Residential letting agents operating on a ‘let only’ basis have been told they should not be liable for fines for unlicensed houses in multiple occupation (HMOs). The landmark ruling of the Upper Tribunal provides some much-needed clarity in a contentious area.

Martin Rodger KC, Deputy Chamber President, allowed an appeal by letting agent Kartal Cetin (pictured) of Direct Discover Residential Limited against Epping Forest District Council, which had imposed a £7,064 penalty on Cetin for his agency’s involvement in “controlling” or “managing” an unlicensed HMO.

Unclear definition

The case arose when Cetin was asked in October 2021 to let two vacant rooms above a shop in Loughton. Two tenants each paid a holding deposit and a month’s rent in advance to his company. Epping Forest said the flat then became an HMO liable to licensing requirements as these lettings meant there were five residents overall.

The council argued that because Cetin’s company had received rental payments, it fell within the definition of a ‘person managing’ under the Housing Act 2004, making it liable for the offence of running an unlicensed HMO. The First-Tier Tribunal subsequently reduced the penalty to £3,532 but maintained that the offence had still been committed.

The importance of the definition of ‘person managing’ is not that it identifies an event or a transaction but that it describes a status to which certain responsibilities are attached.”

However, Rodger said he was: “Not attracted to an over-literal construction of the statute. The importance of the definition of ‘person managing’ is not that it identifies an event or a transaction but that it describes a status to which certain responsibilities are attached.”

Not the intention of Parliament

He concluded that Parliament did not intend that the receipt of a single instalment of rent by an agent with no continuing management responsibilities should place the agent under the same statutory obligations as a landlord or managing agent. Treating letting agents as ‘persons managing’ when they have no actual management powers would be ‘surprising, simply as a matter of language.’

“A payment made to an agent of the landlord whose only function is to let the property in question and who thereafter has no involvement in the continuing management, is not a payment within the scope of section 263(3),” Rodger ruled.

landlords not the wrongdoers

The decision resolves a previously contentious area where some councils had successfully prosecuted ‘let only’ agents simply for receiving initial rent payments.

Leading property lawyer, David Smith, of Constant & Williams says: “Although relatively few ‘let only’ agents have been pursued for failures by their landlords to obtain an HMO licence, it has happened and the Upper Tribunal is clear that it should not be happening.

“Local authorities should look to pursue the landlords, as the true wrongdoers in this situation, and not go after the agent on the basis that they are an easier target.”