Civil penalties

This guidance is intended to work in accordance with the Leeds City Council – Enforcement Policy (the Enforcement Policy) published by the council, and the statutory guidance 'Civil Penalties under the Housing and Planning Act 2016, Guidance for Local Authorities' published by the Department of Communities and Local Government (DCLG).

In the DCLG statutory guidance the term "civil penalty" is used, while the applicable legislation uses the term "financial penalty".  This document follows the DCLG guidance in using the term "civil penalty", but the terms "civil penalty" and "financial penalty" are interchangeable.   

Introduction

Section 249A of the Housing Act 2004 (as amended by the Housing and Planning Act 2016) establishes the legal basis for imposing civil penalties as an alternative to prosecution for specific offences under the 2004 Act.

Civil penalties are an alternative to prosecution for the following "relevant housing offences" under the Housing Act 2004:

• Section 30 – failure to comply with an improvement notice
• Section 72 – offences relating to mandatory licensing of Houses in Multiple Occupation
• Section 95 – offences relating to licensing under Part 3 of the Housing Act 2004
• Section 139 – failure to comply with an overcrowding notice
• Section 234 – breach of management regulations in respect of HMO

In addition, civil penalties can be imposed under regulation 11 of the Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 (the Electrical Regulations) where the authority is satisfied beyond reasonable doubt that a landlord has breached a duty under regulation 3.

The government has laid out statutory guidance as to the process and the criteria that need to be considered when determining civil penalties. These are:

• level of culpability
• level of harm
• severity of the offence
• aggravating Factors
• mitigating Factors
• penalty to be fair and reasonable
• penalty to be such as to be a deterrent and remove the gain derived through the failure to comply
  

The statutory guidance indicates that a council should ensure that the civil penalty acts as a punishment and a deterrent to future offending by the recipient or others, takes into account any previous patterns of offending, and ensures that no offender should benefit as a result of committing the offence.

The law allows a maximum civil penalty of £30k per offence. In determining the level of any penalty a council will have regard to local circumstances, the relevant local enforcement policy and the relevant Government guidance detailing the factors to take into account, as shown above.

The overriding principle when considering civil penalties is that the landlord (as defined by the Housing Act 2004 as the owner, person having control or the licence holder) should not make any financial gain as a result of their failure to comply with the relevant legislation.

What is the burden of proof for a civil penalty

Before imposing a civil penalty on a person under the Housing Act 2004, the council must be satisfied beyond reasonable doubt that the person's conduct amounts to a relevant housing offence as defined by section 249A (2).

The Electrical Regulations do not create a criminal offence, but to impose a civil penalty the council must still be satisfied beyond reasonable doubt that the landlord has breached a duty under regulation 3.

The council will have regard to the "Crown Prosecution Service Code for Crown Prosecutors" published by the Director of Public Prosecutions when considering the evidence.

The council will consider:

• does the evidence prove beyond reasonable doubt that an offence has been committed by the landlord? – see Evidentiary Stage of the Full Code Test in the "Crown Prosecution Service Code for Crown Prosecutors" published by the Director of Public Prosecutions
• is there a public interest in imposing a civil penalty on the landlord in respect of the offence? – Public Interest Stage of the Full Code Test in the "Crown Prosecution Service Code for Crown Prosecutors" published by the Director of Public Prosecutions
• has the council taken into account its own Enforcement Policy when deciding to impose the civil penalty including the alternative option of prosecuting for the offence?

All decisions as to whether or not to pursue a civil penalty will be taken in accordance with the Enforcement Policy covering Private Sector Housing.

Process for imposing a civil penalty

Where it is considered (subject to any representations received from the person in question) that it appears appropriate to impose a civil penalty, the council will follow the following process:

A "Notice of Intent" shall be served on the person against whom the civil penalty is proposed. The Notice shall specify:

a. The amount of any proposed civil penalty.

b. The reasons for proposing the penalty.

c. Information about the right to make representation to the council.

