Bradford DC v Kazi [2024] EWCA Civ 1037

Court of Appeal, 10 September 2024

The Court of Appeal has ruled that a local authority did not fetter its discretion when applying a policy in order to calculate financial penalties imposed on a landlord for non-compliance with improvement notices.

The Landlord (Mr Kazi) owned a property that had been converted into eight self-contained flats and was a house in multiple occupation (HMO). Following a complaint from one of the tenants, the local authority (Bradford District Council) inspected the property and subsequently served several improvement notices requiring, amongst other things, the installation of a proper heating system and a new kitchen in each of two flats. There were also requirements for work to be done on the common parts, including new entrance doors to address fire hazards, and the repair or replacement of the locking system in the main entrance door. Mr Kazi only partly complied with the improvement notices, so Bradford District Council issued two civil penalties of £14,250 and £18,790 for failing to comply with the regulations governing the management of HMOs

Mr Kazi appealed against the civil penalties, but this was rejected by the First-tier Tribunal, which upheld the penalties in full. However, the Upper Tribunal allowed his appeal and substantially reduced the amount of the penalties, ruling that Bradford District Council’s “rigid” approach when adjusting penalties its discretion and had no purpose. Bradford District Council appealed against the reduction of the penalties.

The Court of Appeal, in allowing the appeal, held that Bradford District Council did not its discretion when applying its Private Sector Housing Enforcement Policy in order to calculate the fines. The Upper Tribunal had erred when it interpreted the provision in the Policy that allowed for the adjustment of penalties imposed on landlords for housing offences based on aggravating and mitigating factors as being so unduly “rigid” as to amount to an unlawful of discretion.

This decision will be welcomed by local authorities, many of whom have policies in place that are similar to the one used by Bradford District Council.

A copy of the judgment is here.

A1 Properties (Sunderland) Ltd v Tudor Studios RTM Co Ltd [2024] UKSC 27 

Supreme court, 16 August 2024

The Supreme Court has confirmed that the failure of a right to manage company to serve a claim notice on an intermediate landlord did not invalidate the transfer of the right to manage the accommodation.

The residential leaseholders of Tudor Studios sought to acquire the right to manage their building, a former factory that had been converted into student accommodation. This would enable Tudor Studios RTM Company Ltd, the company formed by the leaseholders for this purpose, to take on the role of the management company at Tudor Studios and carry out the management functions. A1 Properties (Sunderland) Limited was an intermediate landlord that owned four leases in Tudor Studios, covering the communal area, including the common room, the laundry, the gym and the reception area.

Tudor Studios RTM Company Ltd served a claim notice to acquire the right to manage on both the freeholder of the building and the management company, which was party to each of the flat leases, but did not serve the claim notice on A1 Properties (Sunderland) Ltd. As a result of this, the management company served a counter-notice stating that Tudor Studios RTM Company Ltd was not entitled to acquire the right to manage as it had not complied with section 79(6)(a) of the Commonhold and Leasehold Reform Act 2002, which stipulated that an RTM company had to serve a notice of claim on each person who is a landlord.

Tudor Studios RTM Company Ltd applied to the First-tier Tribunal for a determination that it was entitled to acquire the right to manage. The First-tier Tribunal held that Tudor Studios RTM Company Ltd’s failure to serve the claim notice on A1 Properties (Sunderland) Ltd did not invalidate the claim, as A1 had no management functions in relation to the building. A1 Properties (Sunderland) Ltd A1 appealed, but the Upper Tribunal (Lands Chamber) held that it was bound by the decision in Elim Court RTM Co Ltd v Avon Freeholds Ltd [2017] EWCA Civ 89 and dismissed the appeal.

In Elim Court RTM Co Ltd v Avon Freeholds Ltd [2017] EWCA Civ 89, the Court of Appeal had held that the failure to serve a claim notice on an intermediate landlord of a single flat with no management responsibilities did not invalidate the acquisition of the RTM company's right to manage.

A1 Properties (Sunderland) Ltd appealed.

The Supreme Court, in dismissing the appeal, held that Tudor Studios RTM Company’s failure to serve a claim notice on A1 Properties (Sunderland) Ltd did not invalidate the transfer of the right to manage. However, although it upheld the decision in Elim Court RTM Co Ltd v Avon Freeholds Ltd [2017] EWCA Civ 89, it did not fully endorse the Court of Appeal’s reasoning in the case. The Supreme Court held that persons whose property or contract rights are to be taken away or significantly qualified should have a fair opportunity to raise any substantive objections. It was not sufficient to allow an intermediate landlord's right to participate to be ignored just because they had no management powers.

A copy of the judgment is here.

Shorr and another v London Borough of Camden [2024] UKUT 202 (LC)

Upper Tribunal (Lands Chamber), 17 July 2024

The Upper Tribunal has dismissed joint landlords’ defence of a lack of knowledge for their failure to licence a house in multiple occupation (HMO).

Mr Shorr and Ms Ro were married and jointly owned several properties. Ms Ro had purchased a long lease of a flat and registered it in both of their names, although she took primary responsibility for managing and letting it. In September 2022, Ms Ro let out the flat to four students for a 12-month term. Under the tenancy agreement, Ms Ro was solely identified as the landlord and, under an additional licensing scheme, was required to obtain a licence for a HMO from the London Borough of Camden. However, Ms Ro claimed that she was unaware of the scheme and did not think that properties with fewer than five tenants required such a licence. Following a subsequent inspection, council officers found several defects in the property that breached the Management of Houses in Multiple Occupation (England) Regulations 2006 and concluded that the flat was an HMO, thus requiring a licence.

Mrs Ro applied for, and was granted, an HMO licence after the necessary remedial works had been completed. However, London Borough of Camden issued penalty notices on both Mr Shorr and Ms Ro for owning or managing an unlicensed HMO and for breaching fire safety measures. Ms Ro and Mr Shorr appealed against the financial penalties, arguing that

1. their lack of knowledge of the additional licensing scheme constituted a reasonable excuse for failing to obtain a licence
2. Ms Ro was the person responsible for managing the flat, not Mr Shorr.

The First-tier Tribunal rejected their reasons for not licensing the property, but reduced the penalties imposed on Ms Ro from £13,500 to £13,000 and those imposed on Mr Shorr from £13,500 to £8,000. Ms Ro and Mr Shorr appealed against the decision to uphold the financial penalties imposed on them.

The Upper Tribunal (Lands Chamber), in partly allowing the appeal, held that although London Borough of Camden could have handed down a warning (rather than a financial penalty) to Ms Ro and Mr Shorr for being unaware of the additional licensing scheme, the poor condition of the flat meant that a financial penalty was justified. However, the Tribunal found that the different positions of Ms Ro and Mr Shorr were not reflected in the adjustment to the financial penalties. Consequently, it held that the financial penalties imposed on Mr Shorr should be reduced from £8,000 to £0 and those imposed on Ms Ro should be reduced from £13,000 to £8,000, thus ensuring that the penalties reflected each person’s degree of responsibility.

Local authorities should be reassured that Tribunals will look unfavourably on HMO landlords who use ignorance as a defence to penalties imposed for breaching HMO licencing schemes.

A copy of the judgment is here.