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A reasonable excuse defence to an RRO – ‘they told me they’d tell me’

D’Costa v D’Andrea & Ors (HOUSING – RENT REPAYMENT ORDERS – the defence of reasonable excuse) (2021) UKUT 144 (LC)

An Upper Tribunal appeal of a rent repayment order. Ms D’Costa was the owner of a property in Tower Hamlets. In 2015, she
let the property to a company named in the letting agreement as “FTC Property (Apartment Wharf)” and to which she has referred as FTC Limited trading as Apartment Wharf (“AW”). It was permitted to sublet, and its business model is to let out rooms in HMOs. The more occupants AW can place in a building the greater its profits, because the rent it pays is fixed; the rent payable by AW to Ms D’Costa was a £2,250 per month. AW let out all five rooms; prior to 1 October 2018 the property did not need an HMO licence because it had only two storeys but after that date, whenever there were five or more occupants, it did.

No licence was applied for until 31 July 2019, when she was told by a Tower Hamlets officer that one was required. A licence was required from 6 October 2018, when there were five occupants,

The tenants’ RRO application was presented by a Tower Hamlets Officer, as against Ms D’Costa and AW. The FTT had made an RRO against both (in relation to Ms D’Costa assessed against the rent she had received from AW).

Ms D’Costa had raised a defence of reasonable excuse at the FTT, on the basis that:

in September 2017 an employee of the London Borough of Tower Hamlets, Mr Ali Hempstead, visited the property as a result of a complaint from a neighbour. Ms D’Costa’s evidence was that she exchanged emails with Mr Hempstead and that she asked if she could apply for an HMO licence; she was told by Mr Hempstead by email that she could not because the property was not eligible (because it did not have three or more storeys), and that he would tell her if the position changed and the property needed a licence.

It was common ground that Mr Hempstead had visited the property, but the email exchange and its contents were not agreed. The FTT did not tackle this head on, though it did find that Ms D”Costa genuinely belied she would be told by Tower Hamlets if and when a licence was required. No finding on a defence was made.

Ms D’Costa appealed.

The council officer presenting the tenants’ case on appeal argued that Ms D’Costa could not have been told that the council would let her know, as no council officer would have said such a thing. However, the relevant emails, to which Ms D’Costa no longer had access, were not porduced by the council, despite repeated attempts by Ms D’Costa to get them to disclose the emails, including by SAR request.

The Upper Tribunal found that there was a defence of reasonable excuse.

It may be unlikely in general that a local authority employee would promise a landlord that he would do so, but without more information about Mr Hempstead it is not possible to say whether it was likely that he did so. The only evidence on the point is Ms D’Costa’s evidence that he did. It is surprising that Mr Williams did not instigate a search for the correspondence, in the interests of those he was representing since he was sure that it could not contain the assurance that Ms D’Costa said it contained, and in any event in order to assist the Tribunal.

The FTT did not make explicit its finding of fact about Ms D’Costa’s evidence that she was given an assurance by Mr Hempstead. But there is absolutely no reason to suppose that in finding that Ms D’Costa “genuinely believed that she would be told by Tower Hamlets if the premises required a licence” the FTT intended to say that that belief was irrational (as Mr Williams suggested to me) or that she had made up and then believed the assurance. There is no suggestion in the FTT’s decision that it doubted Ms D’Costa’s credibility. If it had found that she was lying in her evidence about the correspondence with Mr Hempstead it would have said so. I take the FTT’s finding to mean that it accepted her evidence that Mr Hempstead told her, and that that was the source of her belief.

It is difficult to understand why a landlord would not have the defence of reasonable excuse to the offence created by section 72(1) of the 2004 Act where he or she has been told by a local authority employee that their property does not need an HMO licence and that they will be told if that situation changes, and I find that Ms D’Costa had that defence. She therefore did not commit the offence and no rent repayment order can be made against her.

Comment

So, ignorance of the law is not a defence, or a reasonable excuse, but having been told by the council that they will tell you if and when a licence is needed could well be. And a word of caution from the UT to local authorities who chose to assist tenants on RRO applications – they must do so fairly.

