Palmview Estates Limited v Thurrock Council

The offence under section 72(1) of the Housing Act 2004 is controlling or managing an HMO which is required to be licensed but is not licensed. A reasonable excuse under section 72(5) must relate to that prohibited activity, not merely to the failure to apply for a licence. The defence is assessed objectively and in light of all relevant circumstances. A reason for not applying may sometimes support the defence, but it does not do so automatically. Where a tribunal applies the wrong legal question and the result might have differed, an appellate tribunal may set aside its decision and remit the matter for rehearing.

Palmview appealed against the Upper Tribunal’s decision in [2020] UKUT 355 (LC), which had set aside a First-tier Tribunal decision cancelling a financial penalty for operating an unlicensed HMO and remitted the matter for rehearing. The First-tier Tribunal had treated the alleged reasonable excuse as a reason for not applying for a licence. The central issue was whether section 72(5) of the Housing Act 2004 instead required a reasonable excuse for controlling or managing the HMO without a licence, and whether the First-tier Tribunal had applied the wrong legal test.

The appeal was dismissed. The Upper Tribunal was entitled to set aside the First-tier Tribunal’s decision and remit the matter for a full rehearing.

1. The offence under section 72(1) of the Housing Act 2004 is controlling or managing an HMO which is required to be licensed but is not licensed. Section 72(5) provides a defence where, viewed objectively, there is a reasonable excuse for having control of or managing the HMO in those circumstances. The defence must therefore relate to the prohibited activity itself.
2. A reasonable excuse for not applying for a licence is not automatically a reasonable excuse for continuing to control or manage an unlicensed HMO. Treating the two matters as interchangeable could permit a landlord to continue operating an unlicensed HMO merely because a licence was unlikely to be granted, undermining the licensing regime. The strict-liability character of the offence forms part of the statutory context but does not broaden the defence. The court applied the approach to the licensing regime’s purpose stated in R (Mohamed) v Waltham Forest LBC [2020] EWHC 1083 (Admin).
3. The First-tier Tribunal had repeatedly framed the issue as whether Palmview had a reasonable excuse for not applying for a licence. It did not explain why that reason amounted to an excuse for committing the section 72(1) offence. Its formulaic reference to the correct language in its conclusion did not cure the earlier misdirection. The tribunal needed to consider all relevant circumstances objectively, including whether simple steps could have avoided the offence, such as reducing occupancy or making an effective application.
4. Failure to apply may nevertheless support a reasonable-excuse defence in appropriate circumstances. The court referred to D’Costa v D’Andrea [2021] UKUT 144 as an example, but emphasised that it was best not to speculate about exhaustive categories. The issue had to be reconsidered by the First-tier Tribunal on the facts.
5. The Upper Tribunal did not substitute its own factual decision. It set aside the First-tier Tribunal’s findings and ordered a rehearing because the legal error was material and more than one outcome remained possible. The authorities on appellate interference with discretionary decisions, including In re C (A Child) (Adoption: Placement Order) [2013] 1 WLR 3720 and Re F (Children) [2016] EWCA Civ 546, were materially different. The second ground of appeal was misconceived because the real issue was misdirection, not merely inadequate reasons.

• Court of Appeal (Civil Division): Dismissed Palmview’s appeal and upheld the decision to set aside the First-tier Tribunal’s decision and remit the matter.
• Upper Tribunal (Lands Chamber): In [2020] UKUT 355 (LC), set aside the First-tier Tribunal’s decision after finding that it had asked whether there was a reasonable excuse for not applying for a licence, rather than whether there was a reasonable excuse for managing or controlling an unlicensed HMO, and remitted the matter for rehearing.
• First-tier Tribunal Property Chamber: Cancelled the financial penalty after finding that Palmview had a reasonable excuse for not applying for an HMO licence.