Landlord wins Upper Tribunal over level of penalties for housing penalties

A Bradford landlord has had penalties reduced in a case which the Upper Tribunal (Lands Chamber) said raised “some interesting questions about mitigation, totality, and the principle that civil penalties for housing offences should be set at a level that ensures the landlord does not profit from his crime”.

In an appeal against the First-Tier Tribunal (Property Chamber), landlord Hasan Kazi challenged penalties totalling £49,290.31 imposed by Bradford Metropolitan District Council.

Upper Tribunal Judge Elizabeth Cooke heard Mr Kazi is an experienced landlord and one of his properties is a four-storey house converted to eight self-contained flats but designated a house in multiple occupation (HMO) because the conversion did not comply with building regulations.

Mr Kazi has housed a number of tenants in difficult circumstances including four clients of a homelessness project who would otherwise have no accommodation.

A tenant complained about conditions in June 2021 and environmental health officers investigated and served eight improvement notices relating to individual flats and the common parts, with works to be completed by 20 September 2021.

Environmental health visited again in October and found some works complete but that new kitchens and heating systems had not been installed.

Bradford then issued three notices of intention to impose financial penalties, which would be for £14,250 for each of two flats and £18,790 for failure to comply with HMO regulations. Final notices were in February 2022.

Mr Kazi appealed to the FTT, which rejected his defence that there were no category 1 hazards present in the two flats, and was satisfied about the breach of HMO regulations.

The FTT applied a 5% discount because Mr Kazi had carried out some works, derived from the council’s policy that a discount of no more than 5% could be applied for individual items of mitigation.

But the FTT then said: “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…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 £2,000 or 10% of that amount (whichever is the greater).” 

It said that gave ‘a relatively straightforward calculation” that the total cost of works under HMO regulations was £16,790.31 together with the additional £2,000 giving a fine of £18,790.31.

Turning to the totality principle, the FTT said: “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”.

This meant the total payable by Mr Kazi was  £49,290.31, being £14,250 for each of the two flats and £18,790.31 for breaching HMO regulations.

He appealed on three grounds, the first of which was that Bradford had, after carrying out an inspection, placed vulnerable individuals in his house only to later judge it as below standard, and that this should count in mitigation as should damage caused by tenant misconduct.

Judge Cooke said the first part of this argument “has no prospect of success.”

She explained: “It is not inconsistent for the respondent to ask a landlord to accommodate a homeless person, to approve the property for the tenant’s initial entry, and then to serve improvement notices. Such notices do not require that the flat or building cease to be used for residential purposes, unlike prohibition notices which do. In effect the respondent is asking the appellant both to take a tenant and also to improve the condition of the flat.”

Judge Cooke said though that Mr Kazi had responded to the council’s requests and accommodated difficult tenants who damaged the property, used drugs, accumulated rubbish and had visitors who broke in and he had said maintenance workers were often refused admission by these tenants.

“If some of the problems were caused or exacerbated by the tenants that will in some cases provide a defence to the offence, and the FTT should be alert to that possibility even if a landlord does not raise it,” she said. "If it does not provide a defence it must be a very significant item of mitigation, which is what is claimed here.”

The FTT allowed this mitigation in respect of the common parts, but not the two flats even though the improvement notices “may well have included items where Mr Kazi had had difficulty getting work done because of the tenants’ behaviour”.

Judge Cooke agreed that Bradford’s policy of a 5% reduction in the penalty “fetters the respondent’s discretion and I fail to see any purpose in it. The FTT in adopting that aspect of the policy fettered its own discretion.”

She said: “I take the view that the FTT exceeded the generous bounds of its discretion by failing to allow mitigation in respect of all three offences on the basis of the tenants’ contribution to the state of the property, and in adhering to the [council’s] inexplicable 5% limit upon the effect of mitigation.”

All three penalties were then set aside but the judge also dealt with the other two grounds raised.

Ground 2 was that the FTT erred in adopting Bradford’s policy that a civil penalty “must never be less than what it would have cost the landlord to comply with the legislation in the first place”.

The judge said this was “expressed an invariable rule as to the minimum level of a penalty, regardless of aggravating and mitigating circumstances; it therefore purports to be the final stage in the decision about the quantum of the penalty”.

She said the FTT was not bound by Bradford’s policy “and should depart from it if it is irrational or unjustifiable.

“In the present case in following the policy of setting the cost of the works as a minimum for the penalty the FTT acted irrationally, because that policy does not achieve the objective it is supposed to achieve, and again unlawfully fettered its discretion.”

The third ground of appeal was that the FTT failed properly to apply the principle of totality, as Mr Kazi argued that since the two offences relating to the two flats were identical only one penalty should have been imposed.

Judge Cooke said: “It is difficult to see how there could be an argument that only one penalty should be imposed in respect of the two section 30 offences.

“They were different offences in respect of different flats and therefore in respect of different tenants” and ruled this ground failed.

She said that rather than remit the matter to the FTT she would substitute her own decision. This gave a total of £26,500 to be paid as penalties.

Mark Smulian