[2023] UKUT 263 (LC)

Mr Kazi is an experienced landlord; in his statement to the FTT he said that he owns numerous large properties in Bradford and has been a landlord for about 50 years (being now over 70 years of age). One of those properties is 2 Laisteridge Lane, Bradford; it is a large four-storey house converted (without planning permission) into 8 self-contained flats. It is an HMO because the conversion to flats did not comply with the relevant building regulations (paragraph 31 of the FTT’s decision). Mr Kazi has housed there a number of tenants in difficult circumstances; in the bundle before the FTT was a letter from an officer at the Wyfi Project, Bradford explaining that Mr Kai had accommodated four clients of the project who would otherwise have been homeless.

On 22 September 2020 Mr Kazi received a letter from Sue O’Brien of the respondent’s Housing department. She thanked Mr Kazi for meeting with her and allowing her to look at Flat 4 as a prospective home for a Mr Douglas who was then homeless. She said “… with the colder weather drawing in, it would be great to get a roof over his head as soon as we can” and referred to Mr Kazi’s offer to get the flat ready “by Friday”. She set out a number of certificates that he would need to provide, including an EPC certificate and an electrical condition report, offered to prepare a tenancy agreement, and listed what he needed to do to “make the property habitable and safe to use” on the basis of her inspection. That list included pulling and securing a loose carpet, new lino in the bathroom, cleaning (especially the kitchen and bathroom areas) and a new toilet seat. She concluded “My suggestions above do not constitute a formal Housing Standards inspection so this is not an exhaustive list”.

Following that letter, Ms O’Brien prepared a tenancy agreement and Mr Douglas moved in; it can be inferred that Ms O’Brien was satisfied that her requirements had been met.

In June 2021 after a complaint from one of the tenants, Mr Wayne Gray, one of the respondent’s environmental health officers, inspected the property; after further investigation on 6 August 2021 the respondent served on Mr Kazi eight improvement notices specifying a number of category 1 and category 2 hazards in respect of each of flats 1 to 7, and an improvement notice specifying a number of category 2 hazards in respect of the common parts. The notices required work to be started by 8 September 2021 and completed by 20 September 2021. Mr Kazi did not appeal any of the notices.

The notice relating to flat 1 required:

The notice relating to flat 4 required:

In respect of each flat the first two items in the list were described as category 1 hazards, the rest as category 2.

The notice relating to the common parts required:

Mr Gray visited the property again on 11 October 2021. He found that flats 2, 3 and 5 were unoccupied; access could not be gained to flat 6; work to flat 7 had been completed; and that the two notices relating to flats 1 and 4 had been partially complied with but that new kitchens and heating systems had not been installed.

On 10 December 2021 the respondent issued three notices of intention to issue a financial penalty. These are the notices required to be served when the respondent is satisfied that any of the offences listed in section 249A has been committed in order to give the landlord the opportunity to make representations. The notices related to (1) failure to comply with the improvement notice in relation to flat 1 by failing to provide a new kitchen and adequate heating; (2) the same in relation to flat 4; and (3) failure to comply with HMO regulations 5, 8 and 9.

The penalties proposed were £14,250 in respect of each of flats 1 and 4, and £18,790 in respect of the failure to comply with HMO regulations. Mr Kazi made representations in response. Final notices were issued on 17 February 2022 in the amounts proposed in the notices of intent.

Mr Kazi appealed the penalties to the FTT. He was not represented in the FTT.

The FTT noted that Mr Kazi had had previous improvement notices served on him and had had a number of previous prosecutions. It rejected his defence that there were no category 1 hazards present in flats 1 and 4 and recorded that it was satisfied to the criminal standard of proof that Mr Kazi had committed the offences of failure to comply with an improvement notice. The FTT was likewise satisfied about the breach of HMO regulations.

