Determining the Level of the Civil Penalties
When considering the severity of any offence Section 143(1) of the Criminal Justice Act 2003 states:
In considering the seriousness of any offence the court must consider the offender’s culpability in committing the offence and any harm which the offence caused, was intended to cause or might foreseeably cause.
It also considers harm as encompassing those offences where harm is caused but also those where neither individuals nor the community suffer harm but a risk of harm is present.
In order to set the level of the penalty the following steps will be considered by the council.
Step 1: Setting the initial determination
The council will determine the level of penalty based on:
- the culpability and track record of an offender and
- the level of harm to the tenants
Step 2: Adjustments to the Initial Determination
The council will make adjustments to the initial determination of that level of penalty having regard to:
- any aggravating or mitigating circumstances
- the totality of that level
- that the level is fair and proportionate but in all instances act as a deterrent and removes any gain
Step 3: Final determination of the level of any Civil Penalty
The council will make adjustments to the final determination should the offender provide written information/proof to demonstrate the impact of the level fine would be unfair and disproportionate.
Step 1 - Setting the initial determination
1) Culpability and track record of an offender
The level of culpability of a person will depend upon a number of factors.
High level of culpability
A person will be deemed to be highly culpable when they intentionally or recklessly breach or wilfully disregard the law:
- they have a history of non-compliance
- despite a number of opportunities to comply they have failed to do so
- they have been obstructive as part of the investigation
- failure to comply results in significant risk to individuals
- they are a member of a recognised landlord/letting agency association or accreditation scheme
- they are a public figure who should have been aware of their actions
- they are an experienced landlord/agent with a portfolio of properties failing to comply with their obligations
- there is serious and/or systematic failure to comply with their legal duties
Medium level of culpability
A person commits an offence through an act or omission a person exercising reasonable care would not commit:
- it is a first offence with no high level culpability criteria being met, such as a member of an accreditation scheme
- failure is not a significant risk to individuals
- the landlord/agent had systems in place to manage risk or comply with their legal duties but these were not sufficient or adhered to or implemented
Low level of culpability
A person fails to comply or commit an offence with little fault:
- no or minimal warning of circumstances/risk
- minor breaches
- isolated occurrence
- a significant effort has been made to comply but was inadequate in achieving compliance
These examples are not exclusive and other factors may be taken into account when considering the level of culpability.
2) Level of harm to the tenant
When considering the level of harm both the actual, potential and likelihood of the harm will be considered.
High level of harm
A high level of harm could constitute:
- serious effect on individuals, or widespread impact
- harm to a vulnerable individual
- high risk of an adverse effect on an individual
- serious level of overcrowding
Medium level of harm
A medium level of harm could constitute:
- adverse effect on an individual - not high level of harm
- medium risk of harm to an individual
- low risk of a serious effect
- the council’s work as a regulator to address risks to health is inhibited
- consumer/tenant mislead
Low level of harm
A low level of harm could constitute:
- low risk of harm or potential harm
- little risk of an adverse effect on individuals
These examples are not exclusive and other factors may be taken into account when considering the level of harm.
Vulnerable individuals
The statutory guidance states that the harm caused and vulnerability of the individual are important factors in determining the level of penalty.
The Housing Act 2004 defines a vulnerable individuals as one who is at greater harm and therefore the penalty should be greater when vulnerability is an issue.
Determination of Civil Penalty Levels
The statutory guidance makes it clear that it is for each council to determine the level of fine imposed under the Housing and Planning Act.
The following are the initial level of fines for each level of culpability and harm, including the minimum level of fine which will be imposed for each classification (when considering mitigating factors).
Determination of Civil Penalty Level - High level of culpability
- High level of harm: £25,000 initial fine, with £6,000 minimum fine level
- Medium level of harm: £15,000 initial fine, with £6,000 minimum fine level
- Low level of harm: £7,500 initial fine, with £6,000 minimum fine level
Determination of Civil Penalty Level - Medium level of culpability
- High level of harm: £15,000 initial fine, with £4,000 minimum fine level
- Medium level of harm: £10,000 initial fine, with £4,000 minimum fine level
- Low level of harm: £5,000 initial fine, with £4,000 minimum fine level
Determination of Civil Penalty Level - Low level of culpability
- High level of harm: £7,500 initial fine, with £2,000 minimum fine level
- Medium level of harm: £5,000 initial fine, with £2,000 minimum fine level
- Low level of harm: £2,500 initial fine, with £2,000 minimum fine level
Step 2 - Adjustments to the Initial Determination
In order to determine the final penalty the council will consider both aggravating and mitigating factors in each case. These will adjust the initial level of the penalty based on these factors.
