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Council secures reinstatement of part of penalty for failure to licence HMO

Thurrock Council has gained a partial victory in an Upper Tribunal (Lands Chamber) concerning the penalty for failing to licence a house in multiple occupation (HMO).

It failed though to get the full financial penalty it sought to impose on landlord Khalid Daoudi after Martin Rodger QC, Deputy Chamber President, condemned Thurrock’s policy on HMO penalties as “impenetrable” and said he would ignore those parts that did not make sense.

Mr Daoudi had a £10,000 penalty imposed on him by Thurrock for failing to licence a house under section 72 of the Housing Act 2004, which he had originally let whole but had become an HMO when converted to six bedsits.

He appealed to the First Tier Tribunal, which had removed the financial penalty citing mitigating circumstances.

In Thurrock Council v Daoudi (Housing - Civil Penalty - Landlord Operating HMO Without Required Licence) [2020] UKUT 209 (LC) Mr Rodger imposed a substitute £4,000 penalty, which he said balanced Mr Daoudi’s guilt and the council’s imprecise policy.

The FTT had decided that, although the elements of the offence were made out, it was not reasonable to impose any financial penalty since Mr Daoudi had quickly complied with the conditions imposed once made aware of the need for a licence.

It found that he “took all steps requested of him by [Thurrock] in good time”, and applied for a licence at the first possible opportunity.

While ignorance of the law was not a defence the FTT said it could count in mitigation.

The FTT also criticised Thurrock for imposing a penalty that was “unnecessary and unreasonable” and was “unimpressed that the [council] had not yet taken steps to properly progress the applicant’s application for a licence”.

Judge Rodger said the civil penalty regime existed both to secure compliance with the law and deter others from breaching it.

He said: “The deterrent effect of the civil penalty regime, at least as far as it applies to first offences committed by landlords with only one or two properties, would be seriously diminished if securing compliance with the law in relation to one property was regarded as a sufficient achievement of the statutory objective to justify waiving any penalty.

“The FTT’s decision to impose no penalty in this case, despite being satisfied beyond reasonable doubt that the elements of the relevant offence were made out, was described…on behalf of the council as an exceptional course in an unexceptional case. I agree.”

He said the only factors tending towards leniency were the speed with which Mr Daoudi complied with his responsibilities and his personal circumstances. 

Judge Rodger said: “I do not see how eventually doing what the law requires can justify a decision to impose no penalty at all, although it has a bearing on the level of punishment.”

But he found Thurrock did not apply its own policy on setting penalties and when a policy was “as impenetrable as in this case it would be fruitless for the tribunal to attempt to construe and apply it to the letter. 

“The better approach is to apply such parts of the policy as make sense and to ignore the rest.”

Using this interpretation, the penalty should be £6,000, reduced due to mitigating factors to £4,000, Judge Rodger said.

Mark Smulian

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