Landlord Penalised for Unlicensed Property Management

OUTCOME: Dismissed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : LON/00AE/HNA/2024/0031 Property : [ADDRESS] [POSTCODE] Applicant: [redacted] Respondent : [redacted] Type of [NAME] : Appeal against a financial penalty - Section 249A & Schedule 13A to the Housing Act 2004 Tribunal : Judge Nicol Ms S Coughlin MCIEH Date and venue of hearing : 13th [ADDRESS] [POSTCODE] Date of decision : 17th March 2025

DECISION

The Tribunal has decided to confirm the penalty of £9,500 imposed on the Applicant by the Respondent. Relevant legislation is set out in the Appendix to this decision. Reasons 1. The Applicant owns the freehold of [ADDRESS], a house converted into 3 flats. The local authority Respondent has sought to impose a financial penalty of £9,500 on the Applicant for managing or having control of one of the flats when it should have been licensed but was not, contrary to section 95(1) of the Housing Act 2004 (“the 2004 Act”).

2. The final penalty notice was served on 21st December 2023. The Applicant appealed to this Tribunal on 16th January 2024.

2 3. The Applicant’s appeal was heard by the Tribunal on 13th March 2025. The attendees were: • Mr [COUNSEL], counsel for the Applicant, assisted by Mr [COUNSEL]; • The Applicant, assisted by a Tribunal-appointed interpreter, [APPELLANT]; • The Applicant’s witnesses: o Mr [NAME] [APPELLANT], one of the Applicant’s sons; o Mr [APPELLANT], the Applicant’s tenant at the subject property; • Mr [COUNSEL] [NAME], counsel for the Respondent; • Mr [COUNSEL] from the Respondent’s solicitors, [RESPONDENT]; • The Respondent’s witnesses: o Ms [RESPONDENT], [NAME]; o Ms [NAME], Licensing Enforcement Officer.

4. The Tribunal had the following documents, filed and served in accordance with the Tribunal’s directions issued on 4th June 2024: • Updated Applicant’s Bundle, incorporating his original and reply bundles, 139 pages; • Respondent’s Bundle, 350 pages; and • A skeleton argument prepared by Mr [NAME] for the original hearing listed for 23rd August 2024 (which was adjourned).

5. By the time of the hearing, the Applicant was putting forward one ground of defence, namely that he had given up management of the property to another of his sons, [APPELLANT], while he was in Pakistan so that he was ignorant of the licensing situation in relation to the property. This was said to constitute a reasonable excuse under section 95(4) of the 2004 Act.

6. In accordance with the decision of the Upper Tribunal in Marigold v Wells [2023] UKUT 33 (LC); [2023] HLR 27, in considering whether a landlord had a reasonable excuse for failing to comply with a licensing requirement, the Tribunal must: (a) establish what facts the landlord asserts give rise to a reasonable excuse; (b) decide which of those facts are proven; and (c) decide whether, viewed objectively, those proven facts initially amounted to a reasonable excuse and whether they continued to do so. The Tribunal should take into account the experience and other relevant attributes of the landlord and the situation in which they found themselves at the relevant time or times.

7. In 2015 the Applicant applied for and obtained a licence for the property in accordance with the Respondent’s recently-introduced selective licensing scheme. The Applicant does not read English and only speaks a little English. He also has limited experience of using technology, not having a mobile phone or an email address. Therefore, the [NAME]

3 was actually completed on his behalf by one of his sons, probably the then 17-year-old [NAME].

8. When Mr [APPELLANT] sought to cross-examine the Applicant about the terms of the licence, it transpired that he had never read them, had them translated or in any way sought to have the terms conveyed to him. Essentially, he had no idea what was in the licence or, therefore, what his obligations under it consisted of. This included obligations to inform the Respondent if he moved, changed his contact details or passed management on to someone else. Further, the Applicant was not only not a member of any relevant organisation, such as the [COMPANY], nor a subscriber to the Respondent’s newsletter for landlords, he was unaware they even existed.

9. When in the UK, the Applicant lived with his wife and 2 sons, [APPELLANT] and [APPELLANT], at [ADDRESS], Leytonstone. However, on 13th February 2019 he went to Pakistan to be with his parents. In June or July 2019, his mother passed away. He returned for one month from 2nd August to 3rd September 2019. His father passed away about 6 months after his mother. He returned to the UK on 19th July 2020 before again going to Pakistan a year later on 30th June 2021. He also returned to the UK for 9 months from 10th January to 30th September 2022.

10. This travel history, established by the stamps in his passport, is worth setting out because [NAME] said in his witness statement that his father “stopped residing in the United Kingdom as his main place of residence in 2019”. Indeed, neither the grounds of appeal nor the Applicant’s witness statement mentioned his time in the UK between 2019 and 2023 and gave the clear impression that he was abroad for the whole of that period.