The following is a list of both aggravating and mitigation factors which will be considered as part of the determination. The list is not exhaustive and other factors may be considered depending on the circumstances of each case.
Aggravating factors could include:
- previous convictions having regard to the offence to which applies and time elapsed since the offence
- motivated by financial gain
- obstruction of the investigation
- deliberate concealment of the activity/evidence
- number of items of non-compliance - greater the number the greater the potential aggravating factor
- record of letting substandard accommodation
- record of poor management/inadequate management provision
- lack of a tenancy agreement/rent paid in cash
When considering previous offences regard should be given to the guidance on Banning Orders as well as any relevant offence such as trafficking.
Mitigating factors could include:
- cooperation with the investigation, for example turns up for the PACE interview
- voluntary steps taken to address issues, for example submits a licence application
- acceptance of responsibility, for example accepts guilt for the offences
- willingness to undertake training
- willingness to join recognised landlord accreditation scheme
- health reasons preventing reasonable compliance - mental health, unforeseen health issues, emergency health concerns
- no previous convictions
- vulnerable individuals where their vulnerability is linked to the commission of the offence
- good character and/or exemplary conduct
For each aggravating or mitigating factor which applies to each specific case the level of fine will be adjusted by 5% of the initial fine, up to the maximum £30,000 or to the minimum fine for each determined level of culpability and harm, as shown above.
The only exception to this principle will be for the number of items of non-compliance which will be 5% for the first 5 items and 10% for any number of items greater than this level of non-compliance with items on any notice which has not been complied with.
Totality Principle
If issuing a financial penalty for more than one offence, or where the offender has already been issued with a financial penalty, consider whether the total penalties are just and proportionate to the offending behaviour.
Where the offender is issued with more than one financial penalty, the council should consider the following guidance from the definitive guidelines on Offences Taken into Consideration and Totality.
The total financial penalty is inevitably cumulative.
The council should determine the financial penalty for each individual offence based on the seriousness of the offence and taking into account the circumstances of the case including the financial circumstances of the offender so far as they are known, or appear, to the council.
The council should add up the financial penalties for each offence and consider if they are just and proportionate.
If the aggregate total is not just and proportionate the council should consider how to reach a just and proportionate financial penalty. There are a number of ways in which this can be achieved.
For example:
- Where an offender is to be penalised for 2 or more offences that arose out of the same incident or where there are multiple offences of a repetitive kind, especially when committed against the same person, it will often be appropriate to impose for the most serious offence a financial penalty. This should reflect the totality of the offending where this can be achieved within the maximum penalty for that offence. No separate penalty should be imposed for the other offences;
- Where an offender is to be penalised for 2 or more offences that arose out of different incidents, it will often be appropriate to impose a separate financial penalties for each of the offences. The council should add up the financial penalties for each offence and consider if they are just and proportionate. If the aggregate amount is not just and proportionate the council should consider whether all of the financial penalties can be proportionately reduced. Separate financial penalties should then be passed.
Where separate financial penalties are passed, the council must be careful to ensure that there is no ‘double-counting’.
Fair and Proportionate
A third determinate of any civil penalty must be the general principle:
The civil penalty should be fair and proportionate but in all instances should act as a deterrent and remove any gain as a result of the offence.
The statutory guidance states that a guiding principle of civil penalties is that they should remove any financial benefit that the landlord may have obtained as a result of committing the offence. This means that the amount of the civil penalty imposed most never be less than what it would have cost the landlord to comply with the legislation in the first place.
When determining any gain as a result of the offence the council may take into account the following issues:
- cost of the works required to comply with the legislation
- any licence fees avoided
- additional rent which the landlord received while the property was operating without an HMO licence (Thurrock Council v Khalid Daoudi 2020UKUT 209 (LC))
- any other factors resulting in a financial benefit as determined by City of York Council
If the level of gain less than the calculated penalty, the reduction will be the level of gain plus £2,000 or 10% whichever is the greater to the maximum of £30,000.
Step 3 - Final determination of the level of any Civil Penalty
On appeal to the initial notice the person may advise that the impact:
- of the financial penalty on the offender’s ability to comply with the law
- of the penalty on third party - employment of staff, customers
- on the offender - is it proportionate to their means - loss of home
However it must be remembered that as property owners if they claim the inability to pay and show their income is small then there can always be consideration to the property/properties they own which can be sold or refinanced.
Recording of the decision
A record of each decision and the reasons for the financial penalty will to be made by an officer and how the amount of the penalty was obtained and the reasons for imposing it.