The person to whom the notice relates will be given 28 days to make written representation to the council about the proposal to impose a civil penalty. Representations can be made about the imposition of a penalty (including whether an offence or breach has been committed) and/or about the proposed amount of the penalty, including any mitigating circumstances. To enable the council to consider any representations made, it is the responsibility of the recipient of the notice to provide appropriate and satisfactory documentary evidence to support their submission. Failure to provide such evidence may mean that the council will not be able to consider any representation made.

Representations can only be made by the recipients served with a Notice of Intention. No other parties have an automatic right to make representations and the council will determine whether to consider any such information on a case by case basis.

Following the end of the 28 day period and having considered any valid representations received, the council will decide:

a. Whether it is satisfied beyond reasonable doubt that the relevant offence/breach of duty has been committed by the person;

b. Whether to impose a civil penalty on the person, and

c. The final amount of any such penalty to be imposed.

If the council decides to impose a civil penalty, a final notice will be issued imposing that penalty. The final notice will specify:

a. the amount of the civil penalty,

b. the reasons for imposing the penalty,

c. information about how to pay the penalty,

d. the period for payment of the penalty,

e. information about rights of appeal to the First-Tier Tribunal and

f. the consequences of failure to comply with the notice.

The period for payment of any civil penalty will be 28 days from the date of the final notice.

The council can at any time withdraw either the Notice of Intent or Final Notice or reduce the level of penalty imposed. This will be via a written notice to the person on whom the notice has been served.

If the council decides to withdraw a civil penalty, it has the right to pursue a prosecution against the landlord for the original offence for which it was imposed (with the exception of where the civil penalty was proposed for a breach of duty under regulation 3 of the Electrical Regulations). Each case will be considered on its merits and be in the public interest in line with CPS guidance.

A landlord on whom a Final Notice has been served has a right of appeal to the First-Tier Tribunal. The appeal would be against the council decision and if made would suspend the civil penalty until the appeal is determined or withdrawn.

Payment of the civil penalty will be within 28 days of the date of the Final Notice, unless appealed. Where appealed and the Notice is confirmed it will be for the Tribunal to specify the period in which the landlord is to pay any fine imposed.

The council would take into account a reduction of the level of the penalty for an admission of guilt.

A one-third reduction in the penalty may be offered if at the first opportunity the landlord admits guilt for the offence and immediately remedies any outstanding issues. This is in line with the Sentencing Guidelines and will only be available for a first offence.

Where offered, the reduction will only be available to the landlord when the council serves the Final Notice, and is conditional upon the following criteria being met:

• payment of the net civil penalty (after the one-third reduction) is made in full within 28 days of the date of the Final Notice
  
• any outstanding issues or works are fully completed within the same period
  

In default of the above conditions the offer of a reduction will be withdrawn and the full amount of the penalty will become payable.

At any point after 28 days of service of the Final Notice there will be no further offer of any reduction in the level of penalty.

If the civil penalty imposed is not paid within the appropriate time period, either 28 days from the date of the Final Notice or within such time as determined by the First-Tier Tribunal, the council will commence proceedings to recover the debt owed. This will include the recovery of any additional costs to the council from having to undertake such action. This process will be the council's existing recovery policy and procedures for the collection of such debt including pursuance of the debt via the county courts if appropriate.

A certificate signed by the Chief Finance Officer for the Authority including the outstanding amount due will be accepted by the courts as conclusive proof of any outstanding payment due to the council.

In setting a civil penalty, the council may conclude that the offender is able to pay the penalty imposed unless the offender has supplied satisfactory financial information to the contrary. 

It is for the offender to disclose to the council such data relevant to his financial position as this will enable it to assess and determine what they can reasonably afford to pay.

Where the council is not satisfied that it has been given sufficient reliable information, the council will be entitled to draw reasonable inferences as to the offender's means from evidence it has heard and from all the circumstances of the case.

However when considering the level of any civil penalty the final determining factor will always be the level of financial gain as a result of the landlord's failure to comply with the relevant legislation.

Consequences of a civil penalty

Civil Penalties under the Housing Act 2004 (as amended by the Housing and Planning Act) are an alternative to criminal proceedings (with the exception of where the civil penalty was imposed for a breach of duty under regulation 3 of the Electrical Regulations). A civil penalty cannot be imposed in respect of conduct which constitutes a relevant housing offence under the Housing Act 2004 if a prosecution for that conduct has been commenced and has resulted in conviction, or if the prosecution is still ongoing.  If a civil penalty has been imposed on a person in respect of such conduct, the person cannot then be prosecuted for the same conduct.

