[2024] UKUT 202 (LC)

In December 2015 the Council introduced a borough-wide additional HMO licensing scheme requiring all HMOs not already covered by the mandatory licensing obligation to be licensed. It ran initially for a period of five years but was renewed for a further five years in 2020. It was widely advertised in the Borough when it was introduced and comprehensive information about the scheme, and how it differs from mandatory licensing, is available on the Council’s website.

Mr Shorr and Ms Ro are a married couple who have a joint bank account and who hold their home and other properties in their joint names. They are both professional musicians and teachers in higher education and, having previously lived in London, they now live in Scotland.

105 Fordwych Road is a large Victorian house converted into flats. The freehold belongs to the Council. Flat C (the Flat) is on the upper two floors and contains four bedrooms, a living room, kitchen and two bath or shower rooms. In 2002 Ms Ro purchased a long lease of the Flat which she registered in the couple’s joint names. She has taken primary responsibility for managing and letting it, although Mr Shorr has assisted when Ms Ro has been out of the country. The couple own one other flat in London which they also let.

In 2022 the couple spent considerable sums refurbishing the Flat to a high standard before advertising it as available to let. In August, one prospective tenant who had been interested in the flat, but to whom Ms Ro did not let it, used the Greater London Authority’s online reporting system to submit a complaint that the deposit which had been requested was greater than the limit of five weeks rent introduced in June 2019 under the Tenant Fees Act 2019. The complaint was referred to the Council which began an investigation.

On 1 September 2022 Ms Ro let the Flat to a group of four post graduate students for a term of twelve months at a monthly rent of £3,200. Under written tenancy agreement Ms Ro alone was identified as the landlord, and no reference was made to Mr Shorr. Ms Ro did not obtain an HMO licence under the additional licensing scheme. She already held a licence from Camden for the other property which she and her husband own (which satisfies the requirements for mandatory licensing) but she was unaware of the additional licensing scheme and believed that flats or houses with fewer than five tenants did not require a licence. When one of the new tenants asked her if the Flat had a licence she responded that there was no need for one.

On 19 October 2022 officers of the Council’s housing department inspected the Flat, unannounced. They formed the view that it was an HMO and that it required to be licensed but had not been. They also observed a number of defects which they considered were breaches of the 2006 Management Regulations.

The Council notified both Ms Ro and Mr Shorr separately by post on 26 October 2022 that it considered they had each committed five offences contrary to sections 72 and 234, 2004 Act and invited their comments. Ms Ro was not in the UK when the letter arrived, but Mr Shorr telephoned the Council as soon as he received his copy. He spoke to the housing officer who had carried out the inspection and assured her that he was anxious to rectify any deficiencies. On the same day, 27 October, Ms Ro applied online for an HMO licence. In due course she was granted a licence once the Council was satisfied that the remedial works which it considered necessary had been completed.

On 28 December 2022 the Council served five notices of intention to impose financial penalties on each of the appellants. In each case one notice alleged that there had been a breach of section 72, in that the recipient was a person in control of or managing an unlicensed HMO, and four notices alleged breaches of section 234(3) and the 2006 Management Regulations. The penalties which the Council initially intended to impose totalled £16,500 for each appellant. Following representations four final notices imposing total penalties of £13,500 on each appellant were served on 15 February 2023.

The details of the offences and the penalties imposed on each appellant by the Council were as follows:

The appellants appealed against each of the penalties and relied on their lack of knowledge of the additional licensing scheme as providing a reasonable excuse for their failure to licence. They also explained that although the Flat was held in their joint names and the rent was paid into their joint bank account, Ms Ro was the person responsible for managing it.

By its decision issued on 1 September 2023, the FTT dismissed the appellants’ defence of reasonable excuse. It reduced the penalty imposed on Mr Shorr in respect of the licensing offence from £6,000 to £1,000 to better reflect his individual responsibility and so that the total penalty for that offence would be brought “closer to a proportionate amount”. It also reduced the penalty for the offences of failing to display the manager’s name, address and telephone number prominently in the Flat from £1,000 to £500 for each appellant, which was again said to bring the total sum down to a proportionate amount. The combined effect of these changes was that the penalties now imposed on Ms Ro totalled £13,000 and those imposed on Mr Shorr totalled £8,000.

It is also relevant to mention that on 11 April 2023, a differently constituted panel of the FTT made a rent repayment order against Ms Ro. She was ordered to pay her four former tenants £3,200, which was half of the total rent they had paid before she made her application for an HMO licence. The FTT was aware of this decision when it reached its own decision on the financial penalty appeal, but it did not take it into account in its assessment of the appropriate penalty.