London Residentials Limited v The London Borough of Newham [2026] UKFTT 1095 (GRC)

[2026] UKFTT 01095 (GRC)

Case References: PR/2022/0012 & PR/2022/0013

First-tier Tribunal

(General Regulatory Chamber)

Hearing Heard on: 27 April 2026 &21 July 2026

Date 28 July 2026

Professional Regulation

Heard by Cloud Video Platform

Before

JUDGE SAWARD

Between

LONDON RESIDENTIALS LIMITEDAppellant

THE LONDON BOROUGH OF NEWHAMRespondent

Jagdev Singh Chima, Director of London Residentials Limited for Appellant

Nicholas Ham, Counsel for Respondent

Decision: The appeals are allowed as to the extent of the penalties.

The First Final Notice is varied to substitute a financial penalty of £7,500 instead of £20,000.

The Second Final Notice is varied to substitute a financial penalty of £3,500 instead of £4,000.

REASONS

Preliminary Matters

[1]The hearing opened on 27 April 2026. Jagdev Singh Chima, the Appellant company’s director and witness, joined the remote hearing from India. Without permission of the state of India for evidence to be given from its territory, the Tribunal could not consent to Mr Chima giving oral evidence from abroad, and his application to do so was refused. Out of fairness to both parties, the hearing was therefore adjourned without any evidence being heard. It resumed on 21 July 2026. On that occasion Mr Chima confirmed that he was joining the remote hearing from the UK.

[2]The afternoon before the hearing resumed, the Respondent (“the Council”) sought to apply for costs against the Appellant in the expectation that the application could be heard the next day. Tribunal proceedings differ from those before the civil courts. For the costs application to be heard at the same time as the substantive appeals, it should have been made far earlier. Moreover, the application was not made on the correct form. The costs application was not admitted. The parties were informed that any costs application would need to be made on the correct form and within the timescale prescribed by Rule 10 of The Tribunal Procedure (First-tier Tribunal) (General Regulatory Chamber) Rules 2009. As previously indicated to the parties, the Tribunal is generally a ‘no costs’ jurisdiction and the bar for an award of costs is a high one.

Background

[3]The Appellant is a letting agent. The Council is the enforcement authority which served two Final Notices (“FN”) on the Appellant on 26 January 2022.

[4]The First FN imposed a financial penalty upon the Appellant of £20,000. The FN alleges a failure to comply with the duty to belong to a client money protection scheme (“CMPS”) in breach of regulation 3 of The Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc.) Regulations 2019 (“the Regulations”), as of 27 September 2021. It followed a Notice of Intent (“NOI”) to impose a monetary penalty of £20,000, issued on 20 October 2021.

[5]The Second FN imposed a financial penalty of £4,000 under sections 83 to 88 and Schedule 9 of the Consumer Rights Act 2015 (“the Act”). The FN alleges a breach of section 83(6) of the Act on 9 August 2021, by failing as a letting agent to display required information on its website, namely:

“A statement indicating that you are a member of a client money protection scheme that gives the name of that scheme with your list of fees (section 83(6)).”

[6]The Second FN reduced the amount of the monetary penalty from £5,000 as shown in a NOI, also issued on 20 October 2021.

[7]By Notices of Appeal dated 15 February 2022 the Appellant appealed to this Tribunal, challenging the amount of each penalty.

[8]By Decision dated 5 September 2025, the First-tier Tribunal confirmed both FNs. That Decision was subsequently set aside by the Upper Tribunal by decision dated 22 June 2025 (re-issued with corrections on 9 October 2025). The Upper Tribunal remitted the appeals for rehearing entirely afresh by a different panel of the First-tier Tribunal. As directed by the Upper Tribunal, I have considered the appeals entirely afresh.

Documents before the Tribunal

[9]In Case Management Directions dated 28 October 2025, both parties were given opportunity to exchange and provide updated/additional evidence on which they seek to rely. In particular, the Appellant was invited to provide evidence of the inability of the business to continue trading if the financial penalties are imposed, such as evidence of deficit in its profit and loss account (as referenced at paragraph 31 of the Upper Tribunal’s decision).

[10]I have been provided with the original bundle of some 738 numbered pages plus index, along with the Appellant’s supplemental bundle of 92 pages and the Council’s supplemental bundle of 29 pages. The Appellant produced a skeleton argument.

