Upper Tribunal rules on ability of councils to impose financial penalties on joint landlords for HMO offences

An Upper Tribunal judge has handed down a ruling on the ability of housing authorities to impose financial penalties on joint landlords for the offence of having control of an unlicensed house in multiple occupation (HMO).

In Gill & Anor v The Royal Borough Of Greenwich (HOUSING - CIVIL PENALTY - joint landlords) [2022] UKUT 26 (LC) Martin Rodger QC, Deputy Chamber President of the Lands Chamber, set out the questions that arose on the appeal: “Does section 249A of the Housing Act 2004, allow a financial penalty to be imposed on each of two joint landlords for the offence of having control of an unlicensed HMO contrary to section 72(1) of the Act, or may only one penalty be imposed jointly on them both, or none at all?”

The First-tier Tribunal (Property Chamber) (the FTT) had confirmed separate financial penalties of £10,000 originally imposed on each of the two appellants by the Royal Borough of Greenwich.

The penalties had been imposed because the council and the FTT were satisfied that the appellants were both persons having control of an HMO on a road in London SE18 which was required to be licensed under Part 2 of the 2004 Act but which was not licensed. 

The property is a small mid-terrace house which at the relevant time was occupied by five elderly people who were unrelated and who shared kitchen and bathroom facilities.

On 1 October 2017 it became subject to an additional licensing scheme introduced by Greenwich under Part 2 of the 2004 Act. 

The appellants were brothers who had inherited the property from their parents in March 2017.  At that time the whole building was let to a single tenant, who was holding over under an expired tenancy granted to him by their father.

The original tenancy had included a prohibition on sub-letting but, as the appellants were aware, the single tenant did not live at the property but instead sub-let it to the five residents. He paid £1,400 a month to the appellants and collected rents totalling £1,800 a month from his sub-tenants.

Permission to appeal was granted by the Tribunal on two grounds:

1. Whether the two appellants were each persons having control of the HMO and therefore each guilty of the offence under section 72(1), 2004 Act; and
2. If they were, whether it was permissible for a separate penalty to be imposed on each of them.

On ground one the Deputy Chamber President said: “Joint owners of the whole of the building are entitled to receive the whole of the rent of the building, and it is immaterial that the terms on which they hold their joint interests give each of them an entitlement, as against the other, to only a proportion of the total rent.

“For that reason, where there are joint landlords, any one of them may give a good receipt for the rent, and on the death of one of them the rent is payable in full to the survivor (see Woodfall: Landlord and Tenant, para 7.073). For the purpose of section 263 both of the appellants were therefore persons entitled to receive the rack rent of the HMO and both were persons having control of it.”

On the second issue one of the the appellants put forward the alternative argument that joint landlords should jointly be liable to a single financial penalty and that the FTT was wrong to impose separate penalties on him and his brother.

However, Martin Rodger QC said it was “permissible for separate financial penalties to be imposed on each of two or more joint landlords where each has committed a relevant housing offence based on the same acts and omissions”. 

He accepted an explanation from Greenwich’s counsel that the purpose of section 249A(3) is not to limit the number of joint landlords on whom financial penalties can be imposed, but is to prevent the same facts being used to justify the imposition of more than one financial penalty on the same person.

The judge did however add a note of caution to decision makers dealing with cases such as this. “In this case neither of the grounds of appeal challenged the quantum of the financial penalties or raised any issue about the assessment of the appropriate penalties to be imposed on joint landlords where each has committed an offence arising out of substantially the same facts.”

He added: “ When the FTT applied the respondent’s penalty matrix in this case it did not differentiate between the appellants and treated them as equally culpable for the fact that the HMO was not licensed. But it is important that the penalty imposed on each joint landlord reflects his or her degree of responsibility, and a local authority or FTT should give separate consideration to the conduct of each person on whom a penalty is to be imposed.

“There may be cases where one of two joint landlords is responsible for the management of jointly owned property and where the other plays no part. There may be cases where one joint landlord has a relevant history of similar offences while the other does not. The proper response to cases of that sort will depend on the facts found. What is important is that the responsibilities, actions and circumstances of each landlord are separately assessed.”