A local authority is a public body with duties to the public, and with a strong interest in the administration of justice. The local housing authority chose to conduct the proceedings for the sub-tenants and to have Mr Williams give evidence for them, yet chose not to produce the correspondence between Ms D’Costa and Mr Hempstead (or, at least, not to conduct a search for that evidence), even though it knew that Ms D’Costa wanted it to be produced and that it would have been of assistance to the FTT. It is regrettable that Ms D’Costa made a number of allegations about Mr Williams’ integrity and that of other representatives of the local authority, which I have no doubt were unfounded; but as she saw things she was being treated very unfairly, and it is unsurprising that she drew adverse conclusions from that behaviour. The Tribunal rejects Ms D’Costa’s allegations of bad faith, but it does express disappointment in the way the local housing authority conducted this litigation for the sub-tenants. If the local authority chooses to enter the fray it should take pains to do so in a way that is fair to all parties.

 

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.

18 Comments

  1. Alan Armstrong

    so, I take this as ‘on the balance of probabilities there was a defence of reasonable excuse’

    I have just had a look at my ‘sent’ emails and the latest I can find is from 2018.

    I wonder what the outcome would have been if the Council had interrogated its email back ups (which I assume are for at least 5 years) but had not found the conversation.

    It also seems strange that the owner hadn’t seen any of the press or publicity that most Councils issued when the law changed.

    Reply
    • Giles Peaker

      The owner was abroad, according to the judgment.

      An RRO has to be proved to the criminal standard, so would have to establish that any raised defence of reasonable excuse could not be made out (on facts or in law). In this case, there was not evidence put forward to rebut the owner’s positive case on her defence.

      The FTT hearing was in March 2020, so the emails (if any) were less than 3 years old.

      Reply
  2. Ben Reeve-Lewis

    What about a landlord’s obligation to keep on top of the law?

    In Christine Perrin v. The Commissioners for Her Majesty’s Revenue and Customs (2018) the UT commented “Some requirements of the law are well-known, simple and straightforward but others are much less so. It will be a matter of judgment for the FTT in each case whether it was objectively reasonable for the particular taxpayer, in the circumstances of the case, to have been ignorant of the requirement in question, and for how long”

    The October 2018 changes were well advertised some considerable time before the 3 storey rule change and what consideration was given to her reasonable expectation that the council officer, 13 months later and after dealing with countless thousands more complaints will have picked up the phone on the 1st October 2018 and said “Oh by the way Mrs DaCosta…..I dont know if you’ve heard…………………” That just doesnt seem to have been an “objectively reasonable” presumption at all, to expect an overworked officer to personally shoulder the responsibility of calling infdividual landlords updating them on changes in law, even if the email were to have been produced.

    .

    Reply
    • Giles Peaker

      I don’t think that is the UT finding. It is not saying that is what an LA should do. But if – as it appears – such was the message to the owner, she would be entitled to believe it. I think a presumption that everybody knows how overworked local authority officers are and therefore how unlikely they are to fulfil what they have said they will do is workable…

      Reply
  3. Sam

    You have to remember that the Tribunal has to decide whether a criminal offence has been committed. I personally don’t want to live in a state in which a person can be prosecuted for not doing something when an organ of the state has told them that they do not need to do it. Flip the scenario over and imagine it was a tenant being prosecuted for not doing something they should have done because they were told by the state that they did not need to. I don’t think anyone would argue it would be reasonable to prosecute them.

    Reply
  4. Ben Reeve-Lewis

    You’re conflating the issues. In the DaCosta case, At the time of the council officer’s visit in September 2017 she didnt need a licence. The law changed in October 2018 and that change in law was widely publicised, even then she did not apply for a licence until July 2019

    Do you not think that its reasonable to expect a landlord, who runs a property, at a profit, however small and for whom swathes of legislation applies governing the renting of accommodation, including safety, should not be expected to personally keep abreast of those laws? Why should it be the council’s duty for individual officers to personally notify each landlord of a change in national legislation?

    My wife is a self employed corporate travel agent, who is required, by UK law, to keep abreast of a wide variety of issues that include regulations of other countries. It is her responsibility to know what they are. If she gets them wrong, which happens on occasion, then she has to reimburse clients from her own pocket. She regularly attends conferences and seminars to keep on top of the never ending changes, whether it be amended visa rules, insurance requirements, individual airline baggage allowances etc.

    Does she like it? No but she accepts it as her responsibility to know her business.

    Reply
  5. Bill Disney

    And comparing this to corporate travel agency isn’t conflating the issues at all…

    Reply
  6. Ben Reeve-Lewis

    No it isnt. It’s showing comparable logic.

    Sam commented that ” I personally don’t want to live in a state in which a person can be prosecuted for not doing something when an organ of the state has told them that they do not need to do it.”. The organ of the state were correct in telling the landlord she didnt need a licence because at that time she didnt. That is not the legal point at issue with this RRO. Said legal point being whether she “genuinely believed that she would be told by Tower Hamlets if the premises required a licence”.

