We’ve all heard the expression, “ignorance of the law is no excuse” and this applies without question in all areas of the law. But in some rare instances it seems the courts and tribunals are open to accepting a defence of what is termed ‘reasonable excuse’ even when the regulations have not been followed to the letter.

The defence has been pleaded in many areas of the law, including regulations in the private rented sector (PRS), in areas of the law relating to HMRC and the tax regulations, and there have been several examples used recently with the regulations relating to Covid and the ‘stay at home’ rules during lock-downs.

Being able to show that you have a ‘reasonable excuse’ has been shown in certain rare instances to be a valid defence to a criminal offence, which would otherwise would be dealt with by a court on a strict liability basis.

Many examples have been made where a landlord breaches the requirements under the Management of Houses in Multiple Occupation (England) Regulations 2006, but where it did not make any difference if the landlord did not know the rules or intend to breach them – they were penalised.

The Regulations

Acts of parliament rarely give any guidance as to what may be deemed a “reasonable excuse”, which means that lawyers may try to structure a reasonable excuse defence based on the facts of the particular case, and on what the courts – judges, magistrates and tribunals – have decided before. Nevertheless it is possible given the right circumstances to build a successful defence based on having a “reasonable excuse.”

A recent appeal in the D’Costa v D’Andrea and others (2021) case in the Upper Tribunal (Lands Chamber) proves this point. The appeal was against a previous ruling about a rent repayment order (RRO) awarded against the landlord owner and a property management company by the First-tier Tribunal.

Background to the case

In the D’Costa case the owner of a residential property was let to a property management company, FTC Property (Apartment Wharf), which in turn rented out rooms in the property as a house in multiple occupation, otherwise known as an HMO and a rent-to-rent arrangement.

The agreement between the two allowed FTC Property to dependently sublet parts of the property, which comprised five bedrooms across two storeys, together with a kitchen and two bathrooms.

The company successfully sublet all five rooms in the property and it was clear that no mandatory HMO licence was required for the property prior to 1 October 2018, as it comprised only two storeys.

The law changed after 1 October 2018 for HMOs, with five or more occupants requiring a licence when the three storeys rule was removed. The result was that some HMOs, which had previously been exempt from the licencing requirements, as in this case, now required HMO licencing.

Inspection visits

At the time of a visit from the local authority inspector in 2017, the landlord owner asked if a licence was required and was willing to apply for one. She was told via email that a licence was not required and she would be advised if this situation changed.

At a further inspection in 2019, there being no communication from the local authority in between these dates, she was told that a licence was required. She made the application the same day.

The property therefore was without a required a licence since 6 October 2018, when a fifth tenant had taken up occupation.

The tenants, who were supported by the local authority, applied to the First-tier Tribunal for a Rent Repayment Order because their property was not licensed as required. The FTT found in favour of the tenants and made out the order based on the fact that the landlord owner had committed an offence as the person ‘in control’ of the property, and the management company had also committed an offence as the ‘manager’ of the HMO.

The First Tier Tribunal ruled that a Rent Repayment Order (RRO) of £16,000 be made out against Ms D’Costa (the landlord owner) and £6,218 against FTC Property (the property manager) for failing to licence the HMO.

The landlord appealed to the Upper Tribunal.

The decision:

The Upper Tribunal found that the landlord could in this case use the defence of “reasonable excuse”, as set down by s.72(5) of the Housing Act 2004, and that the Rent Repayment Order could not be made against her.

Section 72(1) of the HA 2004 provides that ‘a person commits an offence if he is a person having control of or managing an HMO which is required to be licensed… but is not so licensed’.

The landlord argued the defence of “reasonable excuse” as the local authority representative had told her that she would be advised if a licence was required.

She could show that she had received this advice, but she did not receive any further notification. She further argued that only the management company should be liable for obtaining the HMO licence as it was in control of the occupation of the property, the landlord owner having had no control over the company’s sub-lettings.

The Upper Tribunal found in the landlord’s favour and agreed her defence of “reasonable excuse” – she had not committed the criminal offence of operating the HMO without a licence, and the RRO could not be made out against her.

