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Selective licensing and company directors

House key iStock 000004543619XSmall 146x219Alice Richardson examines a case where the director of a property management company fined for a failure to license a property, was prosecuted personally.

In Gateshead Metropolitan Borough Council v. Thrower Stone Property Management Ltd and Mr Joseph Schleider, Sunderland Magistrates’ Court, 29th November 2017 a district judge has sentenced a property management company to a fine of £17,500 for failure to license a property in an area designated by the local authority as subject to selective licensing. The company’s sole director was found guilty of the same offence at trial and sentenced to a nominal fine of £100.

Facts

Thrower Stone Property Management Company (“the Company”) was the long leaseholder and managing agent of 334 Whitehall Road, Gateshead, NE8 4PX (“the Property”). Mr Schleider was the sole director of the Company.

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In February 2012, the local authority, in exercise of its powers under s.80 of the Act, designated the area in which the Property was located as an area subject to selective licensing from 18th May 2012 to 17th May 2017.

No application for a license was made and the Property was let to tenants under an Assured Shorthold Tenancy from 16th December 2016 for a period of two years. The Company was named as the landlord.

The Company and Mr Schleider were prosecuted by the local authority for managing, or having control of, a property which was required to be licenced under Part 3 of the Housing Act 2004 (“the Act”), but was not so licensed, contrary to s.95(1) of the Act.

The company pleaded guilty to the offence but Mr Schleider pleaded not guilty denying that the conditions in s.251 of the Act were satisfied and arguing that it was not in the public interest to pursue a prosecution against him, in light of the company’s guilty plea.

The legal framework

By s.80 of the Act a local housing authority may designate either the area of their district, or an area in their district, as subject to selective licensing. The authority must be satisfied that either:

(a) The area is, or is likely to become, an area of low housing demand and that making a designation will… contribute to the improvement of the social or economic conditions in the area: s.80(3).

(b) The area is experiencing a significant and persistent problem caused by anti-social behaviour, that some or all of the private sector landlords who have let premises in the area… are failing to take action to combat the problem that it would be appropriate for them to take; and that making a designation will… lead to a reduction in, or the elimination of, the problem: s.80(6).

Where an area is designated as subject to selective licensing all single household properties (i.e. not HMOs) require a license authorising occupation of the property under a tenancy (see ss.79,85). Applications are made to the local housing authority: s.87(1).

By s.95(1) a person commits an offence if he is a person having control of, or managing, a house which is required to be licensed under this Part but is not so licensed. A person who commits an offence under s.95(1) is liable on summary conviction to an unlimited fine: s.95(5).

s.263(1) defines “person having control” and “person managing”.

By s.251(1) where an offence under the Act is committed by a corporate body and is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of a director, manager, secretary or other similar officer (or a person purporting to act in such a capacity) he as well as the corporate body commits the offence and is liable to be proceeded against and punished accordingly.

The decision

The Company had pleaded guilty and Mr Schleider did not dispute that. However, he argued that the offence had not been committed with his consent or connivance and was not attributable to any neglect on his part.

The prosecution argued that, on the facts, the actions of the Company were indivisible from the actions of Mr Schleider. District Judge Elsey agreed, finding that the company did not act without Mr Schleider’s consent. Further, it was clear that the company’s systems were inadequate and this was the result of Mr Schleider’s neglect.

As to Mr Schleider’s argument that it was not in the public interest to prosecute, the judge agreed with the authority that, absent an abuse of process, it was not within his jurisdiction to consider the point. However, the judge was concerned that there was an element of ‘double jeopardy’ and therefore, whilst he imposed a significant fine on the Company, Mr Scheidler was sentenced to only a nominal fine.

Alice Richardson is a Barrister at Trinity Chambers, Newcastle and represented the local authority in this case. (She is also a member at Arden Chambers, London).

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