First-tier Tribunal Quashes Penalties Due to Notice Ambiguities

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL [NAME] CHAMBER ([NAME]) Case reference : LON/00AW/CMP/2025/0005 LON/00AW/HLP/2025/0003 Applicant : [redacted] : In Person Respondent : [redacted] Chelsea Representative : [COUNSEL] (Counsel) Type of application : Appeals against a “financial” and a “monetary” penalty Tribunal member :

Judge Robert Latham Carolyn Barton MRICS

Date and Venue of Hearing : 1 [ADDRESS] [POSTCODE] Date of Determination : 14 April 2026

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DECISION __________________________________

Decisions of the Tribunal The Tribunal quashes both Final Notices on the basis that they are fatally flawed and are nullities. There is a fundamental ambiguity in both Notices as to whether the penalty was imposed on the Company or on the Applicant, as a director of the Company. Any notice must be clear as to the intended recipient.

2 The Application 1. On 5 June 2025, the Applicant issued an appeal against two penalties imposed by the Respondent on “[RESPONDENT[NAME], Company Director of [RESPONDENT]”: (i) a financial penalty of £15,000 for breach of Regulation 3 of The Client Money Protection Schemes for [NAME] (Requirement to belong to a Scheme etc.) Regulations 2019 (SI 2019 No.386) ("the CMP Regulations"), the offence being not being a member of an approved or designated client money protection scheme.

(ii) a monetary penalty of £5,000 for a breach of Article 5 of The [NAME] for Lettings Agency Work and [NAME] Management Work (Requirement to belong to a Scheme etc) (England) Order 2014 (SI 2014 No.2359) ("the [NAME]"), the offence of not being a member of a [NAME].

2. On 17 October 2025, the Tribunal gave Directions pursuant to which:

(i) The Applicant has filed a Bundle of Documents (56 pages), reference to which will be prefixed by "A.__";

(ii) The Respondent has filed a Bundle of Documents (188 pages), reference to which will be prefixed by "R.__". The Tribunal uses the electronic pagination as the numbering in the bundle is not entirely consistent.

The Hearing

3. The Applicant, [NAME] [APPELLANT[NAME], appeared in person. He was accompanied by [NAME] [NAME] who assisted him in presenting his case.

4. The Respondent was represented by [NAME] [COUNSEL] (Counsel), instructed by the Respondent’s legal department. He was accompanied by Ms [RESPONDENT] who is a Trading Standards Officer who dealt with the CMP penalty and Ms [NAME] who is Head of Redress who dealt with the [NAME] penalty.

5. [NAME] [NAME] and [NAME] [NAME] provided Skeleton Arguments.

The Preliminary Issue

6. At the commencement of the hearing, the Tribunal asked the Respondent to clarify against whom the Final Notices had been issued. In each case, the Respondent had issued both Notices of Intent and Final Notices directed to “[NAME[NAME], Company Director of [COMPANY]”. Had these Notices imposed penalties on:

(i) [NAME] [APPELLANT[NAME] (“the Applicant”) in his capacity as a director of [APPELLANT] (“the Company”); or

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(ii) The Company, the Applicant being named for reference purposes as the sole director of the Company?

All the Notices had been served on the Company’s registered office.

7. This ambiguity was only too apparent from the written submission filed by the parties:

(i) In his application, dated 5 June 2025 (at A.11-16), the Applicant appealed against the Notices on the basis that they had been wrongly served on him personally, whereas they should have been served on the Company. In his Skeleton, the Applicant states: “The central issue in this appeal is whether the Respondent lawfully imposed financial penalties totalling £20,000 on the Applicant personally where the relevant activities were carried out by a separate legal entity, [COMPANY] (“[NAME]”)”

(ii) In his Skeleton Argument, [NAME] [NAME] responded in robust terms (at [14]): “It must have been clear from the fixed penalty notices that the Company was the intended recipient”. The Notice had been addressed to the Applicant as the appropriate point of contact for the Company.

8. [NAME] [NAME], at [14] of his Skeleton, added that there had been no prejudice to the Company and the substance of the notice was sound. It would be open to the Tribunal to join the Company as a party. The Tribunal questioned whether this was possible, given that the time for appealing in respect of the CPM penalty had expired. Further, it was not our role to determine the intended recipient of the Notices on the balance of probabilities. These are quasi criminal penalties. It was a basic requirement that the Notices be drafted with sufficient clarity so that any recipient should have no reasonable doubt as to whom the Notices were directed.

