Judge allows appeal by landlord over failure to apply for licence for house in multiple occupation, criticises handling of sub-tenants case by council

The First Tier Tribunal (FTT) was wrong to ignore a landlord’s claim that she had a reasonable excuse for failing to apply for a licence for a house in multiple occupation (HMO), the Upper Tribunal (Lands Chamber) has ruled.

In D'Costa v D'Andrea & Ors (HOUSING - RENT REPAYMENT ORDERS - the defence of reasonable excuse) [2021] UKUT 144 (LC) Upper Tribunal Judge Elizabeth Cooke in her ruling criticised the way in which the London Borough of Tower Hamlets acted on behalf of Elizabeth D’Costa’s sub-tenants and noted the council should “take pains to [act] in a way that is fair to all parties”.

The case arose over a house owned by Ms D’Costa but sub-let to six tenants by property manager Apartment Wharf. 

The FTT made a rent repayment order of £16,000 against Ms D’Costa and of £6,218 against Apartment Wharf for failing to licence the property.

But Ms D’Costa claimed the defence of reasonable excuse. A Tower Hamlets officer visited the property in September 2017 and in a subsequent email exchange Ms D’Costa asked if she could apply for an HMO licence.

The officer said no, because the property was not eligible as it was of less than three storeys, and said he would tell her if the position changed and the property needed a licence.

Another officer visited in July 2019 and told Ms D’Costa the property needed an HMO licence, for which she applied the same day.

But the council said she should have had a licence from October 2018 when the rule regarding the number of storeys was abolished.

Ms D’Costa said she had relied on the first officer’s email that she would be advised if she needed a licence.

Judge Cooke noted that when the FTT imposed the rent repayment order its decision made no mention of the defence of reasonable excuse.

Ms D’Costa appealed on five grounds, of which Judge Cooke said the central one was whether the FTT ought to have considered the defence of reasonable excuse and whether, on the facts found by the FTT, Ms D’Costa  had, or may have had, a reasonable excuse for not obtaining the licence.

Judge Cooke said: “Not all landlords are aware of the defence of reasonable excuse, and it is important for the FTT to be alert to the possibility that the facts may give rise to it even where the landlord has not mentioned it.

"But in this case the defence was set out loud and clear in Ms D’Costa’s written submissions. She is entitled to a decision about the defence and needs to understand why the defence is not available if that is indeed the case.

“Either the FTT decided that Ms D'Costa did not have the defence and failed to say so and to explain why, or it failed to consider the defence at all. For that reason alone the FTT’s decision must be set aside.”

She said that although the emails between Ms D’Costa and the first officer could not be found it was not in dispute that local housing authority representatives visited several times after October 2018 and were aware it needed a licence, and Ms D’Costa argued that she should have been told, in line with the assurance she received.

The judge said it was “surprising that [Tower Hamlets] did not instigate a search for the correspondence” since it would be in the interests of the sub-tenants if - as the council argued - it did not contain any assurance from [the first officer] to Ms D’Costa.

There had been no suggestion that the FTT doubted Ms D’Costa’s credibility, which had to mean it accepted her version of what she had been told.

Judge Cooke said: “It is difficult to understand why a landlord would not have the defence of reasonable excuse to the offence created by section 72(1) of the 2004 Act where he or she has been told by a local authority employee that their property does not need an HMO licence and that they will be told if that situation changes, and I find that Ms D’Costa had that defence.

“She therefore did not commit the offence and no rent repayment order can be made against her.”

In her observations on Tower Hamlets’ conduct, Judge Cooke said the council “chose not to produce the correspondence between Ms D’Costa and [the first officer] (or, at least, not to conduct a search for that evidence), even though it knew that Ms D’Costa wanted it to be produced and that it would have been of assistance to the FTT”.

She rejected allegations made by Ms D’Costa about the integrity of council officers, but said she did “express disappointment in the way the local housing authority conducted this litigation for the sub-tenants.

“If the local authority chooses to enter the fray it should take pains to do so in a way that is fair to all parties.”

Mark Smulian