“A house divided …”

Property & Land Law

28 February 2022

I was instructed by a local council who had introduced a selective licensing scheme under Part 3 of the Housing Act 2004 (“the Act”); a property comprising 22 individual flats fell within the designated selective licensing area (and indeed had previously been granted a non-transferrable licence) and was acquired by a limited company with an extensive portfolio of properties including several within the selective licensing area but no fresh licence had been applied for.

The Council wrote several letters to the new owner reminding it of the obligation to obtain a licence which were ignored and so issued Notices of Intent stating that the Council proposed to impose penalties of £10,000 under section 249A of the Act in respect of each unlicensed flat within the property. A director of the company telephoned the Council on receipt of the letter and was told of the company’s right to make written representations in respect of the proposed penalties but elected not to make any such representations. Following a visit to the property which confirmed that (at least) five of the flats were occupied the Council decided to issue five £10,000 penalties in respect of those flats.

The company appealed those penalties to the First Tier Tribunal, Property Chamber (Residential Property) pursuant to Schedule 13A of the Act arguing that no offence had been committed under section 95(1) of the Act which states that “A person commits an offence if he is a person having control of or managing a house which is required to be licensed under this Part (see section 85(1)) but is not so licensed” because the individual flats in respect of which each penalty had been imposed were not “houses” within the meaning of the Act.

The company pointed to the facts that prior to its purchase of the property there had only been a single licence covering the whole of the property (i.e. all 22 flats) and, following the issue of the penalties, a single licence had been issued to the company for the whole property.

Section 99 of the Act provides definitions for Part 3 and states that:

“‘dwelling’ means a building or part of a building occupied or intended to be occupied as a separate dwelling;

‘house’ means a building or part of a building consisting of one or more dwellings;

and references to a house include … any yard, garden, outhouses and appurtenances belonging to, or usually enjoyed with, it (or any part of it)”.

Section 79(2) of the Act provides for the licensing of houses under Part 3 and:

“applies to a house if …(b) the whole of it is occupied either (i) under a single tenancy or licence … or (ii) under two or more tenancies or licences in respect of different dwellings contained in it …”.

The company argued that if a flat was a “house” within the meaning of the Act then the whole property could not also be a “house” because according to section 99, a house is either “a building” or “part of a building”: a “house” could include “one or more dwellings” but a house cannot consist of more than one house. The company said that the Council was required to identify the largest unit (i.e. the whole property) as a “house” and was not permitted to select smaller units or to impose multiple penalties for individual flats within one “house”.

It also relied on section 91(1) of the Act which provides that “A licence may not relate to more than one Part 3 house” and suggested that different authorities might take different views on what was a house (i.e. whether an individual flat or the whole block required a licence) which, in the context of criminal liability for breaches of the licensing legislation, would offend against the principle of doubtful penalisation.

The Tribunal rejected the appeal and agreed that the Council’s interpretation was correct; a single flat was capable of being an (unlicensed) house within the definition from section 99 of the Act as it was “a part of a building consisting of one … dwelling”. The subsequent (or previous) licensing of the whole property as a single Part 3 house did not offend section 91(1) because the new licence identified the whole house as “a building … consisting of one or more dwellings”.

The Tribunal went on to consider the penalties imposed and upheld the five £10,000 penalties – the Council’s policy document, issued pursuant to the 2018 Guidance provided by the Secretary of State, set out the relevant penalties depending on the culpability of the offender among other factors and agreed that the circumstances justified an assessment of high culpability given the facts that the company (and the director controlling it) was a professional landlord, aware of the licensing requirements in the area and knew, or ought to have known, that the previous licence was not transferrable.

Perhaps the key “take away” from this case is not to ignore correspondence from the local Council; the licence fee payable (and, as indicated above, paid) by the company was only £5,700, as opposed to the additional £50,000 in penalties, plus the costs of the unsuccessful application to the Tribunal.

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