Next Location Company Limited v London Borough of Haringey

This is an appeal by Next Location Company Limited against the decision of the First-tier Tribunal on its appeal from a financial penalty imposed upon it by the London Borough of Haringey for the offence of managing a house in multiple occupation (an “HMO”) that was required to be licensed and was not licensed. The appeal has been decided under the Tribunal’s written representations procedure; the appellant has not been legally represented, and the London Borough of Haringey has chosen not to participate in the appeal. I refer to it as the respondent, for brevity, since it was the respondent in the FTT, but it is not a party to the appeal.

Section 249A of the Housing Act 2004 enables a local housing authority to impose a civil penalty, also known as a financial penalty, upon a person who has committed one of certain housing offences, as an alternative to prosecution. Among the offences is that of managing or being in control of a house in multiple occupation that is required to be licensed and is not, under section 72 for the 2004 Act. Schedule 13A to the 2004 Act sets out the procedure for imposing a penalty, including the service of a Notice of Intent to impose a penalty, giving an opportunity to make representations, and then a Final Notice.

Paragraph 10 of that schedule provides that there is an appeal from the imposition of a penalty to the FTT; that appeal takes the form of a re-hearing and the FTT must make its own decision rather than reviewing that of the local housing authority. That includes the amount of the financial penalty, although it must follow the local housing authority’s enforcement policy in determining the level of the penalty unless it gives reasons for not doing so.

The concept of “managing” a property is set out in section 263 of the 2004 Act:

“(3)

In this Act “person managing” means, in relation to premises, the person who, being an owner or lessee of the premises–

(a)

receives (whether directly or through an agent or trustee) rents or other payments from–

(i)

in the case of a house in multiple occupation, persons who are in occupation as tenants or licensees of parts of the premises; and

(ii)

in the case of a house to which Part 3 applies (see section 79(2))), persons who are in occupation as tenants or licensees of parts of the premises, or of the whole of the premises; or

(b)

would so receive those rents or other payments but for having entered into an arrangement (whether in pursuance of a court order or otherwise) with another person who is not an owner or lessee of the premises by virtue of which that other person receives the rents or other payments;

and includes, where those rents or other payments are received through another person as agent or trustee, that other person.”

On 20 April 2023 the respondent served upon both the appellant and another company, Come to London Limited (“CTLL”), a Final Notice imposing a financial penalty of £10,000 on each of them for the offence of managing an HMO without a licence. The property concerned was 6, North Grove, London N15.

Both companies appealed that penalty to the FTT, although CTLL then made a compromise agreement with the respondent and took no further part in the FTT proceedings.

The respondent’s officer Camilla Filipescu made a witness statement for the FTT. She said that in February 2023 she received a complaint about pest infestation and over-crowding at the property. A search at HM Land Registry revealed that the freeholders were a Mr and Mrs Vogiev. She carried out an unannounced visit on 1 March 2023 and found 5 people living there; they said that the managing agent for the property was CTLL and that they paid their rent to CTLL.

On 6 March 2023 the respondent served notices under section 16 of the Local Government (Miscellaneous Provisions) Act 1976 requiring information about the property; the notices were served on the freeholders, on CTLL, and on the appellant. The witness statement does not say why the appellant was served or how it was identified at that stage as having anything to do with the property. However, in their reply to that notice the freeholders said that they had a “rent guarantee scheme with a managing agent who has tenants in the property”; and CTLL in its reply said that the appellant was the freeholder’s agent and said that it too was the managing agent.

The respondent on 21 March 2023 served a Notice of Intent to impose a financial penalty on both the appellant and CTLL; it received no reply from the appellant. On 20 April 2023 it served the Final Notices. The FTT said:

“The respondent asserted it had concluded that Come to London Limited could be defined as persons managing the HMO because they were in receipt of rental income directly from the occupying tenants.”

The appellant then wrote to the respondent and stated that it had not received either the section 16 notice or the Notice of Intent, and that it was not managing the property but had let the property from 3 August 2022 to CTLL, for one year, at a rent of £2,000 per month, and that it was CTLL’s responsibility to apply for an HMO licence if necessary.

That was the appellant’s case in the FTT; it said that it had let the property to CTLL and was not a person managing it. The FTT considered the terms of that letting agreement and noted that the appellant was stated in the agreement to be both the landlord and the landlord’s agent.

The FTT found that the property was a house in multiple occupation that required a licence and did not have one at the relevant time, and there is no appeal from that finding. In relation to the appellant it said:

“18.

The Tribunal finds that the [appellant] at all times was a managing agent for the property on behalf of the freeholders and entered into the Agreement with Come to London Ltd on their behalf.