11. Mr [APPELLANT] gave evidence that he became the tenant at the property a couple of years or so before the Applicant left for Pakistan. During that period, he said, he dealt with the Applicant in relation to his tenancy. After the Applicant left for Pakistan for the first time, he dealt only with [APPELLANT].

12. This is consistent with the Applicant passing management of the property to [APPELLANT]. However, what exactly the Applicant told [APPELLANT] is not known. Due to his language difficulties, the Applicant put nothing in writing. Since he did not know what the licence said, the Applicant could not have told him how to comply with it.

13. The Applicant was asked what [APPELLANT] did for a job between 2015 and 2019 but he could not say, other than that he “worked with some people”. He pointed to the fact that [NAME] formed his own property company in 2022 and said he thought [NAME] had built up some property experience in the months or years before but could not say what that experience was other than stepping into his shoes for the subject property.

4 14. Essentially, the Applicant had no basis for thinking that [APPELLANT] was capable of managing the property. He carried out no checks and did not provide any guidance. Mr [NAME] pointed to the fact that, apart from failing to licence the property, there was nothing to suggest that [NAME] otherwise did anything wrong. In particular, he did successfully renew the licences on the other two flats. However, the Tribunal had no evidence, and the Applicant was unable to say, that this was anything more than coincidental good fortune.

15. Further, the Applicant himself characterised [APPELLANT] as incompetent as a manager, presumably because, although he did apply for a licence for the property, he allowed the [NAME] to lapse by not paying the requisite fee, and dishonest for holding himself out to be the Applicant at times.

16. The rents for the 3 flats came to around a total of £3,000 per month. While he was managing them, one of the rents would be paid directly into the Applicant’s bank account but [APPELLANT] would collect the other two rents, deduct his management expenses, and then pay the balance into the Applicant’s bank account. Therefore, while [APPELLANT] may have been the manager, at all times the Applicant was receiving a significant income from the rental.

17. In return for this income, it appears that the Applicant did virtually nothing to maintain any kind of role in the management of the property. There is no suggestion that he visited the property while back in the UK from Pakistan. He conceded in evidence that he knew the original licence expired in 2020 and needed to be renewed but, even on his own case, he did not ask [NAME] about it until July 2022.

18. The key part of the Applicant’s defence is that he says, when he asked, [APPELLANT] told him that he had obtained licences for all 3 flats. Again, there is no record or other evidence as to precisely what either said to the other. Mr [NAME] asserted that, given the close family relationship and the fact that there were no apparent problems with the management of the flats, the Applicant was entitled to accept [APPELLANT] bare assertion, without more.

19. Given his language difficulties, the Tribunal understands why the Applicant did not ask to see the licence because he would have been reliant on [NAME] in any event to tell him what any document he showed him said. However, it is precisely because of those language difficulties that the Applicant would be expected, as a responsible landlord, to put in place some other arrangements to ensure that the property was managed properly. This would include: (a) Informing himself of his obligations under the licence; (b) Before entrusting his proposed manager with the management of the property, checking his knowledge of those obligations and of property management more generally (a certain level of such knowledge could be

5 assumed of a professional managing agent but not of a family member with an unknown level of knowledge or experience); (c) Ensuring there were arrangements to fill any gaps in the manager’s knowledge or otherwise to provide him with any support he needed; (d) [NAME] arrangements to provide a degree of supervision and feedback to try to ensure standards are maintained.

20. In the absence of any such checks and balances, even assuming everything the Applicant said was true, it is not possible for the Applicant to claim that he had a reasonable excuse for his property being unlicensed.

21. Therefore, the Tribunal is satisfied that the Applicant committed the offence under section 95(1) and did not have a reasonable excuse defence under sub-section (4). That leaves the question of the amount of the penalty.

22. The appeal is a rehearing and the Tribunal needs to reach its own conclusion on the penalty and the amount of it. However, in doing so the Tribunal is entitled to have regard to the Respondent’s views ([NAME] v [NAME] CC [2015] UKUT 0129 (LC)) and must consider the case against the background of the policy which the Respondent has adopted to guide its decisions (R (Westminster CC) v Middlesex Crown Court [2002] EWHC 1104 ([NAME])).

23. In her witness statement, unchallenged by Mr [RESPONDENT], Ms [RESPONDENT] explained that the Respondent’s written policy established the fixed sum of £7,500 for this offence for a landlord with a portfolio of less than 5 properties. To this she added £2,000 for the aggravating factor that, since the Applicant had licensed the property previously, he was fully aware of the Respondent’s licensing scheme and the requirement on him to obtain a licence.

24. The Tribunal is satisfied that the penalty of £9,500 accords with the Respondent’s policy and is justified for the Applicant’s offence. Name: Judge Nicol Date: 17th March 2025

Rights of appeal By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber), then a written [NAME] for permission must be made to the First- tier Tribunal at the regional office which has been dealing with the case.

