The council had appealed against the decision of the First Tier Tribunal (FTT) to cancel the civil penalties imposed on the landlord in respect of 2 properties that should have had selective licences before being rented out.

The landlord bought the 2 properties in Spring 2020, renovated them and, by Autumn 2020, had let both to tenants. The council became aware there were no selective licence applications for either property when the tenants registered for council tax and so contacted the landlord in November 2020 after which the landlord made his applications.

Despite the landlord making his applications within 3 days of being made aware he had to have licences (with the licences being granted the following month), the council imposed two civil penalties (totalling £9,224) on him after interviewing him under caution, serving notices of intention to impose civil penalties, receiving his representations and finally imposing the penalties in 2021.

The landlord appealed to the FTT - which was required to make its own decision on the penalties themselves and not to review the council's decision to impose them - on the ground of "reasonable excuse" saying, effectively, that the failure to licence was the fault of the solicitors involved in the sale and purchase of the properties. This defence is provided for under s. 95 of the Housing Act 2004. Although to impose a civil penalty for operating an unlicensed house a council needs to establish the offence to the criminal standard of proof, the defence of reasonable excuse needs only to be established to the civil standard of proof.

The landlord's argument was that the property had been bought at auction with an information pack provided by the seller's solicitors which did not include any information about the property being subject to selective licensing - an issue which the solicitors could have enquired about, but didn't, as part of the process of their compiling the information pack. As the seller's solicitors did not ask the local authority about licensing there was no information about it in the pack and thus, the reasonable excuse defence applied because the purchaser "relied upon the seller's legal pack".

The landlord also relied on the fact that his own solicitors - a firm that the landlord's company had used on previous property purchases - also did not seek information, as part of their own searches, as to whether the property might be subject to selective licensing. Though describing himself to the FTT as a "professional landlord", the landlord said that it was still unlikely that he would be "able to keep up with the changing regulations applicable to rented property" and that the only licensing he was aware of was HMO licensing.

The council's representative argued that the solicitors would only have sought information on licensing if they were specifically instructed to ask about it but the FTT disagreed with this saying the landlord's solicitors "knew that the properties would be purchased for renovation and letting. They could have discovered online in a matter of minutes that both houses fell within a selective licensing area, a point .... [the landlord] could properly have expected to be included in his solicitor's pre-auction report ...".

The council included its enforcement policy in its evidence and the FTT said that this policy had not been followed - in relation to informal versus formal action and the use of a caution versus civil penalties as alternatives - adding "In accordance with [the council's] published policy, even if [the landlord's company] had been unable to rely on a statutory defence the imposition of a civil penalty would have been unnecessary to achieve the objects of the licensing regulations".

However, the Upper Tier Tribunal (UTT) dismissed all the arguments that the FTT had accepted.

On the reasonable excuse defence the UTT (citing supporting case law) said "It was open to [the landlord] to instruct his solicitors to find out and advise him on the regulatory position about letting the property, without [the owner of the landlord company] being aware either of the selective licensing regime or [the standard enquiry form used to populate the pre-auction legal pack]". Thus the reasonable excuse defence failed.

Secondly, the UTT stated that "The FTT, in hearing an appeal from a financial penalty, is to make its own decision, not to review that of the local housing authority. The question before the FTT is therefore not whether the local housing authority in imposing the penalty followed its own policy .... As it happens I see nothing whatsoever in the local housing authority's actions in this case that was inconsistent with its policy".

Thirdly, the UTT (again citing case law) said "If [the landlord] in the present appeal is a good landlord as the FTT said .... then that goes to mitigation when the level of penalty is considered, but it does not amount to the sort of exceptional circumstance that might justify a decision not to impose a financial penalty where it is proved beyond reasonable doubt that the offence has been committed and the [landlord] has failed to establish the defence of reasonable excuse".

The full case transcript can be accessed here but the UTT allowed Gateshead Council's appeal on all 3 grounds and reimposed a financial penalty on the landlord but remitted the case back to the FTT for a final hearing on the amount of the penalty.

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