Housing Barrister Summary of Borough Council Of Gateshead v City Estate Holdings Ltd [2023]

Trinity Social Housing Law barrister, Henry Percy-Raine has prepared the following summary of the recent Upper Tribunal (Lands Chamber) decision in Borough Council Of Gateshead v City Estate Holdings Ltd [2023] UKUT 35 (LC).

This was an appeal against the decision of the First Tier Tribunal (FTT) to cancel civil penalties imposed on the Respondent under s.249A Housing Act 2004 for the offence under s.95(1) of the 2004 Act of managing or being in control of properties that were required to be licensed under a selective licensing scheme and were not so licensed.

The facts

The Respondent was a company owned by Mr Kosmas, it bought and let out properties. In April 2020 the Respondent bought two properties in Gateshead (numbers 117 and 215). In the summer of 2020, the properties were both let to tenants. The two houses were in an area of selective licensing. From August 2020 the Respondent became aware he should have had licences and made applications which were subsequently granted. In July 2021 final notices were served upon the Respondent imposing financial penalties, of £4,871.26 in respect of 215 and of £4,353.40 in respect of 117 for failing to have licences when he ought to have had them.

The Respondent appealed those penalties to the FTT, contending that it had the defence of reasonable excuse under s.95(1) of the 2004 Act. The defence was argued on the basis that no information was given about the selective licensing designation by either the seller’s solicitor or his own solicitors. It was not contended that Mr Kosmas gave specific instructions to his solicitors to make those enquiries nor did he undertake any such research himself.

FTT decision

The FTT found that it had been ‘entirely reasonable’ for Mr Kosmas to rely on his professional advisers,  that he was not informed of the need for a licence and that the Respondent had therefore had the defence of reasonable excuse. The FTT further found that even if the statutory defence was not established, in accordance with the Appellant’s policy the imposition of a civil penalty was unnecessary to achieve the objectives of the licensing regulations [18].

Permission to appeal was granted on three grounds:

• that the FTT had erred in finding that the Respondent had the defence of reasonable excuse;
• that the FTT erred in holding that the Appellant’s failure to follow its own policy was a reason for not imposing a penalty;
• and that the FTT was wrong to regard the Respondent’s status as ‘a reputable landlord’ as a reason not to impose a penalty.

The Appeal

As to the first ground, it was held there was no basis for holding that the defence of reasonable excuse was made out. It was open to the Respondent to give instructions to his solicitors to advise him on the regulatory position even without Mr Kosmas being aware of the selective licensing regime. Equally the Respondent could, through Mr Kosmas or through a letting agent, have researched the regulatory and licensing position [25]. The point was no enquiry was made.

As to the second ground, it was noted that on an appeal of penalties imposed the FTT must make its own decision, not review that of the local housing authority (paragraph 10(3) of Schedule 13A to the 2004 Act) [26]. In any event, the Appellant’s actions here were not considered to have been inconsistent with its policy [27].

The third ground of appeal was also successful. The finding by the FTT that the Respondent was a ‘good landlord’ went only to mitigation but did not amount to exceptional circumstances that might justify a decision not to impose a financial penalty in a properly established case where there was no defence [29].

The Appellant accordingly succeeded and the Tribunal substituted its own decision that a financial penalty should be imposed on the Respondent with the amount to be determined.