9. It is not unusual for the Housing Acts to impose liability on both a body corporate and a director (or, indeed, some other person involved with the body corporate). Thus, section 251 of the Housing Act 2004, provides that where an offence is committed by a body corporate which is proved to have been committed “with the consent or connivance of, or to be attributable to any neglect on the part of a director”, the director as well as the body corporate commits the offence and is liable to be proceeded against and punished accordingly.

10. However, neither of these statutory regimes create offences under the 2004 Act:

(i) The CMP Regulations are made pursuant to the Housing and Planning Act 2016. Section 135 permits the Secretary of State to make regulations requiring “a [NAME] agent” who fails to join a “client money protection scheme” to pay a financial penalty. Section 56 defines “[NAME] agent” as a “letting agent or [NAME] manager”.

4 (ii) The [NAME] is made pursuant to the Enterprise and Regulatory Reform Act 2013. Sections 83 and 84 respectively permit the Secretary of State to make an order requiring persons who engage in “lettings agency work” or “[NAME] management work” to be members of a [NAME]. Section 85 provides that any such order may make provision for “civil penalties” to be imposed in respect of any breach. Appeals were initially made to the General Regulatory Chamber, rather than to this Tribunal.

11. The Tribunal adjourned the case on two occasions to allow the parties to review their positions and for the Respondent to take instructions. Having reviewed the situation, both parties agreed that any Notice must be drafted with sufficient clarity so that any recipient had no reasonable doubt as to the identity of the legal entity to which the Notice was directed.

12. The position of the Respondent was:

(i) There was no ambiguity in the Notices. These had been imposed on the Applicant in his capacity a director of the Company.

(ii) [NAME] [NAME] conceded that this directly contradicted the position that he had taken in his Skeleton Argument.

(iii) The Notices had been served on the Applicant because he had been engaged in “[NAME] management work” as opposed to “letting agency work”.

13. The Respondent conceded that the Notices had not addressed:

(i) the grounds upon which it was contended that the Applicant was liable as director.

(ii) the financial circumstances of the Applicant as opposed to those of the Company.

14. The position of the Applicant was:

(i) The Notices are ambiguous.

(ii) He had brought the appeal as he considered that the appeal should have been brought against the Company and not himself. His complaint was that the Respondent was wrongly trying to “pierce the corporate veil”.

(iii) As a result of this, he had only appealed on the grounds that the decision was “wrong in law”. He had not raised other grounds, such as his financial circumstances, as he did not understand the basis on which he was being made liable as director.

(iv) Whilst the Applicant was the sole director of the Company, he does not have a controlling interest. He is rather employed by the Company under a contract of employment. The Respondent had no evidence to contradict this.

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The Law

The CMP Regulations

15. The CMP Regulations came into effect on 1 April 2019. The Secretary of State has made these regulations in exercise of the powers conferred by section 133, 135 and 214(6) of the Housing and Planning Act 2016.

16. Regulation 3 provides that

"a [NAME] agent who holds client money must be a member of an approved or designated client money protection scheme".

17. Regulation 5(2) provides that

"a breach of regulation 3 or 4 by a [NAME] agent is taken to have occurred in each local authority area in England in which—

(a) the agent has premises; or

(b) housing is situated in relation to which the [NAME] agent’s English letting agency work or [NAME] management work is undertaken.

18. Regulation 6 provides that (emphasis added):

"(1) Where a local authority in England is satisfied beyond reasonable doubt that a [NAME] agent has breached regulation 3, the authority may impose a financial penalty in respect of the breach.

(2) The financial penalty—

(a) may be of such amount as the authority imposing it determines; but

(b) must not exceed £30,000."

19. Paragraph 5 of the Schedule provides for a right of appeal to this tribunal against (a) the decision to impose the penalty or (b) the amount of the penalty. An appeal is to be a re-hearing of the local housing authority's decision but may be determined having regard to matters of which the authority was unaware. The Tribunal may quash, confirm or vary the final notice.

20. An appeal must be brought within the period of 28 days beginning with the day after that on which the final notice was served. There is no provision for extending time.

21. Section 56 of the 2016 Act defines “[NAME] agent” as “a letting agent or [NAME] manager”. Section 55 defines “[NAME] manager” as:

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“(1) In this Part “[NAME] manager” means a person who engages in [NAME] management work.

(2) But a person is not a [NAME] manager for the purposes of this Part if the person engages in [NAME] management work in the course of that person's employment under a contract of employment.”

