HMO: the focus of the defence should be to the offence committed

Landlords and their agents should bear in mind that having a reasonable excuse for not applying for a licence to operate a house in multiple occupation (HMO) is not the same as a defence of reasonable excuse for being in control of or managing an unlicensed HMO. In Thurrock Council v Palm View Estates Ltd [2020] UKUT 0355 (LC), the respondent was a professional landlord. In 2014, the respondent purchased a property in Essex and converted it into a house in multiple occupation for six people with a shared kitchen. Once tenanted, the appellant, Thurrock Council, received complaints concerning the size of the kitchen. In September 2017, the council served a prohibition notice on the landlord, which required it to provide a kitchen adequate in size for a household of six. The landlord applied for planning permission to extend the kitchen. The application was refused. Planning permission for the kitchen extension was finally granted in February 2019. On 1 October 2018, the Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018 (the 2018 Order) came into force. The 2018 Order meant that the property had to be licensed, and this fact was known by the respondent landlord. During the course of its application to obtain planning permission, the respondent’s managing agent was informed by an officer in the council’s planning department that there was no point in applying for an HMO licence while the planning position for the kitchen remained in dispute. In March 2019, the council wrote to the respondent to inform it that the property did not have a licence and that it was therefore committing an offence under section 72(1) of the Housing Act 2004 (the 2004 Act). The respondent failed to rectify the situation and the council subsequently served a notice of intent to impose a financial penalty. It subsequently imposed a penalty of £17,500. In due course the landlord applied for a licence and appealed the financial penalty to the First-tier Tribunal (FTT). The respondent did not dispute that it was in breach of section 72(1) of the 2004 Act. Instead, it argued that it had a reasonable defence for not obtaining a licence in light of what it had been told by the council’s officer. The FTT agreed. It found that “once the defendant [had] raised a defence, it [was] for the prosecution to show that the excuse was not reasonable to the criminal burden of proof”. The council appealed on two grounds. Firstly, that the FTT had misdirected itself in law as to the burden of proof. Secondly, that it had made an error of law in that it asked itself the wrong question. The offence under section 72(1) of the 2004 Act was not the failure to apply for an HMO licence, but of managing or being in control of an HMO without a licence. Even if the respondent had a good reason for not applying for a licence, that did not amount to a reasonable excuse for continuing to manage the HMO without one. The UT set aside the FTT’s decision on the basis of the second ground of appeal only. The FTT should have asked itself whether the respondent had a reasonable excuse for committing the actual offence in question. The first ground of appeal was dismissed. The UT found that the FTT had misdirected itself in relation to the burden of proof in light of IR Management Services Ltd v Salford [2020] UKUT 0081 (LC), [2020] PLSCS 47. Yet, it was clear from the FTT’s reasoning that it had required the respondent to establish the defence of reasonable excuse to the civil standard of proof. Elizabeth Dwomoh is a barrister at Lamb Chambers