[2023] UKUT 129 (LC)

The fourth ground of appeal identified a number of factors which it was said had been overlooked by the FTT in setting its revised penalty. It is not necessary to consider that complaint as I have already decided that the FTT’s assessment cannot stand because it treated the offence as having been committed on a single day. What remains to be done is to determine the appropriate penalty in this case.

For the reasons I have already given, I am not prepared to follow the Council’s Policy. By treating all HMO licensing offences as being worthy of a penalty at the top end of the available scale, the penalty is set at a level which is disproportionate to the seriousness of the offence and to the seriousness of the other offences with which it is equated. The Policy produces a penalty which is greater than is required to achieve the objectives of appropriate punishment and deterrence and which I consider to be excessive and unjust.

In declining to adopt the Council’s policy I take into account its democratic mandate and the vital importance of its role as local housing authority with responsibility for housing standards in Leicester. In determining the appropriate penalty I nevertheless have regard to two of the three specific factors which the policy identified as justification for treating licensing offences as meriting the most stringent penalties. Those are: first, that by their nature, HMOs represent enhanced risks to the health and safety of their occupants and require high standards of management; and secondly, that operating an HMO without a licence undermines the Council’s ability to carry out its statutory duties. The third factor relied on is in the nature of a statement of principle which proposes that a failure to licence an HMO is a very serious offence in every case even where the current occupants are not suffering harm or exposed to potential harm. In my judgment that proposition overstates the seriousness of the offence of being in control of or managing an unlicensed HMO. The first two reasons provide solid grounds for treating licensing offences as serious, but their seriousness should not be exaggerated. In Ekweozoh v LB Redbridge [2021] UKUT 0180 (LC), at [50], I referred to a licensing offence a being of “moderate seriousness” and I adhere to that view. The level of harm to which occupants have actually been exposed also seems to me to be a factor of greater significance than the policy recognises.

Where the FTT’s assessment is not conditioned by the erroneous conclusion that the offence had been committed on a single day I will also take it into account.

Having regard to the matters identified in the Council’s policy an offence of failing to licence an HMO should, in my judgment, be treated as one of moderate seriousness for which the appropriate penalty will begin at between £8,000 and £12,000. That figure is consistent with other cases in which this Tribunal has determined for itself the appropriate sanction in a licensing case (in which final penalties of £5,000, £6,000 and £12,000 have been imposed). Bearing in mind the seriousness with which the Council takes this offence it is appropriate to start at the top of that range.

The evidence in this case supports the conclusion that specific harm was caused to two occupiers of Room 5 for a period of up to thirty months. That harm was the result of occupying a room which was too small to provide acceptable living accommodation and which Ms Morjaria eventually agreed should be the subject of a prohibition order. To reflect that specific harm I adjust the penalty upwards by £3,000.

Ms Morjaria acknowledged that she was aware of the need to licence any HMO of which she was in control, and I agree with the FTT’s conclusion that her offence must therefore have been committed deliberately. She also took active steps to cover up the presence of the fifth tenant and failed to cooperate with the Council’s investigation. To reflect her high level of culpability and these aggravating factors I add a further £3,000.

In my judgment there is no reason to strip Ms Morjaria of a further sum of up to £4,500, being 30 months income at the rate of £150 a month. The penalty of £18,000 already exceeds that figure by a substantial margin and fully achieves the objective of depriving the wrongdoer of what the Council’s Policy describes as the “unjust economic benefits” of the offence.

For the same reason it would it be inappropriate to increase the penalty by the amount of an unpaid licence fee. Additionally, if a licence had been applied for it would have been refused and it is likely that a prohibition order would have been made in respect of Room 5.

There is no adequate evidence of Ms Morjaria’s means or outgoings, despite her having had the opportunity to provide it. At the hearing before the FTT it may have been asserted on her behalf by her representative that her only source of income was from letting three properties, but she did not say so in her written evidence and she did not attend the hearing to answer questions. In the Council’s own calculation of the original penalty it referred to accounts of her letting business in the year to April 2021 which showed a profit of £15,952. There is no evidence that her letting properties are her only source of income nor of the value of property or other assets she may own. There is therefore insufficient material on which to justify any deduction to reflect her ability to pay the penalty.

For the reasons I have already given I make no addition for the costs of the Council’s investigation.