The [NAME]

22. The [NAME] came into effect on 1 October 2024. The Secretary of State has made the order pursuant to powers conferred by sections 83(1), (5), and (9)(b), 84(1) and (7)(b), 85(1)(a), (2)(a), (3) and (4) and 88(1) of the Enterprise and Regulatory Reform Act 2013.

23. Article 5 provides that: "A person who engages in [NAME] management work must be a member of a [NAME] for dealing with complaints in connection with that work. (2) The [NAME] must be one that is—

(a) approved by the Secretary of State; or

(b) designated by the Secretary of State as a government administered [NAME]."

24. Article 8 provides: "(1) Where an enforcement authority is satisfied on the balance of probabilities that a person has failed to comply with the requirement to belong to a [NAME] under article 3 (requirement to belong to a [NAME]: lettings agency work) or article 5 (requirement to belong to a [NAME]: [NAME] management work), the authority may by notice require the person to pay the authority a monetary penalty (a “monetary penalty”) of such amount as the authority may determine.

(2) The amount of the monetary penalty must not exceed £5,000.

(3) The Schedule provides for the procedure relating to the imposition of a monetary penalty." 25. Article 9 provides that a person may appeal against a notice imposing a monetary penalty to this Tribunal. The grounds of appeal are that:

"(a) the decision to impose a monetary penalty was based on an error of fact;

(b) the decision was wrong in law;

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(c) the amount of the monetary penalty is unreasonable;

(d) the decision was unreasonable for any other reason."

26. The Tribunal may: (a) quash the final notice; (b) confirm the final notice; or (c) vary the final notice.

27. The Order makes no provision for the time within which an appeal must be brought. Regard must therefore be had to the Tribunal Procedure (First-tier Tribunal) ([NAME] Chamber) Rules 2013. Rule 52 provides that an appeal must be brought with 28 days, but the Tribunal may extend time.

28. Section 84(6) of the 2013 Act defines “[NAME] management work”:

“(6) In this section, “[NAME] management work” means things done by any person (“A”) in the course of a business in response to instructions received from another person (“C”) where—

(a) C wishes A to arrange services, repairs, maintenance, improvements or insurance or to deal with any other aspect of the management of premises in England on C's behalf, and

(b) the premises consist of or include a dwelling—house let under a relevant tenancy.”

The Appeal against the Financial Penalty of £15,000 (The CMP Regulations)

29. On 14 March 2025 (A.17-22), the Respondent served a Notice of Intent proposing to impose a monetary penalty of £20,000. The Tribunal notes the following:

(i) The accompanying letter (A.17) is addressed to “[NAME[NAME] Company Director of [COMPANY]”; whilst the Notice of Intent (A.20) are addressed to “[NAME[NAME], Company Director of [COMPANY]” (i.e. a comma is added).

(ii) The accompanying letter (A.17) starts: “Dear [NAME[NAME], Company Director of [COMPANY]”.

(iii) The Notice of Intent (A.20) states that the Respondent intends to impose a financial penalty of £20,000”. It does not specify the person on whom the penalty is to be imposed. However, it does refer to "your conduct".

30. On 31 March 2025 (A.26-27), the Applicant made representations against the proposed financial penalty:

8 “I write regarding the recent correspondence issued to [NAME] ([NAME]) concerning Client Money Protection (CMP) scheme membership. When the CMP requirements were introduced, [NAME] contacted several council-listed agencies to seek membership. However, we were advised that due to the nature and scale of our operations, [NAME] did not meet their eligibility criteria. Following receipt of the recent notice from RBKC, we have again reached out to multiple CMP schemes. While the majority still deemed [NAME] ineligible, Money Shield has indicated a willingness to consider our application, and we have now commenced the process. We would like to highlight that [NAME] operates under a business model that differs significantly from conventional letting agencies: • [NAME] does not handle or collect rent—tenants pay rent directly to the landlord. • [NAME] does not hold tenancy deposits—all deposits are paid directly into the [NAME] ([NAME]) without being retained by [NAME]. • [NAME] charges a commission fee to the landlord, which is paid directly by the landlord and does not constitute client money. • In rare cases, a holding deposit may have been received at a tenant’s request to secure a [NAME] temporarily. This was solely to facilitate a potential refund during a cooling-off period, and in such instances, the deposit was transferred to the [NAME] upon final tenancy confirmation’. Since the [NAME] scheme has been in place, all tenant deposits have been held directly by the [NAME], and at no point is [NAME] holding client money. The only area of potential misunderstanding appears to relate to the instances where a short-term holding deposit was temporarily received before confirmation of a tenancy. Given these factors, we respectfully seek clarification on whether [NAME] is strictly required to be a member of a [NAME], as we do not operate a client account or handle client money in the conventional sense. Specifically, if deposits are paid to the landlord and subsequently transferred to the [NAME], would [NAME] still be classified as handling client money and therefore required to hold CMP membership’? We have already started the process of joining a [NAME] (see attached) and will proceed unless it is confirmed that we are exempt. In the meantime, to avoid any further ambiguity, any new tenants will pay deposits directly to the landlord. We would also request additional time to complete the registration process if required. In light of the above, we respectfully request that the council reconsider the penalty, taking into account: 1. [NAME]’s unique operational structure,

