Houses in Multiple Occupation - A Cautionary Tale for Errant Landlords

Pressure on the housing market has led to the conversion of many redundant office buildings into flats and the number of such projects is likely to be greatly increased by shifting work patterns brought about by the COVID-19 pandemic. A Court of Appeal ruling, however, powerfully signalled that rules in respect of health, safety and living standards at such premises will be rigorously enforced.

The case concerned an office block that had been converted into 47 flats. After a housing officer visited, the local authority employed its powers under the Housing Act 2004 to serve a number of improvement notices on the company that owned the block's freehold. The notices, amongst other things, required the company to remedy fire safety and electrical hazards and to install double glazing and central heating in some of the flats that were said to be excessively cold.

After some of the notices were not complied with, the council imposed civil penalties on the company totalling £140,000. The company's director and majority shareholder received identical penalties on the basis that he had consented to or connived in the company's failures. In addition, each of them received penalties of £96,600 in respect of breaches of the Licensing and Management of Houses in Multiple Occupation (Additional Provisions) (England) Regulations 2007.

When the council served a prohibition order barring the building's use as residential premises, the company's rental income dried up and it entered administration. The company's and the director's appeal to the Upper Tribunal was subsequently rejected, save in respect of the amount of the penalties. The company's overall penalties were reduced to £75,000 and the director's to £99,000.

Dismissing the director's appeal against that outcome, the Court rejected his plea that he had suffered double punishment, both as an individual and as a shareholder in the company. His penalties reflected his responsibility for the conduct of the company's affairs, his personal knowledge of the condition of the building and his responsibility for the occurrence of similar problems at another property. The penalties, whether viewed individually or in aggregate, could not be impugned as excessive or unjust.