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.
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.