Proving your HMO case in the First- tier Tribunal – IR Management Services Ltd v Salford City Council

This is the second instalment in a series of blogposts exploring recent Upper Tribunal decisions dealing with HMO matters and evidence. The first post looked at the case of Hastings v Turner where the Upper Tribunal was asked to consider which party had the evidential burden of proving whether or not a property was an HMO. In this blogpost we look again at which party has the ‘burden of proof,’ this time in the context of a financial penalty appeal concerning HMO offences.

As an alternative to bringing a prosecution in the magistrates’ court, local authorities can issue financial penalties of up to £30,000 where a person commits a specified housing offence. In order to impose a financial penalty the local authority has to be satisfied, beyond reasonable doubt, that the person’s conduct amounts to a relevant housing offence. The person on whom a financial penalty notice has been served has a right to appeal to the First-tier Tribunal (FTT).

A large number of financial penalty appeals relate to HMO licensing offences and offences under the HMO Management Regulations 2006 (regulations that impose duties on persons managing HMOs in relation to the repair, maintenance, cleanliness and good order of the house). If the landlord appeals a financial penalty notice, it is for the local authority to prove to the criminal standard of proof that the offence has been committed.

While it is for the local authority to prove the offence, what happens if the landlord asserts a defence? The Housing Act 2004 that sets out the failure to license and breach of HMO Management Regulations offences, also states that it is a defence if the person against whom the offence is alleged has a reasonable excuse for not complying with the law. There is no definition of what constitutes a reasonable excuse and therefore the Courts and Tribunals have been left to decide what it means on a case-by-case basis, often applying a narrow interpretation. My colleague Robin Stewart has written further about what is a reasonable excuse here.

If the landlord does raise a defence of reasonable excuse then which party has the responsibility of proving the defence and what is the degree of proof required? Is it the criminal standard of proof, “beyond reasonable doubt,” or the lower, civil standard of proof “on the balance of probabilities”?  These are questions the Upper Tribunal was asked to decide in the case of IR Management v Salford City Council.

IR Management Services Ltd v Salford City Council

IR Management v Salford City Council started as an appeal against the local authority’s decision to impose a financial penalty on IR Management for offences involving breach of the HMO Management Regulations. IR Management’s director had asserted in the FTT that he had no knowledge that the property was an HMO; it had been let to a single individual who had been prohibited from subletting or sharing the accommodation. This, the company argued, provided them with a reasonable excuse defence for not complying with the regulations.

The FTT concluded that while it must be satisfied beyond reasonable doubt that each element of the offence had been established, it is then for the person pleading the defence of reasonable excuse to prove it on the balance of probabilities. The FTT rejected IR Management’s defence that they were not aware the property was an HMO and increased the financial penalty from £25,000 to £27,500.

IR Management appealed to the Upper Tribunal. The substance of the appeal was whether the FTT had applied the wrong burden of proof and standard of proof in its consideration of the reasonable excuse defence. IR Management’s case was that once they had produced evidence which properly raised the reasonable excuse defence, in this case the company’s director’s lack of knowledge that the property was an HMO, it was then for the local authority to prove to the higher criminal standard the absence of such a reasonable excuse. IR Management’s lawyers argued that the absence of a reasonable excuse should be read as a component of the offence itself. The Upper Tribunal disagreed. In his decision, the Deputy Chamber President, Martin Rodger QC, stated:

“The offence of failing to comply with a relevant regulation is one of strict liability, subject only to the statutory defence. The elements of the offence are set out comprehensively in section 234(2). Those elements do not refer to the absence of reasonable excuse which therefore does not form an ingredient of the offence, and is not one of the matters which must be established by the prosecutor. Section 234(4) provides, separately from the description of the defence itself, a single defence of reasonable excuse. The burden of proving a reasonable excuse falls on the defendant.”

The Upper Tribunal therefore dismissed IR Management’s appeal agreeing with the FTT that it is for the person asserting the reasonable excuse defence to prove it. However, the defence need only be established on the lower civil standard of proof, on the balance of probabilities.

The case is interesting as it shows that while the local authority bears the responsibility for proving the offence, if the landlords seeks to rely on a reasonable excuse defence, the burden of proof then switches to them to prove they have a reasonable excuse. It is not for the local authority to prove the absence of a reasonable excuse. This means a person seeking to raise such a defence will have to think carefully about what evidence they need to put before the Tribunal to prove it, for example, producing a detailed witness statement setting out the relevant facts of the excuse. It will then be for the Tribunal to determine whether, objectively, the excuse is a reasonable one. However, that does not mean that a Tribunal should only consider whether the landlord has a reasonable excuse in cases where the statutory defence is formally argued. In the Upper Tribunal’s decision, the Deputy Chamber President advised that Tribunals should consider whether any explanation put forward by the appellant, especially if they are unrepresented, amounts to a reasonable excuse defence even where there is no specific reference to the statutory defence.

While IR Management v Salford City Council concerned a financial penalty notice appeal, the same principle would apply to Rent Repayment Order (RRO) claims based on licensing offences where the landlord asserts a reasonable excuse defence. The final blogpost will look at the recent Upper Tribunal RRO case of Opara v Olasemo, the criminal standard of proof and how it should be applied by the Tribunals.

*Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*