Case No. UKUT-179-(LC)-UTLC-Case-Number:-LC-2022-146

The appellant’s construction of a “Part 3 house”28. The appellant’s starting point is that if an individual flat in William Meadows House is a Part 3 house, then the consequence of section 91(1) is that it is unlawful to grant a licence for the whole building, because that would be a licence relating to 22 Part 3 houses. That, Mr Morris argues, is an unacceptable conclusion because the legislation makes it clear that Parliament intended it to be possible to licence the whole building. Section 99 refers to “a building consisting of one or more dwellings”, and section 79(b)(ii) is about a house occupied under two or more tenancies or licences in respect of different dwellings within it. Local housing authorities commonly licence whole buildings consisting of flats, and guidance published by this respondent (albeit in connection with an earlier designation) advised the owner of a building divided into flats (whether converted or purpose-built) to make a single application for a licence for the whole property. This makes obvious administrative sense.29. Therefore the FTT’s decision, which brings with it such an unacceptable consequence, must be wrong. 30. Moreover, the idea that the whole of a building, or one flat within it, or any group of flats within it may be a Part 3 house offends the principle against doubtful criminalisation, set out in the eighth edition of Bennion, Bailey and Norbury on Statutory Interpretation at paragraph 24.6:“It is a clear principle of legal policy that a person should not be penalised except under clear law. This principle forms part of the context against which legislation is enacted and, when interpreting legislation, a court should take it into account.”31. The learned authors go on to observe that the “the legislature is presumed to intend that a person on whom a hardship is inflicted should be given a fair warning”, and cite Brett J in Dickenson v Fletcher (1873) LR 9 CP 1 at 7:“Those who contend that a penalty may be inflicted must show that the words of the Act distinctly enact that it shall be incurred under the present circumstances. They must fail if the words are merely equally capable of a construction that would, and one that would not, inflict the penalty.”32. Therefore, Mr Morris argues, a situation where a landlord is at risk of committing an unknown number of offences – relating to one flat, the whole building, or to any combination of the 22 flats – is unacceptable. Faced with a choice between that and a construction of the statute that has the appellant committing one offence only, the Tribunal should favour the latter. The appellant says that there must be, for any landlord, one Part 3 house and one offence; and the Part 3 house to which the section 95(1) offence relates must be the only one in respect of which a licence could be granted. Put another way, the number of offences committed must correspond with the number of Part 3 houses required to be licensed and the number of licences that can be issued.33. Moreover, for the local housing authority to decide in each case what is the Part 3 house – a flat, a group of flats or the whole building – is an unacceptably broad discretion and would lead to arbitrary outcomes.34. Mr Morris therefore argues that the correct approach to Part 3 is to appreciate that the definition of a house in section 99 is not determinative of what is a Part 3 house; instead section 99 provides the “raw material” from which housing authorities and landlords can “construct a Part 3 house in every given case, using the tools provided by the other sections of the Act” (I quote from Mr Morris’ skeleton). But this is not to be done by an arbitrary exercise of discretion by the local housing authority, nor is it a matter of choice for the landlord. Section 91(1) is of critical importance and takes away that potential choice by determining the answer. The FTT thought that the answer was that the Part 3 house was the smallest possible unit, the flat. But that is unacceptable for the reasons explained. Instead, the Part 3 house to be constructed must be the largest possible unit, or combination of dwellings, in a given case that can satisfy the requirement in section 79(2)(b)(ii). If it is possible to licence the whole of a building comprising flats, then that is the Part 3 house; no smaller part of that building can be a Part 3 house (because that would run headlong into section 91(1)). If one of the flats in the building is subject to an exempt tenancy or licence, or is subject to an intermediate lease, then that is to be excluded, and the Part 3 house is the remaining part of the building.35. Obviously flats that are initially not within the Part 3 house may come to be part of it later. Where a landlord owns a block of 10 flats but two are let on long leases and then sub-let, the Part 3 house is only the other eight flats which the landlord lets to occupiers. If later the other two flats fall into possession, on Mr Morris’ case the Part 3 house is now the whole building. He argues that the power to vary a licence in section 92 of the 2004 Act would enable the licence to be extended to cover all ten flats; alternatively the landlord could obtain a new licence for the whole.The appellant’s argument about occupation36. It will be recalled that in the present case the local housing authority did not know how much of the building was occupied at the time when it served its Notices of Intent (see paragraph 21 above); and section 79(2) applies Part 3 to a house if “the whole of it is occupied…”. Mr Morris argues that the word “occupied” in this context means “occupied or intended to be occupied”. He says that it must do, because that is how section 99 defines a dwelling, and section 79 cannot cut down what section 99 has set up. Parliament’s intention was that houses are to be licensed if they are intended to be occupied. Where a house consists of a number of flats, it is not the case that it must be licensed only when the final flat is let. 37. Mr Morris argues that the requirement is not that the whole of the building is actually occupied, but that it is entirely occupied by two or more non-exempt tenancies. That is consistent with the idea that a house includes the garden and outbuildings (see section 99), which are common parts and not “occupied” under any of the flat tenancies. If a building consists of three flats, two of which are occupied under non-exempt tenancies or licences but the third of which is unlet, then the whole building is the Part 3 house that is required to be licensed. And that means that the identity of the Part 3 house is stable and does not change every time a new licence or tenancy is granted. The difficulty that the respondent thought it had in this case does not arise; it did not need to know whether all the flats are occupied. 38. Mr Morris says that this explains why section 95(1) provides that a person commits the offence once the licensing requirement is engaged, which means that a licence must be acquired before tenants or licensees are allowed into occupation; Parliament intended a licence to be acquired where the building was intended to be occupied, and not just where it was actually occupied.39. Mr Morris also argues that if section 79(2) is construed literally then if a whole block were licensed and one flat became vacant then the block would cease to be a Part 3 house.The appellant’s construction of the section 95(1) offence40. The other reason why part of a building may not fall within a Part 3 house is that it is occupied under an exempt tenancy or licence. The respondent in this case did not know whether any of the flats was so occupied and in many cases the local housing authority will not know. Moreover, although in the present case the respondent knew that the appellant owned the freehold of the building, in other cases it may be aware that a person is in control of or managing part of a building but may have no way of knowing whether that person is in control of or managing the whole. Mr Morris accepts that that means that the local housing authority will not know the extent of the Part 3 house in respect of which the offence in section 95(1) is being committed. It knows, however, that there is a Part 3 house and that therefore an offence is being committed. And the offender knows the extent of the house and the exact nature of the offence and therefore is not subjected to doubtful penalisation. Similarly, the tenant of a flat who applies for a rent repayment order does not need to know how many flats his landlord is in control of or managing; the applicant knows that there is a Part 3 house and that an offence is being committed if his or her own flat is unlicensed, and the landlord knows, even if he or she does not disclose, the extent of the Part 3 house.