[11]The bundle includes a witness statement of Mr Chima, Director of the Appellant company. For the Council, a witness statement is provided by Alexandra Cosgrove, Trading Standards Officer and Julie Cannard, Team Leader within the Council’s Portfolio Landlord’s Team.

The hearing

[12]Mr Chima was accompanied by Jyoti Dhote, the company’s Business Manager. Mr Chima confirmed at the start of the resumed hearing that the Appellant does not dispute that the breaches identified in each FN took place. It is the amounts that are in dispute.

[13]The Council was represented by Mr Ham, Counsel, who called two witnesses; Ms Cosgrove and Ms Cannard. In light of the Appellant’s confirmation that only the amounts are in dispute, the Council’s evidence focussed on how and why the decisions to impose the disputed amounts were reached.

[14]As the Appellant was unrepresented, the Tribunal proactively questioned the Council’s witnesses to address the imbalance and ensure a fair hearing.

[15]During his oral evidence, Mr Chima claimed that whilst he had not personally responded to the Council before issue of the FN’s, Jyoti Dhote (Business Manager for the Appellant company) had telephoned Ms Cosgrove. Given this development, Mrs Dhote was called to give evidence, and Ms Cosgrove was re-called to give evidence in reply.

Grounds of appeal

[16]The grounds of appeal are the same in both appeals. In summary:16.1 There were mitigating circumstances outside of the Appellant’s control

16.2 From the moment of being prompted about not having registered with a CMPS, the Appellant acted swiftly to correct this.

16.3 At every step of completing this process, immediate action was taken to resolve any issues faced. However, the Appellant had to wait on external parties to complete their part, which was out of the Appellant’s hands.

16.4 The imposition of a penalty may result in the inability for the business to continue and force the company into liquidation.

[17]The Appellant attaches a timeline of events leading up to it entering a CMPS, along with email correspondence relating to the timeline.

[18]The outcome sought in respect of both FNs is for “the penalty to be reduced to the minimum”.

Grounds of opposition

[19]The Council opposes the appeals on the following grounds:19.1 When the Appellant’s website was inspected in September 2021, it was found not to comply with section 83(6) of the Act, requiring it to publish with the list of its fees a statement that indicates it is a member of a CMPS.

19.2 In October 2021 the Council’s officer received confirmation from each of the CMP schemes that the Appellant was not a member of a CMPS in breach of regulation 3 of the 2019 Regulations.

19.3 The Appellant emailed the Council officer stating that it was in the process of joining a CMPS. The Appellant did not make formal representations.

19.4 At the date of the FNs (26 January 2022) the Appellant remained in breach of the above two requirements. Neither penalty has been imposed at the maximum levels, namely £30,000 and £5,000 respectively. The covering letters to the FN’s set out the factors taken into consideration when imposing each FN.

19.5 The Council does not consider that the amount of either penalty was unreasonable and/or contrary to the Guidance from the Ministry of Housing, Communities and Local Government.

19.6 The Appellant failed to remedy the breaches between August/September and January 2022 when the FNs were sent. The Appellant did not provide formal representations in response including on the ability of the company to pay.

19.7 The Council puts the Appellant to strict proof that the amount of the penalties might cause the Appellant to cease trading. Legal Framework

The Regulations

[20]Pursuant to regulation 3(1) of the 2019 Regulations, a property agent who holds client money must be a member of an approved or designated client money protection scheme.

[21]Where a local authority in England is satisfied beyond reasonable doubt that a property agent has breached regulation 3, the authority may impose a financial penalty in respect of the breach (regulation 6(1)). The amount may be of such sum as the authority determines, but it must not exceed £30,000 (regulation 6(2)).

[22]There is a right of appeal to the Tribunal under paragraph 5 of the Schedule to the Regulations against-(a) the decision to impose the penalty; or

(b) the amount of the penalty. An appeal must be brought within 28 days beginning with the day after the final notice was served. The effect of an appeal is to suspend the final notice until the appeal is finally determined.

[23]An appeal is to be a re-hearing of the local housing authority’s decision, but regard may be had to matters of which the authority was unaware (paragraph 5(4)). The Tribunal may quash, confirm or vary the final notice (paragraph 5(5)). However, the final notice may not be varied to impose a penalty of more than £30,000 in respect of a breach of regulation 3 (paragraph 5(6)).

