Sanctions for letting an unlicensed HMO or breaching licence conditions

A landlord who does not have a licence in respect of an HMO that should be licensed is restricted from using the section 21 procedure to obtain possession[1].

Where a landlord has either applied for a licence, or for a temporary exemption notice on the basis that they are planning to take steps to ensure that the property will no longer require licensing, there is no restriction on using the section 21 procedure as long as the application has not been withdrawn, and the authority has either:[2]

• not reached a decision on the application

• decided not to grant the application, but either an appeal has been made against the decision, or the appeal period has not yet ended

A landlord of a flat in an unlicensed HMO cannot rely on section 21 Housing Act 1988 to gain possession for as long as the HMO remains unlicensed. This restriction only applies if the person serving the notice is the person with control of the HMO and the flat it relates to is also under their control.[3]

It is arguable that the landlord of a self-contained unit let on a separate AST in a licensed HMO cannot rely on a section 21 notice also if they did not provide an energy performance certificate (EPC) to the tenant, but this point has not been tested in the courts yet.

It is an offence to be a person having control of or managing a licensable house in multiple occupation (HMO) without a licence. This applies to mandatory and additional licences.[4]

Such a person may have a defence if they have applied for temporary exemption from the requirement to have a licence. No offence will have been committed once an application for a licence or for a temporary exemption notice has been submitted.[5]

Licence holders or persons in control may also have committed an offence if they either:[6]

• knowingly permit another person to occupy and this results in more persons or households occupying than authorised by a licence

• breach any condition of a licence

Defences

There is a general defence of 'reasonable excuse'.[7] The Court of Appeal has held that a landlord could not rely on a defence of reasonable excuse on the basis that it had been told by a local authority employee that it did not need to apply for a license until a planning issue was resolved.[8]

A landlord relying on an agent to inform them of licencing requirements would rarely give rise to a reasonable excuse defence.[9] A landlord might have to continue to check if they need a licence. For example, if they did not initially need a licence but were aware that licencing requirements were due to change.[10] A landlord might have a reasonable excuse if they make repeated attempts to apply for a licence but the local authority does not respond.[11]

In a case relating to a selective licensing scheme, the Upper Tribunal found that a landlord's ignorance of the licensing scheme when purchasing a property would only amount to a reasonable excuse if the landlord had taken reasonable steps to keep themselves informed.[12]

Where an HMO becomes licensed for the first time but there are more people in occupation (and were in occupation previously) than the licence permits, it is a defence to any action that the licence holder is taking reasonable steps to reduce the numbers in order to comply with the licence.[13]

Where an HMO that should be licensed is registered under a registration scheme with control provisions[14] when the licensing provisions commence, it will be deemed to be licensed and the licence will last until such time as the registration would be due for renewal.[15]

A landlord who fails to obtain a licence could be subject to a rent repayment order. Find out more about rent repayment orders.

A landlord who fails to obtain a licence or breaches the condition of a licence could be subject to a banning order. Find out more about banning orders.

Landlords who are convicted can be punished by a fine.[16] As an alternative to prosecution, a local authority can impose a civil penalty of up to £30,000.[17] Before imposing the penalty, the authority must give the landlord a notice of intent within six months of having sufficient evidence to prove the commission of the offence beyond reasonable doubt.[18] The Upper Tribunal found that an authority cannot include a charge for its investigation costs in the penalty.[19]

A local authority can impose separate financial penalties on each of two or more joint landlords. The actions of each landlord should be separately assessed.[20]

Where the relevant offence is committed by a company, the sum of the civil penalties issued against the company and its director can exceed the £30,000 cap, as there is no rule requiring the penalty to be determined first and then apportioned.[21]

A tenancy granted by a landlord who has committed an offence relating to the licensing of a HMO is a lawful tenancy.[22] The tenant’s obligation to pay the rent is binding. To terminate the tenancy, a landlord must follow the lawful procedure for ending the type of tenancy granted.

The Court of Appeal held that a confiscation order under the Proceeds of Crime Act 2002 in respect of the rent received by a landlord while unlicensed was not available because there was no causal connection between the criminal conduct (of failure to obtain a licence) and the benefit (the rent) received. In other words the landlord continued to receive rent not because of the offence but in spite of it.[23]

However, in a non-binding Crown Court case it has been successfully argued that where a tenancy (and the rental income generated) could only be granted as a result of criminal conduct, then a confiscation order can be made. In this case (under the selective licensing regime), the multiple tenancies could only be granted by breaching the specific terms of the license which provided that the property could only be let to a single household.[24]

In one case, the High Court held that since having control of or managing an unlicensed HMO as well as breaches of the HMO management regulations were continuing offences, the six months’ time limit for laying information before the magistrates’ court[25] had run from the date of the local authority’s inspection of the property that was necessary to gather evidence and identify the breaches of the regulatory offences, not from the date when the local authority first received a complaint and started investigating the matter.[26]