The Borough Council of Gateshead v City Estate Holdings Limited

On an appeal against a civil penalty for managing an unlicensed property, the tribunal must make its own decision rather than review the local authority’s decision. Ignorance of selective licensing requirements is not, by itself, a reasonable excuse. Reliance on professional advisers will rarely establish that defence unless the landlord shows a relevant duty to advise, good reason to rely on the adviser, and a reason why the landlord could not establish the licensing position independently. A local authority’s enforcement policy is relevant to the authority’s decision, but not to the tribunal’s independent determination. A landlord’s good character and subsequent compliance may mitigate the penalty, but ordinarily cannot justify imposing no penalty where the offence is proved and reasonable excuse is not established.

The Borough Council of Gateshead imposed financial penalties on City Estate Holdings Limited for managing two properties in a selective licensing area without licences. The First-tier Tribunal cancelled the penalties, finding that the respondent reasonably relied on its solicitors and that the authority had not followed its enforcement policy.

The Council appealed under the Tribunals, Courts and Enforcement Act 2007. The issues were whether the respondent had a reasonable excuse under the Housing Act 2004, whether the authority’s policy affected the tribunal’s decision, and whether the respondent’s status as a reputable landlord justified imposing no penalty.

1. The appeal was allowed on all three grounds. The Upper Tribunal substituted its decision that a financial penalty should be imposed and remitted the question of its amount to a differently constituted First-tier Tribunal panel.

2. Under Part 3 of the Housing Act 2004, the authority had to be satisfied beyond reasonable doubt that the respondent had committed the offence of managing or having control of an unlicensed property. The respondent bore the burden of establishing the reasonable-excuse defence on the balance of probabilities.

3. There was no evidential basis for finding that the respondent’s solicitors were under a duty to investigate selective licensing without being instructed to do so. The respondent could have instructed its solicitors to advise on the regulatory position, researched the position itself, or instructed a letting agent. It had done none of those things. Reliance on the vendor’s solicitor was insufficient. The reasonable-excuse defence therefore failed.

4. The First-tier Tribunal had to make its own decision on the appeal, rather than review whether the local authority had complied with its enforcement policy. The extent to which the policy was followed was therefore irrelevant to the tribunal’s own decision-making process.

5. The respondent’s prompt application for licences and its status as a good or reputable landlord could be relevant to mitigation and the level of penalty. They did not constitute exceptional circumstances justifying no penalty once the offence was proved and reasonable excuse was not established.

6. The amount of the penalty was remitted because the Upper Tribunal lacked sufficient instructions and evidence concerning the respondent’s financial circumstances. The parties could agree the amount; otherwise the Council was to seek directions from the First-tier Tribunal.

• First-tier Tribunal (Property Chamber): cancelled the financial penalties imposed by the Council.
• Upper Tribunal (Lands Chamber): allowed the appeal on all three grounds, substituted a decision that a financial penalty should be imposed, and remitted the amount to a differently constituted First-tier Tribunal panel.