Houses in multiple occupation: Defence of reasonable excuse in appeal against Rent Repayment Order (D’Costa v D’Andrea and others – 2021)

This appeal against a rent repayment order discussed whether the appellant could rely on a defence of ‘reasonable excuse’ where the local housing authority had stated that an HMO licence was not required for the management of the property.

The background

In D’Costa v D’Andrea and others [2021], the appellant was the owner of a residential property which was let to ‘FTC Property (Apartment Wharf)’. The company, which let out rooms in houses of multiple occupation as its business function, was permitted to sublet parts of the property, which comprised five bedrooms across two storeys, together with a kitchen and two bathrooms.

The company had sublet all five rooms in the property. No HMO licence was required for the property prior to 1 October 2018, as it comprised only two storeys. After 1 October 2018, HMOs with five or more occupants required a licence and the stipulation that HMOs over three storeys must be licenced was dropped. As a result, some HMOs which had previously been exempt from licence requirements now fell within the legislation.

Following a visit from the local authority in 2017, the appellant asked to apply for an HMO licence. She was told that a licence was not required and she would be advised if this situation changed. Following a further inspection in 2019, she was told that a licence was required and the appellant subsequently made the application. The property had required a licence since 6 October 2018, when the fifth tenant had taken up occupation. The tenants, supported by the local authority, applied to the First-tier Tribunal for a Rent Repayment Order. The FTT found in favour of the tenants and made the order; the appellant committing an offence as the person ‘in control’ of the property, and the company committing an offence as it was the ‘manager’ of the HMO. The appellant appealed to the Upper Tribunal.

The decision

The Upper Tribunal found that the appellant could 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.

The appellant argued defence of reasonable excuse as the local authority representative had told her that she would be advised if a licence was required, but she did not receive any notification. Further, the appellant stated that only the company should be liable for obtaining the HMO licence as it was in control of the occupation of the property; the appellant had no control over the sublettings.

The UT found that the appellant had not committed the offence of operating the HMO without a licence, and the RRO could not be made against her. Further, in assessing the business relationship between the parties, the appellant could reasonably have expected the company to tell her if the HMO required a licence.

Advice and action for landlords

This case provides useful guidance for both landlords and management companies of HMOs. Management companies should be aware that, with day-to-day responsibilities for the operation of the HMO, they may be found to be liable for ensuring the property carries the correct licence rather than the owner of the property.

Landlords may rely on the defence of reasonable excuse, particularly where they have been misinformed or where others, such as a management company, enjoy the rights to sublet and the contractual relationships with occupiers.