Leicester City Council v Nikita Morjaria

In civil penalty proceedings for an unlicensed HMO, proof of the underlying offence is required to the criminal standard. An appellate tribunal may set aside a first-tier tribunal’s conclusion that the evidence falls short of that standard only where a fundamental flaw undermines the decision and the only reasonable conclusion is that the facts were proved.

When assessing the penalty, the tribunal must consider the duration of the offence, actual and potential harm, culpability, aggravating and mitigating factors, and the objectives of punishment, deterrence and removal of financial gain. A local authority policy merits considerable weight but is not binding. Investigation costs and an avoided licence fee should not be added where that would involve double counting or lack specific statutory authority.

Leicester City Council imposed a civil penalty of £29,817 on Ms Nikita Morjaria for controlling an unlicensed HMO contrary to section 72 of the Housing Act 2004. The Council treated the offence as continuing from October 2018 until 11 August 2021. The First-tier Tribunal accepted that Room 5 had been occupied and that an offence had occurred, but found the criminal standard satisfied only for 11 August 2021. It substituted a penalty of £3,900.

The Council appealed against the FTT’s assessment of the duration of the offence, its treatment of the Council’s policy, its refusal to include investigation costs, and its treatment of other penalty factors. The central issues were whether the FTT’s evidential conclusion was legally sustainable and what penalty was appropriate.

1. Appeal allowed on quantum. The FTT’s decision was set aside and the Upper Tribunal substituted a penalty of £18,000.
2. Financial penalty proceedings under section 249A of the Housing Act 2004 are civil proceedings, but the facts constituting the offence must be proved beyond reasonable doubt. An appellate tribunal should not replace a first-tier tribunal’s conclusion that proof is insufficient merely because it would evaluate the evidence differently. Intervention requires a fundamental error undermining the integrity or coherence of the decision, together with the conclusion that the facts were contrary to the only reasonable conclusion available on the evidence.
3. The FTT’s treatment of the evidence of Mr Sona in isolation was a fundamental error. It failed to consider that evidence alongside the rent receipt, Mr Mursa’s evidence, the removal of the Room 5 occupant, the cover-up, and its findings that contradictory evidence was not credible. Properly considered, the evidence established that Room 5 had been occupied for considerably longer than one day, probably from the introduction of the licensing requirement in October 2018.
4. The FTT was entitled to depart from the Council’s policy after giving it considerable weight and considering whether its objectives would be met by a different penalty. The policy improperly risked conflating the seriousness of the offence with harm caused. An unlicensed HMO offence is generally of moderate seriousness. The appropriate penalty should reflect the offence’s seriousness, actual or potential harm, culpability, track record and mitigation.
5. The Council’s investigation costs could not properly be added as a separate surcharge. The statutory scheme already permits financial penalties to contribute to enforcement costs, and a further addition would risk double counting. There was no specific statutory sanction for recovering investigation costs through the penalty.
6. The appropriate starting range was £8,000 to £12,000. The penalty was set at £12,000, increased by £3,000 for specific harm to two occupants over up to thirty months and by £3,000 for deliberate conduct, concealment and non-cooperation. No further sum was added for avoided rent, the licence fee, ability to pay, or investigation costs.

• First-tier Tribunal (Property Chamber): accepted that an unlicensed HMO offence had been proved, but treated it as proved for one day only and substituted a penalty of £3,900.
• Upper Tribunal (Lands Chamber): allowed the Council’s appeal against the quantum of the penalty, set aside the FTT’s assessment and imposed a penalty of £18,000.