    Reply
  7. Ben Reeve-Lewis

    But I still dont think that qualifies as reasonable excuse. In Thurrock Council v. Palm View Estates (2021) the tribunal commented “Whatever the reasons for not applying for a licence, what the FTT has to decide is not whether the respondent had a reasonable excuse for not applying for a licence. The issue was whether it had a reasonable excuse for continuing to manage and control the HMO without one”, I just cant see how not getting a licence because you sincerely believed that a council officer would personally update you on a law change if the time ever arises is a reasonable excuse for continuing to manage an HMO without a licence.

    In Kristin Shields, Hannah McMillan, Sophie Crow, Chloe Hewer, Francesca Foster, v. Simon and Sheradene Rose the tribunal noted “It is not a defence to claim that they were unaware that an HMO licence is required”.

    We deal with this nonsense all the time, the complaints that they didnt know it needed a licence and expecting everyone else to tell them what to do and when to do it, whether it be their managing agent or the council.

    Reply
    • Giles Peaker

      a) This is the Upper Tribunal, so not constrained by any previous FTT view, b) She wasn’t managing, though controlling. The R2R set up was managing and the RRO against them stands. c) I think if the council had not failed to address the issue and failed to disclose the emails, the result might well have been different. If the emails showed no such comment by the council officer, for example… I’d say the council actively lost the case, rather than the landlord winning it per se.

      Reply
  8. Ben Reeve-Lewis

    But taking Alun Armstrong’s point on, are emails even backed up to 2017? Could LBTH even have been able to produce them? My sent email box doesnt go back that far and even if they could, would it have been a reasonable assumption on Ms DaCosta’s part that she could run an unlicensed HMO secure in the knowledge that it didnt matter that she was doing so, as long as the council officer hadnt called her to tell her about a change in the law? given that the test as exemplified in Palm view was whether the landlord had a reasonable excuse for continuing to manage and control the HMO without a licence?

    Missing emails aside I just cant see how a reasonable person (the tribunal) could presume that her responsibility to licence her HMO was abrogated by a reasonable expectation that a council officer would , at some point in the distant future and should it ever become necessary, to inform her of changes in the law, which is essentially what this decision amounts to.

    A council officer once told me that he would call me if ever there was a change in the law = I dont ever have to worry about keeping on top of legal changes to my business practices, if Mr Ali Hempstead doesnt call me to tell me about any changes in the law. Thats nuts.

    Reply
    • Giles Peaker

      On emails – I would certainly think a local authority would have 3 years backed up. If not, LBTH could have produced evidence to that effect, rather than just ignoring the whole point.

      On ‘reasonable assumption’, you get it wrong, she wasn’t assuming it didn’t matter that she was running an unlicensed HMO (and again, controlling, not managing), but assuming that it didn’t require a licence because she would be informed if it did.

      This isn’t a general excuse. Most offences don’t have a ‘reasonable excuse’ defence.

      But it is on a par with 49 Russell Hill Road, Croydon, CR8 2XB ((Housing) Act 2004 and Housing and Planning Act 2016 – Rent repayment orders) (2021) UKFTT LON_00AH_HMK_2020_0021. The council had told Camelot they didn’t need an HMO licence (albeit that the council were, the Tribunal found, wrong in law). This was a reasonable excuse.

      ‘I didn’t know I had to have a licence’ – not an excuse. ‘I didn’t know I had to have a licence because the council licensing officer had told me he’d tell me if and when I did’ – not unreasonable as an excuse (in the absence of evidence that the officer had not said this. And of course, if they did say that, they shouldn’t have).

      It is hardly going to work as a widespread defence…

      Reply
  9. Ben Reeve-Lewis

    I just dont buy that as logic though Giles, would a reasonable person have genuinely believed that all they had to do was sit back and wait for a call? I agree the rep should have covered the email question in the claim though. I shall shut up now….my outrage has been expunged

    Reply
  10. Sam

    Ben: the state prosecutes its citizens. If the state, albeit a different part of it, tells someone we will tell you when you need to do something, and then doesn’t tell them, and then another arm prosecutes the individual that is inherently unfair and inimical to a liberal democracy. If the person actually knows the law (e.g. they are a housing barrister) I’d accept the same unfairness does not arise.

    Whether it was said, or if it was said so as to be carte blanche forever, is also another matter but, as Giles said, all the UT had to go on was the word of the landlord because the council didn’t bother to adduce the evidence to rebut it.