The Act

[24]The Act imposes a requirement on all letting agents to publicise details of their relevant fees and other information. This is achieved by sections 83 to 86 of Chapter 3 to the Act. Under section 83(6), an agent required to be a member of a client money protection scheme has a duty to display or publish, with the list of their fees, a statement that indicates that the agent is a member of a client protection scheme, and gives the name of the scheme.

[25]A “client money protection scheme” means a scheme which enables a person on whose behalf a letting agent holds money to be compensated if all or part of that money is not repaid to that person in circumstances where the scheme applies (section 83(9)).

[26]The duty applies to “letting agents”, a term defined to mean “a person who engages in letting agency work (whether or not that person engages in other work)” (section 84(1)).

[27]Section 87 explains how the duties within Chapter 3 to the Act fall to the “local weights and measures authority” to enforce through the imposition of a financial penalty not exceeding £5,000.

[28]The system of financial penalties for breaches of section 83 is set out in Schedule 9 to the Act. Before imposing a financial penalty, the relevant authority must serve a notice of intent on the agent of its proposal to do so within 6 months of having sufficient evidence of the agent’s breach. If the breach is continuing, the notice of intent may be served at any time when the breach is continuing (paragraph 1).

[29]The letting agent may respond within 28 days of being sent the notice of intent (paragraph 2). Upon expiry of this period, if the authority decides to impose a financial penalty, then it must serve a final notice on the agent requiring the penalty to be paid within 28 days. The final notice must set out the amount of the penalty, the reasons for imposing it, information on how to pay, the period for payment, the rights of appeal and consequences on non-compliance.

[30]Paragraph 5 of Schedule 9 to the Act provides for appeals to the Tribunal. There are four grounds of appeal:(a) the decision to impose a financial penalty was based on an error of fact

(b) the decision was wrong in law

(d) the decision was unreasonable for any other reason.

[31]By virtue of paragraph 5(5) of Schedule 9, the Tribunal may quash, confirm or vary a final notice.

Main Issues

[32]In summary, the main issue before the Tribunal is:• Whether the amount of the financial penalty in each Final Notice is unreasonable

[33]In arriving at a determination, the Tribunal has considered the following factors, which the parties agreed were relevant:(i) the severity of each breach

(ii) deterring breaches

(iii) aggravating and mitigating factors

(iv) fairness and proportionality as set out in the statutory guidance

(v) financial hardship

(vi) Government and Council’s guidelines

The Appellant’s evidence

[34]In a witness statement of 22 March 2026, Mr Chima states (in summary):34.1 The Appellant accepts there was a period during which CMPS membership “had not yet been finalised”.

34.2 The Appellant commenced the CMPS registration process on 27 October 2021. The process required establishment of a compliant client account and provision of supporting documentation. This involved third-party banking processes outside the Appellant’s direct control. It was a period when administrative and banking processes were operating more slowly than usual.

34.3 The Appellant actively engaged with the Bank during this period and took reasonable steps to progress the application, including responding to request and following up on delays.

34.4 The client account was confirmed as open on 11 January 2022. The Appellant subsequently obtained CMPS membership on 21 January 2022. Therefore, at the point of issue of the FNs on 26 January 2022, compliance had been achieved. The Appellant submits that insufficient weight was given to this in imposing the penalty.

34.5 Continuous CMPS membership has been maintained ever since, demonstrating ongoing compliance and good faith.

34.6 The level of penalty is disproportionate when considering:

(a) The limited period of non-compliance

(b) The steps taken to obtain compliance

(d) The financial position of the business as evidence in accompanying financial documents.

34.7 For those reasons, the Appellant asks the Tribunal to set aside each penalty or substantially reduce them.

[35]In oral evidence, Mr Chima added the following points:35.1 The breaches are admitted. He does not deny it.

35.2 The Tribunal is asked to consider that membership was achieved on 26 January 2026.

35.3 Mr Chima had not been working from the office as it had been flooded. Calls were made to the Council, but he cannot prove them. They were not made by Mr Chima personally. Accountants had been in touch at the first opportunity. They may have made calls to the Council, he cannot speak for them.

35.4 There was no consumer harm. No monies were lost or complaints made.

35.5 They have always worked to a high standard.

35.6 The Council said it checked Companies House. It would have been able to see the profit and loss account. The Appellant’s financial position was never properly assessed.