19.

The Tribunal finds that the Agreement required the applicant to obtain or give permission for any sub-letting and it gave this permission in respect of the Assured Shorthold Tenancy Agreement granted by Come to London Ltd as the landlord to Maybe Luz Ovando Roman and Fausto Eloy Bonifaz Ormaza dated 5 August 2022 at a rent of £2,600 per month.

20.

The Tribunal finds that early in this assured shorthold tenancy the applicant investigated and undertook a repair to remedy a water leak. Thereafter, the applicant could have carried out regular inspections to ensure Come to London Ltd was abiding by the terms of the Agreement but failed to do so. The applicant also failed to ensure the change in tenants was approved by it or the freeholders and that Come to London Ltd had applied for the relevant HMO licence.

21.

The Tribunal finds that the applicant had no contract with the tenants found in occupation by Ms Filipescu and was not their landlord. However, the Tribunal finds that the applicant remained the managing agents for both the freeholders and Come to London Ltd as reflected in their s.16 replies. The respondent benefitted from its collection of rent from Come to London Ltd, as only part of which had to be passed onto the freeholder in order to meet its guaranteed rent obligation to the freeholders, the remainder being kept by the applicant as payment for its managing services.

…

24.

The Tribunal finds that the applicant was managing the subject Property from the date of its guaranteed rent agreement with the freeholders and therefore committed an offence pursuant to section 72(1) of the 2004 Act when it became an unlicensed HMO.”

As to the amount of the penalty the FTT said:

“25.

The Tribunal also considered the level of the financial penalty imposed and the respondent’s reasons in imposing £10,000. The Tribunal finds that the applicant was sent and did receive the s 16 request as well as all the other required documentation as set out in Schedule 13A of the 2004 Act in imposing a financial penalty on the applicant.

26.

No other representations were made by the applicant as to why the sum of £10,000 should be reduced and provided no evidence of the applicant’s financial health or otherwise and accepted it managed a large portfolio of properties.

27.

Therefore, the Tribunal refuses the appeal and confirms the Financial Penalty in the sum of £10,000”.

The appellant has permission, granted by this Tribunal, to appeal the finding that it was managing the property on the relevant date, and also the amount of the penalty, on the basis that both are unexplained by the FTT.

The difficulty with the finding that the appellant was a person managing the property is that the basis on which the FTT made its finding was that it had a management agreement with the freeholder, that it had some involvement in a repair at the property but had not visited regularly, and that it benefited from the rent paid to it by CTLL.

As I said above, the concept of “managing” property is defined in the 2004 Act; it is not a commonsense concept and the definition is not satisfied merely by being a party to a management agreement or doing something that could be described as management. The FTT did not see the agreement between the appellant and the freeholder (as it stated at its paragraph 16).

Section 263(3) requires that the person concerned be an “owner or lessee of the premises.” There is no evidence that the appellant was either. There is no suggestion anywhere that its agreement with the freeholder was a lease, and the freeholders’ reply to the section 16 enquiry stated that the appellant was its managing agent, and did not refer to it as a tenant. If the FTT regarded the appellant as an owner or lessee of the property, it did not say why.

Section 263(3) also states that if payment by the occupiers is received through an agent, then that agent is also a person managing the property. To bring the appellant within the definition the FTT would have had to find that the freeholders were receiving rent from the occupiers through the agency of the appellant, and it made no such finding. That, I think, may be what it had in mind in view of the emphasis it placed on the management agreement.

But on the facts found by the FTT neither the appellant nor the freeholders were receiving rent from the occupiers. The appellant could be seen as benefiting indirectly from the occupiers’ payments, but that is not what section 263(3) requires. As the FTT found, the appellant received rent from CTLL – which would have remained payable whether the occupiers paid rent or not.

So the finding that the appellant was a person managing the property is unexplained, and indeed could not be explained on the basis of the evidence before the FTT. The FTT’s finding is set aside.

Furthermore there is no explanation of the penalty imposed. Again, this was a decision to be made afresh, and therefore explained, by the FTT, albeit by reference to the respondent’s enforcement policy; a cursory reference to the respondent’s reasons will not do. The FTT’s decision about the penalty is also set aside because it was unexplained.

The appeal succeeds; the FTT’s decision is set aside. I have perused the bundles submitted to the FTT and I cannot see that there was given any evidence on the basis of which the FTT could have concluded that the appellant was a person managing the property as defined by section 263. There is no reason why the respondent should be able to make a second attempt to adduce such evidence, and I therefore substitute the Tribunal’s own decision that the appeal to the FTT against the financial penalty succeeds and the appellant is not liable to pay the penalty.