    Reply
  11. Ben Reeve-Lewis

    Sam you’ve gone off on your own point again. This is an RRO, it isnt the state prosecuting a citizen, its a civil matter. a tenant suing their landlord based on legislation written by the state.

    My argument and I dont agree with Giles, is that the reasonable excuse defence was on the basis, not that the property didnt need a licence in 2017, it didnt and there is no argument by either party on that but whether the landlord believed that they could run an HMO without a licence, as long as the landlord didnt get a phone call or email from the council officer, letting them know that the law had changed.

    As I said above, IMO the rep would have better served their case by covering the email issue, even if they couldn’t produce it because it wasnt archived but even if it was evidenced I dont think a landlord should be able to rely on reasonable excuse for not licensing on the basis that they were waiting for a phone call from an individual council officer in their specific instance.

    Landlords, like any other citizen are bound by legislation and shouldnt be able to abrogate their responsibility to comply with those laws on the basis that they were waiting for someone else to update them because they once said they would

    Reply
    • Giles Peaker

      Ben- it is not simply a civil matter. It is primarily a criminal matter, requiring proof of an offence, to the criminal standard.

      I don’t think it would have been a reasonable excuse for the landlord to have relied on not being told by anyone else (an agent, a friend, a landlord body or whatever), but not being told by the council that is the body responsible for licensing, when – let us accept this in the absence of evidence to the contrary – the council had said the landlord would be informed by them if a licence was required, is of a different degree. Look at it this way, if the council had prosecuted for controlling an HMO without a licence, would the same situation give rise to a defence? Yes, of course it would.

      And of course, the FTT accepted that Camelot being told by the Council, who owned the property, that no HMO licence was needed would be a reasonable excuse. What is the difference? The council were found to be wrong in law, but why would that remove the reasonable excuse of relying on what the council had told them?

      As I said, this is hardly going to be a widespread defence. And the council shot itself (and the tenants) in the foot by the way it approached the defence and the evidence.

      Reply
  12. Sam

    Ben – as Giles said, an RRO can’t be made unless the FTT is satisfied that a criminal offence occurred. The meaning of a reasonable excuse is therefore construed as if it was being used as a defence to a criminal prosecution. Whether an excuse is reasonable is therefore the same whether there is a prosecution or claim for an RRO.

    I’m also not so sure that it is even so simple as to say that an RRO is a civil claim. It cannot be brought in either the County Court or High Court and is arguably more accurately described as another means in which the State has decided to punish the landlord given that it has not decided to alter the contractual rights between the landlord and tenant by deeming that no rent is payable (which is what was initially proposed in the bill for the 2004 legislation before they decided to introduce the concept of a rent repayment order).

    Reply
  13. archie maddan

    Some observations (from a barrister who practices in this field and was also employed in a London borough for five years):

    The Respondent should have applied to the FTT for an order for disclosure of the emails, I would hope that the FTT would grant it- certainly any future such requests will be granted after this decision.

    The LHA should in any event have checked the emails to test the accuracy of what the landlord was saying about the council officer’s alleged promise; if only to protect its officer from what seems to have been a nasty personal attack by this landlord.

    The finding that there may have been a reasonable excuse defence seems correct in the circumstances of this case; LHAs are bound by the Regulators’ Code amongst other considerations and must regulate with fairness ; in this case they clearly did not. If a regulated person is told what the landlord was in this case then they are entitled to place some weight upon it (there is sone case authority on this matter however and it’s not altogether clear cut so an appeal may be possible….).

    Housing officers and EHOs involved in these cases often seem not to properly understand the law (and why should they it’s not their specialism), especially criminal procedure law – which in RRO cases underpins the RRO claim.

    If a local council, wearing its LHA hat, is going to take a case on behalf of a tenant (a perfectly reasonable thing to do in some cases) then it MUST do so with the advice and oversight of its legal department who, one hopes, will understand the importance of the points made by the UT in this case. Local councils are crucial stakeholders in our crumbling justice system and if they cannot be trusted to execute their functions properly in RRO cases then it raises a big question over whether they understand the various duties when they prosecute, the Post Office cases raise similar questions. I have spent hours with clients on other London boroughs checking that our disclosure was complete and correct and it actually angers me to see another London borough ignore these matters even in RRO cases.

    Rant over.

    Reply

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  1. Rent Repayment Orders and landlords - nowhere to hide? - The Landlord Law Blog - […] If you want to read more about this case there is an excellent post (and comments) on Nearly Legal…

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