Upper Tribunal rules on how ‘civil penalties’ for landlords and agents should be calculated on appeal

The Upper Tribunal has recently been giving attention to the regime at Schedule 13A of the Housing Act 2004 which allows local housing authorities to impose fines as an alternative to criminal prosecution.

The power allows councils to impose fines of up to £30,000 on landlords and agents where it is satisfied beyond reasonable doubt that a housing-related offence has been committed. Fines are often ‘stacked’ on one another, one penalty per offence, meaning the proposed fines can exceed £100,000.

London Borough of Waltham Forest v Marshall

In London Borough of Waltham Forest v Marshall [2020] UKUT 0035 (LC) (available here) the Upper Tribunal considered two cases where the First-tier Tribunal had upheld penalties on appeal, but significantly reduced the amount of the fine. The local authority argued that the First-tier Tribunal should not have departed from or ignored the Council’s policy when decided what level of fine to impose.

The Upper Tribunal accepted this argument and held that usually the Tribunal should normally apply the Council’s policy on the size of fines. In practise this means, the Tribunal can reduce a penalty on the basis that the Local Housing Authority calculated the penalty wrong, or if it has mischaracterised the seriousness of the offence, but it will be slow to disregard the policy entirely, doing so only in certain circumstances.

This is a significant decision, and it is troubling to me that it has been reached without either respondent taking an active role in or being represented at the hearing in the Upper Tribunal. The Tribunal is placed in a difficult position when, as here, excellent advocates are present to make arguments for the local authority but no-one is present to make the opposing arguments. This is particularly concerning in a quasi-criminal context where the state is exercising a power to impose very substantial fines.

The role of policy in setting fines

The previous authorities considered by the Tribunal in London Borough of Waltham Forest v Marshall were mostly concerned with appeals relating to licensing, and how the courts should take account of local authorities’ policies in that context. There is a compelling logic to the idea that local authorities, which are ultimately accountable to voters through elected councillors, should have their views about how the local area is administered given significant weight.

It is less clear that there is a coherent reason why local authorities should be entitled to punish offences differently. Is a landlord who fails to hold a HMO licence more in one London borough more culpable than another committing the same offence in a neighbouring borough? And do local authorities really have particular expertise in assessing how large a fine should be, or how large a discount should be applied for mitigating factors? This is an exercise where judges have more relevant skills and experience – even if the Tribunal is still getting to grips with this power.

The power to impose these penalties was introduced by the Housing and Planning Act 2016 and it remains a relatively unexplored area of law. It is clear that the power has, on the whole, led to increased fines compared to the fines imposed by the magistrates’ courts for the same offences; this is something which has been widely welcomed – but should local authorities really be the ones to set the bar?

Unlike normal criminal fines, local authorities keep the proceeds of these penalties, meaning that when it comes to setting the level of penalties, they do not have the appearance of impartiality. It is also striking that this decision empowers local authorities to take on the roles which in a criminal context would be split between the police, the CPS, and the Sentencing Council. (Although the Sentencing Council does not, having set guidelines for the levels of fines, get to keep the money!).

Civil or criminal?

The approach taken by the Upper Tribunal to date in financial penalty cases has been to take a reasonably tough line on deadlines, to waive procedural technical requirements, and now to defer substantially to the policies of local authorities on the size of fines. The common thread running through these decisions an approach of treating the fines as ‘civil’ sanctions, and adopting the culture and assumptions of the civil courts.

The Tribunal uses the term ‘civil penalties’ in this and other decisions, but this is a classification with which I have considerable reservations. The legislation describes the fines ambiguously as ‘financial penalties’ – a label which seems to me to consciously depart from the term ‘civil penalty’.

The First-tier Tribunal is certainly a ‘civil’ jurisdiction. Enforcement of the penalties lies thought the County Court, and a penalty is not a conviction. But there are compelling reasons to think that Financial Penalty regime under the Housing and Planning Act 2016 are in fact better characterised as criminal rather than civil.

The penalties are large, and they are imposed for breaches of the criminal law. They can only be imposed where the local housing authority (and the Tribunal on appeal) are satisfied beyond reasonable doubt that the offence has been committed. Those facing a penalty might be ‘named-and-shamed’ on the Mayor of London’s Rogue Landlord and Agent Checker. The penalties can affect a landlord’s ability to obtain a licence, and can lead to an entry on the Government’s Database of Rogue Landlords and Agents. The effects are not simply financial.

The designation of a legal sanction as ‘civil’ in domestic law is just one factor among many which must be considered when the courts assess whether a sanction is ‘civil’ or ‘criminal’ for the purposes of the European Convention of Human Rights. This has important implications. If Financial Penalties are ‘criminal charges’ under Article 6 of the European Convention of Human Rights, this entitles person appealing against such penalties additional rights and protections. The Tribunal has not yet been asked to address this question in any reported decision.

Would that distinction make any difference here? I suggest that it might. In International Transport Roth GmbH v Secretary of State for the Home Department [2002] EWCA Civ 158, the Court of Appeal considered a fixed penalty regime for aircraft carriers and found that the scheme was criminal in nature and incompatible with ECHR Article 6. Simon Brown LJ held [47]: “Sentencing is like all aspects of the criminal trial, a function that must be conducted by an independent tribunal”. If that approach were applied to penalties under schedule 13A of the Housing Act 2004, can the First-tier Tribunal be said to be acting as an independent tribunal if it is applying the policy of the ‘prosecutor’ when setting the ‘sentence’? Previous decisions of the European Court of Human Rights suggest not.

Consequences of Waltham Forest v Marshall

It is strange result that a landlord or agent will be sentenced in the magistrates’ courts in accordance with the Sentencing Council’s General guideline (a guideline for offences where there is no specific guideline), but a financial penalty will be calculated on a entirely difference basis, which will be subject to variation based on which local housing authority has jurisdiction.

Some local authority policies relating to financial penalties are well thought out and logical. Other, unfortunately, are not. But in every case they do not reflect the views of an independent tribunal about what levels of fine are appropriate starting points. It is true that the Upper Tribunal was careful to avoid suggesting the First-tier Tribunal cannot depart from the local authorities policy, but if in practise the approach taken on appeals is to follow the Council’s tariff schemes in all but the cases where the policies are most obviously wrong, this has the potential in my view to deprive appellants of a fair hearing.

Rogue landlords and agents are a popular target. There are obvious reasons for this, and it is clear that limited budgets for enforcement, and sometimes pathetically low fines imposed the courts, had allowed criminal landlords to operate with impunity. But as political parties seek to outdo each other in showing they are tough on landlords and agents, the unpopular arguments for procedural safeguards and the rights of people accused of crimes need to be made forcefully.

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