6 The [NAME] for permission to appeal must arrive at the regional office within 28 days after the tribunal sends written reasons for the decision to the [NAME]. If the [NAME] is not made within the 28-day time limit, such [NAME] must include a request for an extension of time and the reason for not complying with the 28-day time limit; the tribunal will then look at such reason(s) and decide whether to allow the [NAME] for permission to appeal to proceed, despite not being within the time limit. The [NAME] for permission to appeal must identify the decision of the tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party [NAME] the [NAME] is seeking. If the tribunal refuses to grant permission to appeal, a further [NAME] for permission may be made to the Upper Tribunal (Lands Chamber).

7 Appendix of relevant legislation

Housing Act 2004

Section 95 Offences in relation to licensing of houses under this Part (1) A person commits an offence if he is a person having control of or managing a house which is required to be licensed under this Part (see section 85(1)) but is not so licensed. (2) A person commits an offence if– (a) he is a licence holder or a person on whom restrictions or obligations under a licence are imposed in accordance with section 90(6), and (b) he fails to comply with any condition of the licence. (3) In proceedings against a person for an offence under subsection (1) it is a defence that, at the material time– (a) a notification had been duly given in respect of the house under section 62(1) or 86(1), or (b) an [NAME] for a licence had been duly made in respect of the house under section 87, and that notification or [NAME] was still effective (see subsection (7)). (4) In proceedings against a person for an offence under subsection (1) or (2) it is a defence that he had a reasonable excuse– (a) for having control of or managing the house in the circumstances mentioned in subsection (1), or (b) for failing to comply with the condition, as the case may be. (5) A person who commits an offence under subsection (1) is liable on summary conviction to a fine. (6) A person who commits an offence under subsection (2) is liable on summary conviction to a fine not exceeding level 5 on the standard scale. (6A) See also section 249A (financial penalties as alternative to prosecution for certain housing offences in England). (6B) If a local housing authority has imposed a financial penalty on a person under section 249A in respect of conduct amounting to an offence under this section the person may not be convicted of an offence under this section in respect of the conduct. (7) For the purposes of subsection (3) a notification or [NAME] is “effective” at a particular time if at that time it has not been withdrawn, and either– (a) the authority have not decided whether to serve a temporary exemption notice, or (as the case may be) grant a licence, in pursuance of the notification or [NAME], or (b) if they have decided not to do so, one of the conditions set out in subsection (8) is met. (8) The conditions are–

8 (a) that the period for appealing against the decision of the authority not to serve or grant such a notice or licence (or against any relevant decision of the appropriate tribunal) has not expired, or (b) that an appeal has been brought against the authority's decision (or against any relevant decision of such a tribunal) and the appeal has not been determined or withdrawn. (9) In subsection (8) “relevant decision” means a decision which is given on an appeal to the tribunal and confirms the authority's decision (with or without variation).

Section 249A Financial penalties for certain housing offences in England (1) 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. (2) In this section “relevant housing offence” means an offence under— (a) section 30 (failure to comply with improvement notice), (b) section 72 (licensing of HMOs), (c) section 95 (licensing of houses under Part 3), (d) section 139(7) (failure to comply with overcrowding notice), or (e) section 234 (management regulations in respect of HMOs). (3) Only one financial penalty under this section may be imposed on a person in respect of the same conduct. (4) The amount of a financial penalty imposed under this section is to be determined by the local housing authority, but must not be more than £30,000. (5) The local housing authority may not impose a financial penalty in respect of any conduct amounting to a relevant housing offence if— (a) the person has been convicted of the offence in respect of that conduct, or (b) criminal proceedings for the offence have been instituted against the person in respect of the conduct and the proceedings have not been concluded. (6) Schedule 13A deals with— (a) the procedure for imposing financial penalties, (b) appeals against financial penalties, (c) enforcement of financial penalties, and (d) guidance in respect of financial penalties. (7) The Secretary of State may by regulations make provision about how local housing authorities are to deal with financial penalties recovered. (8) The Secretary of State may by regulations amend the amount specified in subsection (4) to reflect changes in the value of money. (9) For the purposes of this section a person's conduct includes a failure to act.

SCHEDULE 13A FINANCIAL PENALTIES UNDER SECTION 249A

6 If the authority decides to impose a financial penalty on the person, it must give the person a notice (a “final notice”) imposing that penalty. 10

9 (1) A person to whom a final notice is given may appeal to the First tier Tribunal against— (a) the decision to impose the penalty, or (b) the amount of the penalty. (2) If a person appeals under this paragraph, the final notice is suspended until the appeal is finally determined or withdrawn. (3) An appeal under this paragraph— (a) is to be a re-hearing of the local housing authority's decision, but (b) may be determined having regard to matters of which the authority was unaware. (4) On an appeal under this paragraph the First-tier Tribunal may confirm, vary or cancel the final notice. (5) The final notice may not be varied under sub-paragraph (4) so as to make it impose a financial penalty of more than the local housing authority could have imposed.