Sanctions for letting an unlicensed HMO or breaching licence conditions

A landlord of an unlicensed HMO cannot serve a valid section 21 notice. A person managing an unlicensed HMO may be committing an offence.

This content applies to England

Unlicensed HMO section 21 restrictions

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require licensing, there is no restriction on using the section 21 procedure as long as the application has not been withdrawn, and the authority has either:[2]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.

HMO licensing offences

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 Upper Tribunal 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]

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.[9]

Where an HMO that should be licensed is registered under a registration scheme with control provisions[10] 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.[11]

Sanctions where an offence has been committed

From 6 April 2017 a landlord who fails to obtain a licence could be subject to a rent repayment order.

From 6 April 2017 a landlord who fails to obtain a licence or breaches the condition of a licence could be subject to a banning order.

Landlords who are convicted can be punished by a fine.[12] As an alternative to prosecution, a local authority can impose a civil penalty of up to £30,000.[13]

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.[14]

A tenancy granted by a landlord who has committed an offence relating to the licensing of a HMO is a lawful tenancy.[15] 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 license) 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.[16] However, it has been successfully argued (in a non-binding Crown Court case) 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.[17]

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[18] 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.[19]

Last updated: 9 June 2021

Footnotes

  • [1]

    s.75 Housing Act 2004.

  • [2]

    ss 75(2) and 73(1) Housing Act 2004; ss 72(4) and 72(8) Housing Act 2004.

  • [3]

    reg 8 Houses in Multiple Occupation (Certain Converted Blocks of Flats)(Modifications to the Housing Act 2004 and Transitional Provisions for section 257 HMOs) (England) Regulations 2007 SI 2007/1904.

  • [4]

    s.72(1) Housing Act 2004.

  • [5]

    ss 72(4) and 72(8) Housing Act 2004.

  • [6]

    s.72(2) Housing Act 2004.

  • [7]

    s.72(5) Housing Act 2004.

  • [8]

    Thurrock Council v Palm View Estates [2020] UKUT 355 (LC).

  • [9]

    s.76 Housing Act 2004.

  • [10]

    ss 347 and 348B Housing Act 1985.

  • [11]

    s.76(6) Housing Act 2004.

  • [12]

    s.72(6) and (7) Housing Act 2004.

  • [13]

    ss 72, 72(7A) and s.249A Housing Act 2004 as amended by s.126 and Sch.9 Housing and Planning Act 2016.

  • [14]

    Sutton v Norwich CC [2021] EWCA Civ 20.

  • [15]

    s.73(3) Housing Act 2004.

  • [16]

    Sumal & Sons (Properties) Ltd v Newham LBC [2012] EWCA Crim 1840.

  • [17]

    Brent LBC v Shah and Others, 29 January 2018, Harrow Crown Court, see Nearly Legal blog.

  • [18]

    s.127(1) Magistrates’ Court Act 1980.

  • [19]

    Luton Borough Council v Altavon Luton Ltd & Ors [2019] EWHC 2415 (Admin).