35.7 The business fluctuates between managing 20 to 25 properties. Sometimes a bit less. During the Covid-19 pandemic, the Appellant managed about 16 or 17 properties. Mr Chima expects it would have been around that number at the relevant time.

35.8 Mr Chima is the sole director, and Mrs Dhote is the Business Manager. No-one else is involved in the business.

35.9 Mr Chima himself has been in property maintenance over 20 years. He established London Residentials Ltd in 2004 in the same line of work as now but also advising on property management. Mr Chima has been actively involved ever since.

[36]Mrs Dhote gave oral evidence to confirm that when she received the letter and NOI from the Council, she was alarmed and called Ms Cosgrove. She recalls this was on 28 October 2021 as it was the day after the letter came. Ms Cosgrove explained the ramifications. Mrs Dhote sent the letter to Mr Chima, they spoke about it and handed it over to their Accountants to deal with. The Council’s evidence

Ms Cosgrove

[37]In a witness statement dated 27 May 2022, Alexandra Cosgrove, Trading Standards Officer states (in summary):37.1 The Officer checked and recorded the Appellant’s website on 27 September 2021. It showed that the Appellant is a property agent engaging in letting agency work. There was no reference to which CMPS the Appellant was a member of.

37.2 There are six CMPS providers. All confirmed that the Appellant was not, and never had been, a member. The Officer also identified a breach of section 83(6) of the Act. A NOI was therefore sent to the Appellant on 20 October 2021 for breach of regulation 3 of the Regulations and also a breach of the Act.

37.3 No representations were received in response to the NOI. An email was received from the Appellant’s Accountants on 5 November 2021 simply saying they were in the process of making an application to join a CMPS. In response, the Officer asked for confirmation when the application was finalised and gave a reminder that their representations were awaited.

37.4 The covering letter accompanying the NOI gave details of how to make representations. It is not for the Council to specify what should go in a representation. The covering letters stated in bold text that if no representations were received, the penalty was likely to be confirmed in full. It also stated that joining a CMPS does not avoid the penalty being imposed. No further response was received.

37.5 The agent was displaying the ‘Propertymark’ logo, which appeared to have been downloaded. Propertymark confirmed that the Appellant was not, and had not applied to be, a member of its CMPS. Propertymark wrote to the Appellant on 2 December 2021 asking the Appellant to remove its logo.

37.6 The Council received confirmation from CM Protect that the first date on which the Appellant made an initial application to join its CMPS was 13 January 2022. CM Protect has confirmed that the Appellant started the registration process with a ‘save and resume’ on 27 October 2021. It expired when the Appellant did not complete or submit the application within 14 days. The Appellant re-started an application and submitted it on 13 January 2022.

37.7 The decision was taken by the Council to issue the First FN imposing the full sum of £20,000 specified in the NOI, having regard to factors including:

(i) the Appellant had not made formal representations in response

(ii) the Appellant had still not joined a CMPS

(iii) the evidence from screen recording

(iv) aggravating factors “as per the London Lettings policy”; and

(v) no financial information was supplied for the Council to assess the Appellant’s ability to pay.

37.8 For the Second FN, the same factors were taken into account. The website was still not compliant. The penalty was reduced to £4,000 to reflect the fact the Appellant had published its landlord fees and details of their redress scheme membership.

37.9 It has been mandatory for all letting agents to hold CMP cover since 1 April 2019.

37.10 None of the documents provided by the Appellant prove it was in the process of joining a CMPS or relate to CMP membership. Documents from the Property Ombudsman is a redress scheme, membership of which is not in dispute. Details provided of membership to Propertymark Inventories is not a CMPS and does not give CMP cover.

37.11 The Act is not new, and the Appellant should be aware of its obligations.

37.12 For both penalties, there is no requirement for a breach to be wilful or deliberate. The Council refers to previous First-tier Tribunal decisions to the effect that it is not for the Council to issue warnings, and it is for agents to keep abreast of legislation.

37.13 Letting agents and estate agents were not placed under any specific business closures or restrictions following the first lockdown in 2020 due to the Covid-19 pandemic. They were expressly allowed to remain open during all later lockdowns.

[38]During oral evidence at the resumed hearing, Ms Cosgrove added the following points (in summary):38.1 The purpose of a CMPS is to protect client money and to ensure it is not held in a business account. Letting agents hold huge amounts of money on behalf of both landlords and tenants which is all ‘client money’.