Where a Civil penalty has been imposed on a landlord, it will not automatically prevent the council from granting a licence under Part 2 or 3 of the Housing Act 2004. The council will consider each case on its merits including the reasons for the penalty and the extent of the person's involvement in any property under consideration.

Where a person has received two financial penalties under the Housing Act 2004 in any 12 month period, irrespective of the locality to which the offences were committed, the council will consider making an entry on the national database of rogue landlords and property agents. When considering making an entry, the council will have regard to any guidance issued by the Secretary of State and best practice available.

Determining the level of the civil penalties

Section 143(1) 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 caused" Harm includes actual harm caused as well as risk of harm.

In order to set the level of the civil penalty the following will be considered by the council:

Level of culpability

The level of culpability of a landlord will depend upon a number of factors.

High level

A landlord will be deemed to be highly culpable when they intentionally or recklessly breach or wilfully disregard the law. Instances may include one or more of the following examples:

• they have a history of non-compliance
  
• despite a number of opportunities to comply have failed to do so
  
• have been obstructive as part of the investigation
  
• are a Member of a recognised landlord association or accreditation scheme, indicating a knowledge of their legal duties and obligations
  
• are a Public figure who should have been aware of their actions
  
• are an experienced/professional landlord (a landlord with 5 or more properties is deemed to be a professional landlord for this purpose), and so ought to know and have arrangements in place to comply with their legal duties and obligations
• the offence provides a serious market advantage over rivals – deliberately avoided works or regulations or committed the offence to gain additional income
  
• serious and/or systematic failure to comply with their legal duties
  

Medium level

A landlord commits an offence through an act or omission a person exercising reasonable care would not commit. Instances can include one or more of the following:

• it is a first offence – with no high level culpability criteria being met i.e. a member of an accreditation scheme
• failure is not a significant risk to individuals
• the landlord 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

A landlord fails to comply or commit an offence with little fault. Instances can include one or more of the following:

• no or minimal warning of circumstances/risk
  
• minor or technical breaches
  
• isolated occurrence
  
• a significant effort has been made to comply but was inadequate in achieving compliance

The above examples are not exclusive and other factors may be taken into account when considering the level of culpability.

Level of harm

When considering the level of harm both the actual, potential and likelihood of the harm will be considered:

High

A high level of harm could include one or more of the following:

• serious effect on individual(s) or widespread impact, and/or,
• harm to a vulnerable individual (defined below), or,
• high risk of a serious adverse effect on an individual, or,
• serious level of overcrowding

Medium

A medium level of harm could constitute one or more of the following:

• adverse effect on an individual – not high level of harm, or,
• medium risk of harm to an individual, or,
• low risk of a serious effect, or,
• the council's work as a regulator to address risks to health is inhibited, or,
  
• consumer/tenant misled
  

Low

A low level of harm could constitute one or more of the following:

• low risk of harm or potential harm, or,
• little risk of an adverse effect on individual(s)

The above examples are not exclusive and other factors may be taken into account when considering the level of harm.

What is meant by a vulnerable individual

The statutory guidance states that the harm caused and vulnerability of the individual occupier(s) are important factors in determining the level of penalty.

A vulnerable individual is one who is at greater risk of harm, and therefore the penalty should be greater when vulnerability is an issue.

Who would we consider as a vulnerable individual(s)?

• elderly person
• children
• pregnant women
• receives domiciliary care
• has health needs – mental health, drug dependency, alcohol dependency, terminally ill etc
• requires assistance in conducting their own affairs
• has payments made to him/her or to an accepted representative in pursuance of arrangements under the Health and Social legislation.
• receives a service or participates in any activity provided specifically for persons who have particular needs because of age, has any form of disability or has a prescribed physical or mental problem.
• those who have difficulty in understanding, speaking or reading English
• an individual in a difficult situation such as bereavement or threat of deportation etc

The above list is not exclusive and other factors may affect vulnerability when considering the level of any penalty.