In addition, the tribunal decided that given the business relationship between the parties, the property being managed by a professional property company, the landlord could reasonably have expected the company to inform her if the HMO required a licence.

Lessons to be learned from this case:

This is another case that shows some of the perils of rent-to-rent arrangements and provides a useful guide for landlords and management companies when operating HMOs.

Management companies are professionals in their field and can be expected to be aware of the rules and regulations in the day-to-day management of properties. Their responsibilities extend to knowing the HMO – Management of Houses in Multiple Occupation (England) Regulations 2006 – and they will be liable if they fail to ensure the properties they have under management are not correctly licenced, rather than the owner of the property.

Landlords it seems may be able to rely on the defence of “reasonable excuse”, in licencing matters in certain rare circumstances, particularly where they have been misinformed be officials and where, as in this case, a management company has total control over the number of occupants in the building.

5 COMMENTS

  1. Despite the appeal going the right way, it would be obvious to Lord Denning’s man on top of the Clapham Omnibus that it is extremely unfair for a tenant to get a rent repayment in this situation. There is nothing to indicate the property was unfit for habitation, so the tenant should still be required to pay the rent. The landlord has acted in good faith on advice from the Local Authority (and the word Authority indicates it is one on such matters!). The law should be applied in a more just way for all parties rather than harshly penalising landlords for unintentional clerical errors made in good faith. The Local Authority emerges from this with absolutely no credit.

  2. Ignorance no excuse in law. It’s a shame we have ignoramuses making the Laws.
    Why did they change it from Civil to Criminal Law just to be spiteful with landlords.
    Licensing was required for many 2 storey houses prior to 2018 as I know to my cost, having had to license & re-license 2 story houses since 2006.

  3. Have an home owning LL who take in lodgers ever been prosecuted and had to repay their LODGERS!?

    5 occupiers in a home who are unrelated 4 of whom pay rent to the live-in LL as LODGERS I believe would require a Mandatory HMO Licence.

    This would require a home to be compliant with Mandatory HMO Licencing.

    I doubt any normal home complies with the HMO requirements.
    How would the council find out 4 lodgers occupying in a 5 bed house!?

    I suppose to avoid such HMO Licensing there can be no more than 4 unrelated occupiers including the live-in LL.

    What happens if the LL gets a partner?

    Does that mean a Lodger has to be removed?

    As regards Additional Licensing does a live-in LL with 2 unrelated occupiers need to have an Additional Licence?

    If so how will the Council find out who is occupying homes where no rent is ever paid into bank accounts etc.

    Live-in LL mostly insist on being paid in cash for lodger rent.

    It is clear what the circumstances are for tenants but NOT for lodgers

    • > How would the council find out 4 lodgers occupying in a 5 bed house!?

      The lodgers could report to the council or make a Rent Repayment Order themselves.

      > What happens if the LL gets a partner? Does that mean a Lodger has to be removed?

      I know this may seem radical to you but…maybe LL should get an HMO licence.

      > As regards Additional Licensing does a live-in LL with 2 unrelated occupiers need to have an Additional Licence?

      Generally no (is not an HMO) but well advised to check the arrangement specifically with the council beforehand to be sure.

      > If so how will the Council find out who is occupying homes where no rent is ever paid into bank accounts etc. Live-in LL mostly insist on being paid in cash for lodger rent.

      As per above, tenants can report / bring legal action themselves. Rent doesn’t have to be paid by bank account, a regular withdrawal of the same amount together with the corresponding written or unwritten contract will determine and evidence an occupant’s occupancy. If it comes to it the tribunal court will decide and sniff out the sham arrangement landlord. Tenants will have to evidence their occupancy and landlord claiming or pretending the person doesn’t live there (when they have keys, message history with the landlord, corroboration from other tenants) will usually be pretty apparently absurd.

      > It is clear what the circumstances are for tenants but NOT for lodgers

      HMO licensing is exactly the same for lodgers (licensees) as for tenants barring the usual exemption for less than 3 lodgers. The occupant just has to use the property as their ‘only or main residence’. The legal framework of their residing is less important unless they are transient (like a holiday let/hotel style stay).

LEAVE A REPLY

Please enter your comment!
Please enter your name here