Houses of Multiple Occupation: Whether the appellant had a ‘reasonable excuse’ for operating an unlicensed HMO (Palmview Estates Ltd v Thurrock Council – 2022)

Where a company operated a house of multiple occupation without a licence, did they have a sufficient ‘reasonable excuse’ for not applying for such a licence?

The background

In Palmview Estates Ltd v Thurrock Council [2022], the appellant company owned and let a house of multiple occupation (HMO) without a licence in accordance with The Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018. The local authority served notice on the appellant under s.72(1) of the Housing Act 2004 of its intention to impose a fine of £17,500.

Applying for an HMO licence, the appellant appealed to the First-tier Tribunal in respect of the notice. The appellant stated that it had a ‘reasonable excuse’ defence. The local authority had suggested to the appellant that it would refuse an application for a licence pending planning approval, and the appellant used this in defence.

The FTT allowed the appeal by the appellant. In the Upper Tribunal, the court found an error in law in the FTT’s approach and remitted the case back to the FTT, whereupon the appellant appealed further.

The decision

The Court of Appeal agreed with the Upper Tribunal, finding that the FTT had made a material error in asking the wrong question and remitting the matter back to the FTT for a re-hearing.

The appellant argued that the FTT had been entitled to find that a reasonable excuse for failing to apply for an HMO licence was sufficient to constitute a reasonable excuse under s.72(5) of the Housing Act 2004.

The Court of Appeal found that the two interpretations of ‘reasonable excuse’ were not linked. A reasonable excuse for not applying for an HMO licence did not necessarily give a party a reasonable excuse for controlling premises under the Housing Act. Further, permitting the tenant’s argument would put into question the licencing regime for HMOs, allowing HMO operators to continue unlicensed where properties were of a poor standard and where a formal application may be refused.

Advice and action for landlords

This case reinforces the importance of the licensing regime for HMOs. Landlords must make the necessary application, with sizeable penalty fines a likelihood where HMO properties are operated unlicensed.

The fact that an application may be refused by a local authority cannot constitute a ‘reasonable excuse’ for failure to apply for an HMO licence, and the operator is not being asked by the court to evidence a reasonable excuse for failure to apply. Instead, a landlord must evidence a reasonable excuse for controlling the HMO without a licence, carrying a different burden of proof.