9 2. Our previous and ongoing efforts to comply with the requirements, 3. The minimal risk posed to clients, and 4. The significant financial hardship the penalty would impose on a small business. Additionally, [NAME] is a small operation managing properties for a single landlord within one building, primarily providing affordable housing to students, with rental rates consistently below the prevailing Kensington market”.

31. On 13 May 2025 (A.28-34), the Respondent served a Final Notice reducing the financial penalty to £15,000. The Tribunal notes the following

(i) Both the accompanying letter (A.28) and the Final Notice (A.32) are addressed to “[NAME[NAME], Company Director of [COMPANY]”

(ii) The accompanying letter starts: “Dear [NAME[NAME]”.

(iii) The Final Notice reads: “The Council is now issuing you with a Final Notice”. The “you” on whom the penalty is imposed is not identified.

32. The letter concludes (emphasis added):

“I have considered the following factors: -

• You/[COMPANY] (since the issuing of the Notice of Intent) have registered membership with Money Shield (an accredited client money protection scheme) and have noted the difficulty experienced in joining a client money protection scheme in accordance with your usual business model.

• [COMPANY] annual financial turnover when deciding the penalty threshold outlined within the relevant enforcement policies.

• You/[COMPANY] rarely hold client money from your tenants.

• It’s the responsibility of the [NAME] management agent to ensure reasonable precautions and due diligence are conducted to avoid breaches of consumer protection legislation such as The Client Money Protection Schemes for [NAME] (Requirement to Belong to a Scheme etc.) Regulations 2019.

• Ignorance is no defence.”

10 33. The Tribunal is satisfied that the Final Notice is fatally flawed and is a nullity. There is a fundamental ambiguity in the Notice as to whether it is directed to the Company or to the Applicant, as a director of the Company. Any notice must be clear as to the intended recipient.

34. The Tribunal reaches this decision for the following reasons:

(i) The Respondent should have stated unambiguously whether the penalty was imposed on the Company or the Applicant. It failed to do so.

(ii) The references to “[APPELLANT]” demonstrate the fundamental ambiguity in the Notice. It is apparent that the decision-maker considered that the Applicant and the Company could be treated as a single entity. In law, they have separate legal personalities.

(iii) The Applicant issued this appeal in the belief that it had been wrongly imposed on him personally. A reasonable person could have reached the same conclusion. Both the letter and the Notice had been directed to him.

(iv) The CMP Regulations required the Respondent to be satisfied beyond reasonable doubt that the relevant person had breached the regulation. There was therefore a greater onus to clearly identify who that relevant person was.

(v) The business was being conducted in the name of the Company. This would have been the primary entity which was required to be a member of an approved or designated client money protection scheme.

(vi) The Applicant was employed by the Company under a contract of employment. He is not therefore a person who could be treated under the CMP Regulations as a “[NAME] manager”.

(vii) Because the Applicant believed that the Final Notice had been wrongly served on him, rather than the Company, he had only appealed on the ground that the decision was wrong in law. He had not considered it necessary to address the other grounds, such that the amount of the monetary penalty was unreasonable.

(viii) The decision-maker did not consider the financial circumstances of the Applicant, as opposed to those of the Company. This would have been a most relevant factor had the relevant person been the Applicant.

(ix) It would not have been open to the Tribunal to join the Company as a party to the appeal as the time for appealing had expired and there is no provision to extend time (see [NAME] v Dramlin Ltd [2021] UKUT 268 (LC).

(x) The Tribunal notes that any appeal under the CPR Regulations is a re-hearing. The Tribunal would be entitled to have regard to matters of

11 which the authority was unaware (see [19] above). However, the Tribunal is satisfied that this wide scope of the appeal cannot cure a defect so fundamental as the identity of the recipient of the Notice.

