AA Homes & Housing Ltd & Anor v London Borough of Croydon

When fixing a civil penalty for managing or controlling an unlicensed property, the primary assessment of harm must concern harm caused by that offence. Unrelated fire-safety hazards in a building cannot increase the stage-one harm score merely because they are serious. They may, however, be relevant aggravating matters at a later stage, and remedial steps may be mitigation.

A tribunal determining an appeal must apply the local authority’s penalty policy for itself, while giving appropriate weight to the authority’s assessment. It must give intelligible and separate reasons for each offender’s penalty. It may draw adverse inferences about culpability where an appellant provides little evidence.

AA Homes & Housing Ltd, the freeholder, and Anabow Services Ltd, the managing agent, were penalised for control and management of Flat 39 without the selective licence required under Part 3 of the Housing Act 2004. The First-tier Tribunal reduced the freeholder’s penalty but upheld the managing agent’s penalty.

Both appellants appealed on the level of the penalties. The principal issue was whether serious fire-safety defects in the common parts of the building could increase the harm assessment for the discrete offence of failing to license Flat 39. A further issue was whether the First-tier Tribunal had adequately and separately reasoned the penalty imposed on the managing agent.

1. Appeal allowed and remitted. The First-tier Tribunal made an error of law by treating fire hazards in the building as a major factor in the stage-one assessment of harm for the offence of failing to obtain a selective licence.

2. Under the respondent’s policy, harm or impact at stage one means harm caused by the offence itself. The serious common-part fire hazards were not caused by the failure to license Flat 39 and would not have been remedied by granting its licence. They could not therefore justify increasing the stage-one score to significant harm.

3. The local authority was not entitled to take a general holistic approach to criminal liability by using breaches punishable under other regulatory processes as the primary measure of this penalty. The appropriate starting point was the harm caused by the particular offence under Part 3 of the Housing Act 2004.

4. The fire hazards could nevertheless be considered as aggravating factors at the appropriate later stage of the policy assessment. Correspondingly, properly evidenced efforts to remedy them could be mitigating factors. Those matters could be addressed at the rehearing.

5. The First-tier Tribunal was entitled to infer high culpability from the material available, including the appellants’ lack of evidence and the inaccurate licence application. This ground did not succeed.

6. The First-tier Tribunal gave insufficient reasons for the penalty imposed on the managing agent. It was not possible to tell whether it had repeated the same erroneous reliance on fire safety or whether it had separately assessed double counting and the other policy stages. The penalties for both appellants were remitted to the First-tier Tribunal for re-determination.

• Upper Tribunal (Lands Chamber): allowed both appellants’ appeals against the level of civil penalties and remitted the matter for a rehearing: [2020] UKUT 181 (LC).
• First-tier Tribunal (Property Chamber): reduced the freeholder’s penalty from £26,000 to £20,000 and dismissed the managing agent’s appeal against its £12,000 penalty.