38.2 It is mandatory under the Act for a letting agent to publish a list of their fees.

38.3 Once the NOIs were issued, the Council expected the Appellant to keep in touch at every point towards securing CMPS membership. For the first 2 years of the Regulations being in force, a client account was not needed to join a CMPS. As of April 2021, it became mandatory for all letting agents to have a client account to get CMPS cover. The Council did not receive any information at all from the Appellant, only one very short email from their Accountant.

38.4 In setting the penalty, the Council took account that the Appellant had been non-compliant for a long time and regulation 3 is one of the most serious breaches. For the regulation 3 breach, the Appellant had added “the illegal logo” to indicate membership of a CMPS when it was not. The Appellant had provided no financial information to say they could not afford the penalty.

38.5 The Council used a starting point for regulation 3 of either £10,000, £20,000 or £30,000 depending on the company turnover. As the Council did not have this information, it had picked the mid-point of £20,000 for a medium sized business with a turnover exceeding £75,000.

[39]Under cross-examination, Ms Cosgrove said that she had looked at Companies House entries for the Appellant’s turnover, but it “was not there”. She confirmed that no enquiries had been made of the Appellant’s accountants but emphasised that it was not for the Council to ask but for the Appellant to provide information.

[40]Ms Cosgrove referred to a penalty calculator used by the Council for breaches of the Regulations providing a maximum 20% uplift or reduction per factor in aggravation or mitigation, but there was no mitigation for the regulation 3 breach.

Ms Cannard

[41]Julie Cannard, Team Leader within the Council’s Portfolio Landlord’s Team provided a witness statement dated 30 May 2022. In summary:41.1 Ms Cannard had managed and supervised Ms Cosgrove over the relevant period. In that role, Ms Cannard attended a panel meeting on 5 January 2022 with the Trading Standards Manager, Ms Cosgrove, and another Trading Standards Officer to discuss this case. As a full representation was not received (only an email saying the Appellant will be joining a CMPS) they were unable to take into account any mitigating circumstances for the CMPS breach. After careful consideration of the legislation, guidance and information provided by the Appellant, it was agreed to keep “the fine”at £20,000.

41.2 At the same panel meeting, it was decided to reduce the Consumer Rights Act breach by £500 per breach as the Appellant was now compliant by publishing their landlord fees and details of their redress scheme membership. This reduced “the fine” to £4,000. As the Appellant did not produce and other information, the amount could not be reduced further.

41.3 The guidance followed was the May 2019 guidance published by the Ministry of Housing, Communities and Local Government and ‘Improving the Private Rented Sector and Tackling Bad Practice- A Guide for Local Authorities’.

41.4 Ms Cannard authorised and signed the FNs on 26 January 2022.

[42]In oral evidence, Ms Cannard confirmed that she is no longer employed by the Council. She took the decision to take enforcement action alongside the Head of Trading Standards at the time. They sat independently of the case and wanted to ensure that Ms Cosgrove’s recommendations were in line with Council policies. Ms Cannard identified the relevant passages within the Council Private Housing: Enforcement Policy, that is exhibited to her witness statement, as paragraphs 3.18 and 3.19. They state:

“3.18 The Council will also make use of other Financial Penalty Notices under different legislation, to deal with relevant trading standards (see 3.19 below)… 3.19 The Council will actively investigate letting agents to ensure that they are compliant with all trading standards legislation including the Consumer Rights Act. We will be ensuring that letting agents are members of a redress scheme and a Client Money Protection scheme, where necessary.”

[43]Ms Cannard acknowledged that the Enforcement Policy does not contain any guidance on how financial penalties should be assessed. The guidance within the matrixes apply to Housing Act offences only. There is a link on the Council’s website to the London Lettings Policy (as Ms Cosgrove described it) that has been there for as long as Ms Cannard can remember.

[44]Ms Cannard confirmed that the Council would have reduced the amounts if they had received the financial information at the time. In answer to the Tribunal’s questions on what reduction would be made and how it would have been calculated, Ms Cannard said that the Council would have looked at the turnover of the business and whether it could afford the fine. Ms Cannard pointed out that it is meant to be a fine for a serious offence that needs to be a deterrent. Mr Chima had not supplied bank statements from the time there was no client account. The Council did take account of the fees being on the Appellant’s website for the £1,000 reduction in the Second FN, but the Appellant could not display a badge to show CMPS membership.

