Are fines to landlords disproportionate to the crime?Make Text Bigger
How much do people get fined for driving a vehicle without a driving licence?
I ask this question because recently a landlord was fined £90,000 for not having licences despite his properties being faultless!
It makes me think that no landlord should take the risk of owning properties in their own personal names these days, for the same reasons that a significant proportion of solicitors and medical professionals choose to operate through LLP’s. It is becoming increasing important for landlords to ring fence as many of their business risks as possible. More on that later but let’s look deeper at the case of the landlord that was fined £90,000 despite is properties being faultless.
The case was reported by Landlord Licencing and Defence Limited, whom I have reached out to with an invitation to become a regular guest author on Property118. In an article they published on 6th February 2020 they said ….
A landlord has been ordered to pay just over £90,000 for repeatedly ignoring selective licensing laws in Brent, north London.
Said Phil Turtle a director of Landlord Licensing and Defence, “The Council admits that there were ‘no serious concerns’ with this landlord’s properties. This fine is not for being a bad landlord – it is purely about the landlord failing to obey the law in respect of being required to apply for licenses – and since that is the law, he must of course face the consequences.”
Brent Council’s press release chooses to brand Mr Ige a rogue landlord – since there seems to be nothing, they could find to prosecute him for inadequacy of the actual properties (and we can be sure they would have done so if they could). They also say he continued to ignore his responsibilities towards the safety of his tenants – but since they found nothing wrong with the properties this wold also seem to be an untruth.
Continued Turtle, “The admission by the Council that there was nothing significantly wrong with the properties gives lie to the claim that Licensing is about improving standards of housing and adds to the considerable argument that it is in reality another tax on landlords which, like Road Tax on motor vehicles will be prosecuted with vigour if landlords attempt not to pay the Licence Tax.”
Stephen Ige pleaded guilty in Willesden Magistrate Court to knowingly renting out three properties, a ground floor flat in Chaplin Road, Willesden Green, and ground and first floor flats in Douglas Road, Kilburn, to tenants without a licence from Brent Council.
Ige was ordered to pay a £25,000 fine for each of the unlicensed properties, £5,000 for failing to supply documents to the council when requested, and £10,763 in court costs to the council, totalling £90,863 including a victim surcharge.
Cllr Eleanor Southwood, cabinet member for housing and welfare reform, commented: “Renting out a property is a serious business and in Brent we have introduced selective licensing to ensure that tenants are living in safe, well managed homes. A fascinating statement to make when she goes on to admit there was nothing wrong with the properties.
“Licensing does this by making sure properties are properly managed by a landlord or agent, setting standards that the landlord must meet for the benefit of the occupiers and the community in general.”
Ige, who owns a number of properties in Brent, had previously been found to have illegally let out two other properties requiring licences and so there is no doubt that he has brought this prosecution and fine upon himself. However, this situation has nothing to do with the quality of accommodation he provides.
He was fined £5,000 and warned to make sure he applied for property licences where required, but continued to ignore the law and his responsibilities towards the safety of his tenants, says the Brent Council press release, the latter part of patently not true since they went on to admit there was nothing wrong with the properties.
Southwood added: “If you are a landlord in a selective licensing area, failing to licence your property puts you at risk of being prosecuted and fined.
“While the council did not identify any serious concerns with the current state of Mr Ige’s properties, our licensing scheme is designed to give tenants confidence that they are living in homes that are safe. Challenging landlords who don’t comply is a priority.”
Turtle concludes “Methinks the Councillor doest speak with forked tongue! If councils put half the effort into chasing landlords of rally poor quality housing stock that they so into chasing and prosecuting landlords who haven’t paid their Licence Tax or in deploying thousands of hours of housing officer time in persecuting landlords who have the odd room in a Victorian house which meets the legal size requirement but doesn’t meet their unenforceable “adopted Standards and a thousand other council nonsenses – we might have an improving housing stock.
“it is a classic case of ‘be careful what you wish for’. And when you make one organisation ‘police, judge and jury’ you can be sure it won’t end well!”
The benefits of a well structured LLP
Whilst I would hope nobody reading this article intends to flout the law, the risks of doing so inadvertently are increasing with ever more legislation that landlords need to comply with. I understand there to be 181 pieces of such legislation, and that’s assuming there is none that I might have missed myself, which is a terrifying thought!
An LLP can ring fence a landlords business liabilities, so from that standpoint alone it is well worth considering the transition, especially as there needn’t be any CGT, Stamp Duty or refinancing implications for doing so. There might also be tax benefits which you have not considered. We recently reported a case where an LLP structure had enabled one landlord to reduce his tax bill by a whopping 85%. Details of that case can be read via THIS LINK.
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