Property Guardianship – legal round up

In this update, we review several recent decisions which impact businesses operating within the Property Guardian Sector. 

Failure to cooperate with the Council

Pedro Reis Tenajas and his property agency London Corporate Relocation Ltd have been prosecuted for:

—  Failing to licence a house in multiple occupation
—  Failing to provide information to the occupiers
—  Failing to carry out the required safety measures

The Court also noted that the defendants failed to cooperate with Merton Council during their investigation; were obstructive and had not filed company accounts prior to the hearing.  In fact, neither defendant attended Court!

The company was ordered to pay £21,750 and Mr Tenajas was fined £11,530.  Both must pay these sums within 21 days.

Prosecutions of landlords for failing to obtain HMO licences are becoming more common.  We have previously commented on how other councils have taken action in March 2021 and November 2020.  We anticipate even more companies will be affected as large swathes of London and urban centred councils bring in selective licensing to help deal with problems associated with the private rented sector such a waste, nuisance, and anti-social behaviour.

Lesson learnt – When considering whether to take on a new property, Property Guardianship Provider (PGP) companies should identify whether selective licensing is being operated by their local council and how that will impact their proposal including their business model and pricing.

Dampness and mould
The Housing Ombudsman Service (HOS) published its spotlight report in October on damp and mould confirming that it’s not a lifestyle choice.  It confirmed that a high proportion of complaints about dampness are upheld by HOS.  It recommends that property owners adopt a zero-tolerance approach to this issue; have a comprehensive policy to manage, mitigate and respond to these complaints; and should investigate their system to find ‘their silence’ i.e. those complaints where nothing has been done but the occupier has gone quiet.  Blaming the occupiers for condensation and mould is unhelpful, and owners should improve their complaints handling processes.

Property guardians can use the HOS to resolve property defect complaints if their PGP company is a member of the HOS scheme.

Lesson learnt – We frequently find that dampness and mould are specified in rent repayment order applications.

Landlord Successful in challenging financial penalty imposed
Aftab Raja was successful in challenging Salford Council in the Upper Tribunal (Lands Chamber) for imposing a financial penalty without assessing his financial means.  Mr Raja operated an unlicensed rented property in an area where selective licensing was imposed.  Salford imposed a £22,500 penalty for failure to obtain a licence. The UT had no information as to how the penalty had been calculated and so it has remitted the case back to the First Tier Tribunal (FTT) for the appropriate penalty to be determined at a re-hearing.

Lesson learnt – Rather than prosecute PGP companies for Housing Act breaches, many councils are choosing to use the civil sanctions route and impose financial penalties.  The Council should provide details of factors used in the calculation of the penalty and should ask questions about the company’s financial standing.  Relying on statutory accounts may not provide accurate information about a business’s current finances.

Confiscation orders 
Ealing Council has been successful in obtaining confiscation orders against landlords for planning and HMO licensing contraventions.  Mr and Mrs Khosa were ordered to pay £253,449 by 3 December, with an order to serve 30 months in prison (for him) and 15 months in prison (for her) if they failed to pay.  They were each fined £6,000 and ordered to pay over £25,000 in costs.

The Khosas had been served with a planning enforcement notice requiring them to cease using an outbuilding as residential accommodation by tenants.  Whilst the main house was being used as a large HMO and required improvements.

Lesson learnt – PGP companies should be aware that councils can and will seek a confiscation order to recover the proceeds of crime which would include income generated by unlawful means.

Rogue landlords’ database
We have previously written about the nationwide database used to record rogue landlords.  The case of the landlord Mr Gibbons from Preston is interesting.  His property was brought to the attention of the EHOs by a student occupier who complained about the structural conditions of the HMO.  On inspection, they found an unlicensed HMO, a property needing repairs, and identified that Mr Gibbons owned other unlicensed HMOs within Preston.

Mr Gibbons failed to carry out the repair works and so the council imposed a financial penalty of £12,375 per offence.  Mr Gibbons appealed to the First Tier Tribunal (FTT), where the tribunal upheld the fines.  The Council also decided that he was not fit to hold an HMO licence. Again, Mr Gibbons appealed and lost.  He was then advised that his name would be added to the rogue landlords’ database.  He appealed but subsequently abandoned his application.  His tenants, 13 of them, brought claims for rent repayment orders and he has been ordered to pay them £46,908.

Lesson learnt – PGP companies need a protocol for onboarding new properties so that the implications of HMO and other licensing is considered before taking on the property.