[45]In arriving at the amount for the First FN, the Council had looked at how many properties the Appellant had an interest in. From recollection, Ms Cannard recalled it was thought to be at least 15 properties. They also looked at whether representations had been made, whether guilt was admitted or a reasonable excuse provided. Those factors were not present here and 2.5 years was a long time without CMPS membership.

[46]In terms of the 20% policy reduction referred to by Ms Cosgrove, Ms Cannard said that the Council was not using that calculator at the time. The Council had referred to previous decisions of the First-tier Tribunal and Upper Tribunal.

Findings of fact

[47]The Tribunal makes the following findings which are understood not to be in dispute.47.1 NOIs were issued in respect of breaches under both regulation 3 and section 83(6) of the Act on 20 October 2021. The Appellant did not make representations in response.

47.2 The company commenced the process to register for a CMPS on 27 October 2021. The application process was ongoing in November 2021. It remained incomplete because the Appellant had not yet completed the requirements for a client account. On 14 December 2021, the Appellant’s Bank confirmed that the client account was nearly opened and final documentation was required. The client account was confirmed as open on 11 January 2022. The Appellant obtained CMPS membership on 21 January 2022. The FNs were issued 26 January 2022.

47.3 The FNs dated 26 January 2022 were received by the Appellant on 27 January 2022. This was soon after the Appellant was certified as having joined a CMPS on 21 January 2022.

47.4 The Appellant failed to comply with the duty to belong to a CMPS in breach of regulation 3 of the Regulations.

47.5 The Appellant breached section 83(6) of Chapter 3 of the Act by failing to display a statement on its website indicating membership of a CMPS that gives the name of that scheme with its list of fees.

47.6 The Appellant joined a client redress scheme in November 2021. This did not attract client money protection. The Appellant displayed a ‘Propertymark’ logo on its website indicating membership of a CMPS when it was not a member of that or any other CMPS. The logo was removed in December 2021.

Factual point of dispute

[48]There was one dispute of fact arising at the hearing concerning the evidence of Mrs Dhote that she had spoken to Ms Cosgrove by telephone. Mrs Dhote’s evidence was vague in content albeit specific that she had called and spoken to Ms Cosgrove on 28 October 2021. Mrs Dhote said that Ms Cosgrave had told her of the implications of non-compliance. She had rung Ms Cosgrove on the telephone number given in her letter.

[49]Ms Cosgrove stated that the telephone number shown at the bottom of the covering letter with the NOIs was for the main Council switchboard. It was not a direct line to her. Ms Cosgrove insisted that she had no conversation with Mrs Dhote or anyone else calling on behalf of the Appellant. When asked how she could be so sure, Ms Cosgrove said that she kept a record of calls in a book. Details of calls were also entered in the Council’s electronic records, but Ms Cosgrove no longer has access to them after leaving the Council’s employment.

[50]It might be anticipated that a Council officer in Ms Cosgrove’s position would have a high number of calls. Ms Cosgrove said this was not the case. She worked from home at the time and encouraged contact by email. She would sometimes receive calls but not routinely as she was not even correctly recorded on the Council’s system.

[51]A business faced with the threat of a large financial penalty may be more likely to recall the steps that it took than a Council Officer dealing with numerous businesses and matters. However, I find it odd if Mrs Dhote had spoken to Ms Cosgrove, as she said, why a record was not kept of such an important matter or a witness statement produced with particulars. Moreover, no mention of a telephone call is made in the Appellant’s own timeline (page 20 of the bundle). Mention of a telephone call on 28 October 2021 was raised for the first time after the Council witnesses had given evidence.

[52]The timeline says that an email response was sent to Ms Cosgrove on 27 October 2021 stating:

“We acknowledge the letters and will resond [sic] to the earliest.”

The email is not produced. I am also concerned over the accuracy of the timeline. It is misleading because it records that on 27 October 2021 the company registered with a CMPS and received email confirmation from them. In fact, the Appellant had begun the online process for registration on that day, but did not complete the process.

[53]On balance, I am not satisfied that either an email or telephone call were made to the Council, as asserted.

