Court of Appeal rules on proper construction of "reasonable excuse" defence for HMO licensing failure

In Palmview Estates Ltd v Thurrock Council [2021] EWCA Civ 1871 the appellant had appealed and won at the First Tier Tribunal (FTT) but lost at the Upper Tribunal (UT).

Lady Justice Asplin, with whom Lady Justice Laing and Lady Justice King agreed, said the case raised a question about the proper construction of the statutory defence of ‘reasonable excuse’ in section 72(5) of the Housing Act 2004.

The defence is available to a defendant in proceedings under section 72(1) of the 2004 Act which created the offence of having control of or managing an HMO which is required to be licensed under Part 2 of the Act but was not licensed.

Palmview Estates bought a house in Grays in March 2014 and converted it for occupation, with a shared kitchen, by six people.

Thurrock decided the house needed an HMO licence and in March 2019 wrote to a Palmview employee about this and later served a Notice of Intent to impose a penalty of £17,500.

Palmview appealed successfully to the FTT on the grounds it had a reasonable excuse for not having a licence because the employee had been told by a council employee not to apply until a separate planning dispute about a kitchen extension was resolved.

Thurrock appealed to the UT, which concluded the FTT made errors of law in its approach to the ‘reasonable excuse defence’ and in the way it interpreted the proper application of the sub-section concerned.

Asplin LJ said there was no definition of ‘reasonable excuse’ in the 2004 Act and any that was proposed “must relate to activity of controlling or managing the HMO without a licence”.

Palmview argued the FTT was entitled to decide that a reasonable excuse for failing to apply for an HMO licence amounted to a reasonable excuse for the purposes of section 72(5).

Asplin LJ said: “As the UT Judge pointed out…not applying for a licence and controlling or managing an HMO without a licence are not the same thing.

“They are not logically concomitant: a person might have a perfectly reasonable excuse for not applying for a licence which does not (everything else being equal) give that person a reasonable excuse to manage or control those premises as an HMO without that licence.”

She said the FTT asked itself the wrong question and did not address its mind to the defence in section 72(5) of the 2004 Act.

Asplin LJ said the FTT’s error was “patently clear”, and it was “not clear that the FTT would have reached the same conclusion had it addressed the correct question and taken into account all of the relevant circumstances”.

Mark Smulian