Property Licensing : The right way to assess financial penalties

In the case of Raja -v- Salford City Council, the Upper Tribunal (“UT”) held that First tier Tribunals (“FtT”) are required to make their own assessment in determining financial penalties and should not limit themselves to solely reviewing the  council’s decision to impose the penalty.

Summary of Facts

Salford City Council sought to impose a financial penalty of £22,500 against a landlord (“AR”) for a failure to license the property under the Council’s selective licensing scheme. AR brought an appeal to the FtT against the Council’s Notice on the basis that:

• He had not received the correspondence from the Council regarding the requirement to licence the property because he was abroad;
• There were no tenants occupying the property during the time of the relevant offence; and
• In any event, he could not afford the financial penalty as he was in receipt of social welfare benefits.

At first instance, the FtT upheld the Council’s decision with issuing the final notice and held that the landlord should have arranged a property manager if he was going to be out of the country.

In addition, Council Tax records indicated that the property was tenanted during the period of the offence and in relation to affordability of the fine, it was held that AR had not previously informed the Council about his financial circumstances.

AR subsequently brought a further appeal by citing similar grounds but this time, he introduced the following to his argument:

• He did not have a tenancy agreement with the tenants and the property was let to a third party individual, “WA”, who sub-let the property to the sub-tenants;
• He did not receive the Council’s letters and when he was later notified he did not understand why he had to apply for a licence;
• He did not have adequate representation and was not fluent in English and the Council therefore should have ensured he understood what was required of him; and
• The financial penalty was excessive and unfair.

The FtT refused to review its decision and permission to  appeal noting that he had not raised the issue about the property being let to WA at the first hearing, he should have obtained legal representation and, there was no evidence to prove his financial circumstances.

Upper Tribunal’s decision

The matter progressed to the UT and was heard by HHJ David Hodge QC.

While the UT mostly agreed with the FtT’s decision, it was held that the Tribunal had not given proper justification as to how the fine was calculated. In reaching his decision, HHJ David Hodge QC held:

“The FTT’s decision contains no statement of how the Council had calculated the financial penalty it had imposed of £22,500. There is no indication of how that penalty was assessed: of how the Council had assessed the levels of culpability and harm so as to arrive at any penalty score, of the band of penalties appropriate to the resulting penalty score, or of how any personal mitigating or aggravating features were identified and factored into the Council’s calculation. There was no reasoned or articulated calculation by the FTT. There is no indication that the FTT had made their own determination of the appropriate amount of the financial penalty to be imposed on Mr Raja or of how “the evidence” had factored into the Council’s figure of £22,500, which the FTT proceeded to endorse.”

The FtT was therefore required to make its own decision on the level of penalty in light of the available evidence and had failed to consider the various factors which the Council’s assessment of the penalty ought to have considered, including an assessment of proportionality of the offence and the penalty imposed and any mitigating and aggravating circumstances put forward by the Appellant. The UT therefore allowed this part of the appeal to progress on the basis that the FtT had failed to make its own assessment of the appropriate amount of the penalty.

Implication of this decision

The UT’s decision suggests that FtT’s must make their own enquiries about the adequacy of the fine in light of all information they have available at hand. This indicates that they must therefore satisfy themselves that the proposed fine is proportionate to the level of offence and harm caused to the tenants and must provide their own opinion on the level of fine that could be imposed rather than favouring the fine proposed by the Council without a justifiable reason.

However, this decision appears to conflict with an earlier UT decision in the case of  Waltham Forest LBC v (1) Marshall (2) Ustek [2020] UKUT 0035 (LC) as in that case the UT determined that Tribunals were required to give particular weight to a Council’s decision and their respective policies, and it could only depart from a Council’s decision if it was “wrong” and in very limited circumstances.

In AR’s case, while the UT did decide that the FtT should be bound to make its own decisions, it did not state that the Tribunal could disregard the Council’s guidance entirely. Quite often, the Council’s guidance does state the appropriate band of penalties and gives reasons for the Council’s decision to impose a penalty against a landlord.

This decision is beneficial for landlords as Tribunals are now required to consider all circumstances including a landlord’s personal circumstances before arriving to a final decision in respect of a financial penalty. It is likely that Tribunals will continue to consider the Council’s policy going forward but they may also ensure to take into account the factors identified by HHJ David Hodge QC so as to justify or disagree with a proposed level of fine.

Anthony Gold Solicitors are specialists in HMO law and assist private residential landlords and letting agents in a wide range of property licensing disputes. Should you wish to speak to a member of our team for further information, please contact us on 020 7940 4000 and we will see how we can assist.