UT Overturns Finding that Company Was Managing HMO

The Upper Tribunal (UT) has allowed a company’s appeal against a £10,000 financial penalty for allegedly managing or being in control of a house in multiple occupation (HMO) without a licence. The UT held there was no evidential basis for the First-tier Tribunal’s conclusion that the company was a “person managing” the property under the Housing Act 2004.

What happened?

  • Following complaints of pest infestation and overcrowding, the local authority inspected the property and served Section 16 Local Government (Miscellaneous Provisions) Act 1976 information notices on the freeholders, the managing agent and the company.
  • The managing agent responded naming the company as the freeholders’ agent and as a managing agent.
  • The local authority then issued £10,000 penalties to both the managing agent and the company for operating an unlicensed HMO.
  • On appeal to the First-tier Tribunal (FTT), the company argued it had let the property to the managing agent and did not manage it. The FTT nevertheless found the company had acted in the capacity of a managing agent, relying in part on rent it received from the managing agent and dismissed the appeal.
  • The company appealed to the Upper Tribunal, arguing the FTT had not properly explained its finding that the company was managing.

The UT’s decision

The UT focused on the statutory definition of “managing” in Section 263(3) Housing Act 2004. Key points:

  • Being a party to a management arrangement or carrying out activities that look like management is not enough; the statute requires that the person is an owner or lessee of the premises. There was no evidence the company was either.
  • Section 263(3) also provides that if payments from occupiers are received through an agent, that agent is a person managing. On the FTT’s findings, neither the company nor the freeholders received rent from the occupiers.
  • Any indirect benefit the company derived (via rent from the managing agent) does not satisfy Section 263(3), particularly because that rent was payable irrespective of whether occupiers paid.

Outcome: The UT allowed the appeal, set aside the FTT’s decision and held that the finding the company was a “person managing” was unexplained and unsustainable on the evidence.

Why this matters (for landlords, agents and investors)

  • Licensing liability turns on statutory status, not labels. Describing an entity as an agent, or even carrying out managerial tasks, is not determinative unless the Section 263(3) criteria are met.
  • Rent flow is critical. To be a “person managing,” there must be receipt of payments from occupiers (including through an agent) or qualifying ownership/leasehold status.
  • Penalty resilience. Financial penalties for HMO offences must be supported by clear evidence addressing each statutory element; where councils rely on inference alone, decisions are vulnerable on appeal.
  • Contract structuring. Head-leases and management agreements should clearly allocate roles, rent flows and liabilities, reducing the risk of misattributed management.

Practical takeaways

  • Audit your documents: Check who actually receives rent from occupiers and who holds legal or leasehold interests.
  • Tidy your paper trail: Keep Section 16 responses precise and consistent across all parties.
  • Review HMO licensing strategy: Confirm who must hold the licence based on statutory definitions, not commercial convenience.
  • Act early on enforcement: If you receive a financial penalty notice, take prompt advice on appeal prospects, particularly where the council has not evidenced Section 263(3) status.

How we can help

Our Housing & Regulatory team advises landlords, portfolio investors, managing agents and freeholders on HMO licensing, financial penalties, and appeals to the FTT and UT. We can review your arrangements, respond to enforcement action and, where appropriate, challenge penalties lacking a statutory basis.

 

Q1: What is a “person managing” under s263(3) Housing Act 2004?
A: Typically an owner/lessee or someone receiving payments from occupiers (including through an agent).

 

Q2: Does acting like a managing agent make you liable?
A: Not by itself. Labels or general activities aren’t enough without meeting s263(3).

 

Q3: Do indirect financial benefits count as “receiving payments”?
A: No. The statute focuses on payments from occupiers (including via an agent), not indirect benefit.

 

Q4: What evidence do councils need for HMO penalties?
A: Proof of ownership/leasehold or receipt of occupier payments and other statutory elements—mere inference won’t suffice.

 

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.