Determination of the level of penalty

The statutory guidance makes it clear that it is for each council to determine the level of civil penalty imposed. The table below shows the initial level of penalty for each level of culpability and harm, including the minimum level of fine which will be imposed for each classification

Adjustments to the initial determination

In order to determine the final penalty level, the council will consider both aggravating and mitigating factors in each case. These will increase or reduce the initial penalty level by 5% for each factor identified.

Below 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 one or more of the following:

• previous convictions having regard to the offence to which applies and time elapsed since the offence;
• offence continued over a prolonged period of time;
• lack of insight into their failings;
• 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;
• retaliation against tenants or others for complaining/reporting concerns.
• record of letting substandard accommodation;
• record of poor management/ inadequate management provision, or,
• lack of a tenancy agreement/rent paid in cash.
• member of an accreditation scheme at the time of offence
  

When considering previous offences regard should be given to the guidance on Banning Orders as well as any relevant offence such as trafficking etc

Mitigating factors could include one or more of the following:

• cooperation with the investigation
  
• voluntary steps taken to address issues e.g. submits a licence application
  
• acceptance of responsibility e.g. accepts guilt for the offence(s)
• willingness to undertake training
• willingness to join recognised landlord accreditation scheme to improve their knowledge and business practices in the future.
• health reasons preventing reasonable compliance – mental health, unforeseen health issues, emergency health concerns
• no previous convictions
• vulnerable individual(s) where there vulnerability is linked to the commission of the offence
  
• good character and/or otherwise exemplary conduct
  

For each aggravation or migrating factor which applies to each specific case the level of civil penalty will be adjusted by 5% of the initial penalty, up to the maximum £30k or to the minimum penalty for each determined level of culpability and harm as shown in the table 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 civil penalty for more than one offence or breach of duty, consider whether the total penalties are just and proportionate to the offending behaviour.

Where the offender is issued with more than one civil penalty, the council should consider the following guidance from the definitive guideline on Offences Taken into Consideration and Totality.

The total civil penalty is inevitably cumulative.

The council should determine the civil penalty level 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 LA.

The council should add up the civil penalties for each offence and consider if they are just and proportionate overall.

If the aggregate total is not just and proportionate the council should consider how to reach a just and proportionate aggregated civil penalty. There are a number of ways in which this can be achieved.

For example:

• where an offender is to be penalised for two 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 a civil penalty for the most serious offence. This should reflect the totality of the offending where this can be achieved within the maximum penalty for that offence. In this case no separate penalty should be imposed for the other lesser offences
  
• where an offender is to be penalised for two or more offences that arose out of different incidents, it will often be appropriate to impose separate civil penalties for each of the offences. The council should add up the civil 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 civil penalties can be proportionately reduced. Separate civil penalties should then be imposed
  

Where separate civil penalties are imposed, the council must be careful to ensure that there is no double-counting.

Final determinate of the level of any civil penalty

The final determinate of any civil penalty MUST be the general principle:

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 must 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 will take into account facts which may be deemed as obtaining a financial gain. These could include the following:

• cost of the works required to comply with the legislation
  
• any licence fees avoided
  
• rent for the full period of the non-compliance – reviewed in conjunction with any Rent Repayment Order
  
• any other factors resulting in a financial benefit – potential cost of rehousing any tenants by the council
  
• as penalty to act as a deterrent
  
• the cost to the council of their investigation
  

Owner’s ability to pay

When determining whether a penalty is fair and proportionate then the following issues need to be considered

• impact of the financial penalty on the offender's ability to comply with the law
• impact of the penalty on third parties – employment of staff, customers etc.
  
• impact on the offender – is it proportionate to their means – loss of home etc.

It must be remembered that properties owned by the offender can be taken into account as assets which could be sold or refinanced to meet the penalty, and this is not limited to the property/properties to which the offence or breach of duty related.

The person who is subject to a proposed civil penalty has the right to make representations and/or appeal regarding the level of penalty including their ability to pay.  It is the responsibility of that person to provide evidence in support of their representations.  

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.