In the recent case of Shorr and Ro v London Borough of Camden [2024] UKUT 202 (LC), the Upper Tribunal (“UT”) considered whether an unlicensed house in multiple occupation (“HMO”) could lead to financial penalties being issued by the local authority for each joint owner of the property (in this case, a married couple), where both are found to have committed relevant housing offences, but only one of which was responsible for the letting and management of the Property.

The facts

In 2015, Camden council (“the council”) introduced a borough-wide selective licensing scheme, requiring all HMOs not already covered by the mandatory licensing obligation to be licensed. It was advertised in the borough when it was introduced and information about the scheme, including how it differs from the mandatory licensing obligation, was on the council’s website.

The landlords in question are a married couple who hold their home and other properties in their joint names. The property in question is a four-bedroom flat (“the Property”) which the wife (“Ms Ro”) purchased in 2002 and registered in the couples joint names. Ms Ro took responsibility for letting and managing the flat, although the husband (“Mr Shorr”) had assisted with such responsibilities from time to time.

In September 2022, Ms Ro let the Property to four students. Under the written tenancy agreement, Ms Ro was identified as the landlord with no reference to Mr Shorr. Ms Ro did not obtain a HMO license under the additional licensing scheme, as she was unaware of the additional licensing scheme.

In October 2022, officers of the councils housing department inspected the Property and deemed it to be a HMO which therefore required it to be licensed. The council notified both Ms Ro and Mr Shorr that they had each committed four offences contrary to The Housing Act 2004, namely:

  1. Being in control of or managing an unlicensed HMO, constituting a penalty of £6,000 on each landlord.
  2. The automatic fire detection system in the Property was inadequate and measures reasonably required to protect the occupiers from injury in the event of a fire had not been taken, constituting a penalty of £5,000 per landlord.
  3. Lights in a number of locations in the common parts were not working, constituting a penalty of £1,500 on each landlord.
  4. The managers name, address and telephone number were not displayed prominently, constituting a penalty of £1,000 on each landlord.

The determination by the First-tier Tribunal (“FTT”) 

The landlords appealed each of the penalties to the FTT. Due to their lack of knowledge of the additional licensing system, they sought that this was a reasonable excuse for their failure to licence. They also pleaded that, although the Property was registered in their joint names and the rent was paid into their joint bank account, Ms Ro was the person responsible for managing the Flat, not Mr Shorr.

In September 2023, the FTT reduced the penalties imposed on Ms Ro from £13,500 to £13,000 and those imposed on Mr Shorr from £13,500 to £8,000. The landlords appealed the decision of the FTT to the UT.

The determination by the UT

The decision made by the FTT in September 2023 was appealed by the landlords to the UT on two grounds:

  1. The FTT erred in law when deciding to impose a financial penalty at all, when a proper application of the council’s policy should have resulted in a warning.
  2. The FTT erred in law when determining the appropriate amount of penalties by failing to treat the landlords’ ignorance of the licensing requirements as a significant mitigating factor, and by failing to take proper account of the different responsibilities of the respective landlords.

In respect of point 1, the UT held that the possibility of a warning rather than a financial penalty was an option for the council to pursue where the scheme differentiated between “rogue landlords” and “good landlords”. The UT could not find here that the landlords were “good landlords” with reference to the fire safety upgrades required (which resulted from a failure to licence when considering that the object of licencing is to improve housing conditions), and therefore it was inappropriate to not regard them as a target of the penalty regime under The Housing Act 2004. The UT therefore considered that a financial penalty was justified.

In respect of point 2, the UT dismissed the landlords defence of reasonable excuse. What the UT did accept however, is that the licencing offence was aggravated by the fire safety issues, and as a separate penalty was imposed for the fire safety offence, an excess total had been concluded by the FTT.

Further, the UT held that as the separate position of the landlords was not reflected in any adjustment to the penalties by the FTT, the penalties imposed on Mr Shorr were not proportionate as he owed the tenants no contractual duty. Coupled with the objects of enforcement being fully imposed on Ms Ro, the penalties against Mr Shorr were set aside. The UT went as far as to say Mr Shorr’s expenditure of time and money in challenging the notices and pursuing the appeal, which he would not recover, was a more than adequate sanction.

The UT set aside the FTTs decision to impose penalties with substitutes as follows:

  1. Reduce the penalties on Mr Shorr from £8,000 to £0.
  2. Reduce the penalties on Ms Ro from £13,000 to £8,000 (the sum of £3,000 for the licensing offence and £5,000 for the inadequate fire measures).

Comments

This judgment solidifies that landlords are expected to be aware of their legal obligations. However, the UT has showed willing in this case of joint landlords to ensure penalties imposed on each joint landlord reflects their degree of responsibility and are to be assessed separately. Nonetheless, the proper response to such cases will be dependent on the individual facts.

Pleading ignorance as a defence to penalties for HMO licencing will not sever liability where a landlord is responsible for the property.

It is also relevant to note that in April 2023, a differently constituted panel of the FTT made a rent repayment order against Ms Ro. Ms Ro was ordered to pay her four former tenants £3,200, being the sum of half of the total rent they had paid before Ms Ro made her application for a HMO licence.

Landlords should regularly check the website of the council in which their rental property is situated to ascertain whether a HMO, additional or selective licence is required. Failure to have a licence when a property requires one is a criminal offence and as can be seen above, can also result in a financial penalty and/or a rent repayment order.

Should you require any assistance regarding property licensing and HMOs, please contact our Residential Possession Team.