the Tribunal finds that the Respondent has not discharged that burden; if the [NAME_1] was not a HMO there was no requirement for a HMO licence and therefore no relevant housing offence has been committed.

50. In consequence, the penalty imposed by the Respondent must be cancelled.

51. The Tribunal has made its determination on the narrow point argued on HMO status dependent on paragraph (c) of s254(2). It did not go on to make a determination on whether paragraph (d) of s254(2) is satisfied. Nor was it necessary to rule on the procedure followed by the Respondent leading to the imposition of the penalty or the assessment of the penalty

52. There were no applications concerning costs.

Tribunal Judge WL Brown

18 September 2019