As to the amount of the penalty, the FTT started, correctly, with the respondent’s policy. As is usual for such policies it sets out a harm/culpability matrix. Each can be high, medium, or low, and the policy provides criteria for each level. For example, there will be a high level of culpability when a landlord has “intentionally, recklessly or wilfully disregarded the law”. The level of harm will be high if there is a “serious effect on individual(s) or widespread impact, harm to a vulnerable individual, or a high risk of an adverse effect on an individual.” The matrix does not distinguish between total failure to comply with an improvement notice and partial failure, although in a situation where category 2 hazards have been fixed and category 1 hazards remain in place that may affect the level of harm.

For the section 30 offences of failing to comply with the improvement notice the FTT agreed that the level of culpability was high because Mr Kazi is an experiences landlord with a large number of properties who has not complied in the past with enforcement action, and who intentionally or recklessly breached the requirements of the notices by refusing to accept the need to carry out the works. Harm was regarded as medium since there was no imminent risk to either tenant but there could not be said to be little risk of harm. The matrix determined that for each of these two offences the starting point was therefore £15,000.

The FTT applied a 5% discount for mitigation on the basis that Mr Kazi had carried out some works, but not all that was required, thus reaching £14,250 for each offence. The figure of 5% derived from the respondent’s policy which stated that a discount of no more than 5% could be applied for individual items of aggravation or mitigation. The FTT did not accept as mitigation the argument that these flats had been approved by Ms O’Brien in September 2020 as suitable for referrals, because that approval came from a different section of the local authority and from a person who was not a trained environmental health officer. And it rejected the argument that the tenants themselves had contributed to the problems because the tenants were not to blame for the type of heating provided or the quality of the kitchen.

Turning to the breach of the HMO regulations, the FTT reached the same conclusion, again therefore starting from £15,000 but this time applying a discount of 5% for Mr Kazi’s having commenced work, and a further 5% for the fact that some of the problems were caused by the tenants, in particular the need for cleaning, thus reaching a figure of £13,500.

Then the FTT said:

“44.

However, tucked away at the back of the enforcement policy is a requirement that any financial penalty is not less than the costs of compliance with the breach. To this extent, Annex 36 of the bundle includes a schedule setting out the costs of carrying out the necessary works to bring the property up to the standard necessary to comply with the HMO regulations. When this part of the policy is read in line with the first paragraph on page 29, the result seems to be that the level of financial gain will be set as the penalty (i.e. in this instance the cost of carrying out the works) together with an additional £2000 or 10% of that amount (whichever is the greater). The policy could reasonably be clearer in relation to this aspect. “Financial gain” is not necessarily synonymous with the costs of the works and rent receipts, for example, and neither is it necessarily the case that these factors demonstrate that the level of the civil penalty might be “less than what it would have cost the landlord to comply with the legislation in the first place.”

45.

That said, in a relatively straightforward calculation as presented by the respondent at Annex 36, we feel obliged to utilise this aspect of the policy in our determination. Accordingly, and utilising our expertise we agree with the respondent that the costs of the works are as set out in the schedule and in some respects, for example the refit of the kitchen, is towards the lower end of what might be expected. The total cost of works is therefore £16790.31 together with the additional £2000 (which is more than 10%) gives a fine in the sum of £18,790.31.

Finally the FTT considered the totality principle and said:

“46.

Finally, and considering the issue of the totality principle, set out in the policy and raised by the appellant, we are satisfied that there is no “double counting” and that each offence is a separate offence which gives rise to a separate breach and a separate financial penalty. We are also satisfied, taking account of the factors set out above that the total penalties cumulatively are just and proportionate. Whilst they all arise out of the same property and concern the same landlord, given the nature of the offences and by reference to the aggravating and mitigating factors set out above, we saw no reason why they might be reduced. If anything, in relation to the HMO regulations breaches, these in themselves might have given rise to separate penalties and so it is right that they are included together.”

Accordingly the total payable by Mr Kazi was £49,290.31 (being £14,250 x 2, + £18,790.31).