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Landlords and other persons who control or manage an unlicensed HMO requiring a licence may be guilty of an offence under section 72(1) of the Housing Act 2004. Local authorities or tenants seeking to recover housing benefit payments or rent from persons involved in such an offence, will need to prove that such an offence has been committed beyond reasonable doubt.
A person found to have committed this offence may be the subject of 4 sanctions:
1. prosecution in the Magistrates Court summary proceedings;
2. a Civil financial penalty imposed by the local housing authority (if no conviction or criminal proceedings pending);
3. an application for a rent repayment order by the local housing authority in respect of rent paid;
4. an application for a rent repayment order by any of the tenants;
The Divisional Court has provided helpful clarification as to one of the elements of the offence under section 72(1).
In Mohamed v London Borough of Waltham Forest  EWHC 1083, the landlords sought to argue it was a necessary element of the offence that the persons who had control of or managed an HMO, knew that they were managing or controlling an HMO, which was required to be licensed.
The Divisional Court had no hesitation in rejecting that argument.
However, the Court accepted that a person alleged to have committed such an offence might have a defence if they established a reasonable excuse for having control of or managing a HMO which was required to be licensed. If the accused did not know that there was a HMO which was required to be licensed, for example because it was let through a respectable letting agency to a respectable tenant with proper references who had then created the HMO behind the accused’s back, that might be relevant to the defence.
In the analogous context of the offence of failing to comply with Management Regulations in respect of HMO’s, it is clear the burden of proving the defence of reasonable excuse lies with the accused. However, the accused only need establish the defence on the balance of probabilities and not to the higher criminal standard of beyond reasonable doubt: I R Management Services Limited v Salford City Council  UKUT 81.
These decisions show local authorities and tenants relying on commission of these types of offence as the basis for the First-tier Tribunal to make a rent repayment order or a Financial Penalty would be well advised to ascertain in some detail the state of knowledge of the person managing or controlling the HMO before launching an application. The extent to which the accused’s lack of knowledge may be relevant the defence of reasonable excuse has yet to be explored in detail. Gaps in evidence about the accused’s knowledge may yet be the subject of challenge.
For more details please contact Howard Lederman (HowardL@42br.com).