(xi) A reasonable person in the position of the recipient of the Notice would have concluded that the Notice is ambiguous.

The Appeal against the Monetary Penalty of £5,000 (The [NAME])

35. On 14 March 2025 (A.23-25), the Respondent served a Notice of Intent proposing to impose a monetary penalty of £5,000. The Tribunal notes the following:

(i) Both the accompanying letter (A.23) and the Notice of Intent (A.24) are addressed to “[NAME[NAME], Company Director of [COMPANY]”.

(ii) The accompanying letter starts: “Dear [NAME[NAME] - Company Director of [COMPANY]”.

(iii) Section 1 of the Notice of Intent specifies the reasons for imposing the monetary penalty. This reads: “As a [NAME] management agent, a failure to comply with the duty to belong to an approved [NAME]”. The relevant [NAME] management agent is not identified.

(iv) Section 2 of the Notice of Intent specifies the amount of the penalty. This reads: “We intend to impose a monetary penalty of £5,000”. It does not specify the person on whom the penalty is imposed.

36. The Applicant did not make any separate response to this Notice of Intent. However, at the hearing, he stated that his letter, dated 31 March 2025 (see [30] above) was also intended to relate to this Notice.

37. On 13 May 2025 (A.35-39), the Respondent served a Final Notice confirming the monetary penalty of £5,000 for non-membership of a [NAME] between 15 July 2023 and 21 September 2024. On 14 May 2024 (R.66), the Company became a member of the [NAME] [NAME].

38. The Tribunal notes the following

(i) Both the accompanying letter (A.35) and the Final Notice (A.37) are addressed to “[NAME[NAME], Company Director of [COMPANY]”

(ii) The accompanying letter starts: “Dear [NAME[NAME]”.

(iii) The Final Notice describes the alleged breach as: “As a [NAME] management agent, a failure to comply with the duty to belong to an

12 approved [NAME]”. The relevant [NAME] management agent is not identified.

(iv) The Final Notice further states: “This notice requires that you carry out one of the following actions within the period of 28 days beginning with the day after this Final Notice was served. [NAME]. Pay the monetary penalty of £ 5000.00 within 28 days or B. Appeal to a First Tier Tribunal within 28 days”. The “you” on whom the penalty is imposed is not specified.

39. The Tribunal is satisfied that the Final Notice is fatally flawed and is a nullity. There is a fundamental ambiguity in the Notice as to whether it is directed to the Company or to the Applicant, as a director of the Company. Any notice must be clear as to the intended recipient.

40. The Tribunal reaches this decision for the following reasons:

(ii) It is apparent from the two notices that the decision-maker considered that the Applicant and the Company could be treated as a single entity. In law, they have separate legal personalities.

(iv) The [NAME] required the Respondent to be satisfied on the balance of probabilities that the relevant person had failed to comply with the requirement to belong to a [NAME]. There is an onus to clearly identify who that relevant person was.

(v) The business was being conducted in the name of the Company. This would have been the primary entity which was required to be a member of a [NAME]. It is the Company that has now become a member of [NAME].

(vi) Whilst the [NAME] imposes an obligation on “a person who engages in [NAME] management work” to be a member of a [NAME], the Final Notice should have specified why the Applicant was the relevant person on whom the Notice was to be served.

(vii) Because the Applicant believed that the Final Notice had been wrongly served on him, rather than the Company, he had only appealed on the ground that the decision was wrong in law (see [25(b)] above). He had not considered it necessary to address the other grounds, such that the amount of the monetary penalty was unreasonable.

13 (viii) The decision-maker did not consider the financial circumstances of the Applicant. This would have been a fatal error had the relevant person been the Applicant.

(ix) Whilst it would have been open to the Tribunal to join the Company as a party to the Appeal, it is not the role of this Tribunal to determine on a balance of convenience the relevant person on whom the monetary penalty imposed. The Final Notice must clearly identify the intended recipient beyond a reasonable doubt.

(x) A reasonable person in the position of the recipient of the Notice would have concluded that the Notice is ambiguous. Judge Robert Latham 14 April 2026

Rights of Appeal

By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) ([NAME] 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 application for permission must be made by e-mail to the First-tier Tribunal at the regional office which has been dealing with the case. The application for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the person making the application. If the application is not made within the 28 day time limit, such application 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 application for permission to appeal to proceed, despite not being within the time limit. The application for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the [NAME] and the case number), state the grounds of appeal and state the result the party making the application is seeking. If the tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).