Failure to Obtain License

It is an offence to be a person having control of or managing a licensable house in multiple occupation (HMO) without a licence; this applies to mandatory and additional licences [1]. Such a person may have a defence if an application for for temporary exemption from the requirement to have licence. No offence will have been committed once an application for a licence or for a temporary exemption notice has been submitted [2].

Licence holders or persons in control may also have committed an offence if they [3]:

  • knowingly permit another person to occupy and this results in more persons or households occupying than authorised by a licence, or
  • breach any condition of a licence.

Defences

There is a general defence of ‘reasonable excuse’ [4].

Where an HMO becomes licensed for the first time but there are more people in occupation (and were in occupation previously) than the licence permits, it is a defence to any action that the licence holder is taking reasonable steps to reduce the numbers in order to comply with the licence [5].

Where an HMO that should be licensed is registered under a registration scheme with control provisions [6] when the licensing provisions commence, it will be deemed to be licensed and the licence will last until such time as the registration would be due for renewal [7].

Sanctions

Offences can be punished on conviction by a fine [8].

A tenancy granted by a landlord who has committed an offence relating to the licensing of a HMO will be a lawful tenancy [9]. The tenant’s obligation to pay the rent is binding, and to terminate the tenancy a landlord must follow the lawful procedure for ending the type of tenancy granted.

The Court of Appeal held that a confiscation order under the Proceeds of Crime Act 2002 in respect of the rent received by a landlord while unlicensed was not available because there was no causal connection between the criminal conduct (of failure to obtain a license) and the benefit (ie the rent) received. In other words the landlord continued to receive rent not because of the offence but in spite of it [10]. However, it has been successfully argued (in a non-binding Crown Court case) that where a tenancy (and the rental income generated) could only be granted as a result of criminal conduct then a confiscation order can be made. In this case (under the selective licensing regime), the multiple tenancies could only be granted by breaching the specific terms of the license which provided that the property could only be let to a single household [11].

As an alternative to prosecution, a local authority can impose a civil penalty of up to £30,000 [12].

A landlord who fails to obtain a licence could also be subject to a:

  • (on or after 6 April 2017) rent repayment order
  • (on or after 6 April 2018) banning order. A landlord who breaches the condition of a licence could also be subject to a banning order.

Section 21 restrictions

A landlord who does not have a licence in respect of an HMO that should be licensed is restricted from using the section 21 procedure to obtain possession.

Where a landlord has either applied for a licence, or for a temporary exemption notice on the basis that they are planning to take steps to ensure that the property will no longer require licensing, there is no restriction on using the section 21 procedure as long as the application has not been withdrawn, and the authority has [14]:

  • not reached a decision on the application, or
  • decided not to grant the application, but either an appeal has been made against the decision, or the appeal period has not yet ended.

A landlord of a flat in an unlicensed HMO cannot rely on section 21 Housing Act 1988 to gain possession for as long as the HMO remains unlicensed. This restriction only applies if the person serving the notice is the person with control of the HMO and the flat it relates to is also under their control [15].

It is arguable that the landlord of a self-contained unit let on a separate AST in a licensed HMO will not be able to rely on a section 21 notice also if s/he did not provide an energy performance certificate (EPC) to the tenant, but this point has not been tested in the courts yet.

Wales

The information on this page applies only to England.

[1] s.72(1) Housing Act 2004.

[2] ss.72(4) and 72(8) Housing Act 2004.

[3] s.72(2) Housing Act 2004.

[4] s.72(5) Housing Act 2004.

[5] s.76 Housing Act 2004.

[6] ss.347 and 348B Housing Act 1985.

[7] s.76(6) Housing Act 2004.

[8] s.72(6) and (7) Housing Act 2004.

[9] s.73(3) Housing Act 2004.

[10] Sumal & Sons (Properties) Ltd v Newham LBC [2012] EWCA Crim 1840.

[11] Brent LBC v Shah and Others, 29 January 2018, Harrow Crown Court, see Nearly Legal blog.

[12] ss.72, 72(7A) and s.249A Housing Act 2004 as amended by s.126 and Sch.9 Housing and Planning Act 2016.

[13] s.75 Housing Act 2004.

[14] ss.75(2) and 73(1) Housing Act 2004; ss72(4) and 72(8) Housing Act 2004.

[15] reg 8 Houses in Multiple Occupation (Certain Converted Blocks of Flats)(Modifications to the Housing Act 2004 and Transitional Provisions for section 257 HMOs) (England) Regulations 2007 SI 2007/1904.

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