Analysis

[54]In considering the amount of each penalty, the Tribunal is not limited to the evidence before the Council. It can consider evidence that was not known to the Council when it issued the FNs. There are two material pieces of evidence which affected the Council’s decisions on the amount of the penalties on which the Tribunal has information not known to the Council at the time of making its decisions and issue of the FN’s.

[55]Firstly, on the evidence of Ms Cosgrove the Council took into account that registration with a CMPS had not been achieved. That was the case when the Council panel met to decide to take enforcement action, but the position had changed by the time the authorisation was signed off and the First FN issued. I consider that it was the Appellant’s responsibility to inform the Council as soon as compliance was achieved. The Appellant was asked to keep the Council updated and it was certainly in its interests to do so. Nevertheless, as a matter of fact, by the time of issue of the First FN on 26 January 2022 registration had been achieved on 21 January 2022 albeit not at the date of breach.

[56]Secondly, the Council had no information on the Appellant’s finances to influence its decisions on affordability of the penalties. The Tribunal has details of the Appellant’s accounts for the 3 years ending 30 November 2020, 2021, and 2022.

[57]I return to these matters when weighing up all the relevant factors below.

[58]It emerged during the Tribunal’s questions to Ms Cosgrove that the Council had used the London Trading Standards, Model London Enforcement Policy, along with previous appeal decisions, to decide upon the penalties. This was referred to in Ms Cosgrove’s witness statement (at paragraph 8) as “the London Lettings policy” in the context of considering aggravating factors in the imposition of a penalty.

[59]Ms Cosgrove indicated that the maximum reduction the Council would have allowed under the lettings policy was 20% if financial information had been supplied. There followed a somewhat curious assertion that the reduction would be “cancelled out” by the aggravating factors even though they had already been taken into in arriving at the sum of £20,000. Ms Cosgrove was rather defensive in her replies to the Tribunal when trying to establish the methodology applied to calculate the penalties.

[60]It is surprising that if the Council, which was professionally represented, had used a local policy why it did not produce it within the hearing bundle or its supplemental bundle. There may well be a link to it on the Council’s website, but that does not assist the Tribunal or Appellant. Account cannot be taken of a policy not produced or the text reproduced at a minimum. As it is, I am not satisfied that such a policy was applied. Ms Cannard confirmed that the penalty calculator referred to by Ms Cosgrove was not used by the Council at the time.

[61]Furthermore, I am more persuaded by Ms Cannard’s witness statement made much nearer to the point in time in 2022 which says that the guidance followed was the Government’s May 2019 guidance and the DCLG Guide of March 2015 for Local Authorities on ‘Improving the Private Rented Sector and Tackling Bad Practice.’

[62]The hearing bundle does contain the Council’s “Private Housing: Enforcement Policy” from February 2022 (i.e. after the FNs), the relevance of which the Tribunal queried. As confirmed by Ms Cannard, breaches of this kind are recognised within the Enforcement Policy, but the guidance on calculating a penalty does not apply to them. It does not assist the Tribunal.

[63]It is the statutory guidance to which local authorities must refer that is highly pertinent. It is to be read alongside the Regulations and Chapter 3 of the Act. The guidance is titled ‘Mandatory client money protection for property agents – Enforcement guidance for local authorities” published by the Ministry of Housing, Communities & Local Government in May 2019.

[64]Paragraph 6.2 of the statutory guidance deals with determining the appropriate financial penalty. It explains that local authorities have discretion in determining the appropriate level of penalty, and they are expected to publish their own policy on making determinations which may be part of a pre-existing enforcement policy. The actual amount levied should be fair and proportionate reflecting the severity of the breach as well as taking into account the agent’s previous record of non-compliance.

[65]To help ensure that the financial penalty is set at an appropriate level, enforcement authorities should consider:(a) the severity of the breach

(b) deterring agents from breaching the Regulations, and

[66]In terms of severity, the more serious the breach, the higher the penalty should be. This should include considering the track record of the agent. A higher penalty will be appropriate where the agent has a history of failing to comply with their obligations and/or their actions were deliberate, and/or knew, or ought to have known, that they were in breach of their legal responsibilities. Agents are running a business and should be expected to be aware of their legal obligation. Account should also be taken of harm caused to the landlord or tenant.

[67]The statutory guidance explains that while the civil penalty should be proportionate and reflect both the severity of the breach and previous track record of the agent, it is important that it is set at a high enough level to ensure that it has a real economic impact on the agent and demonstrates the consequences of not complying with legal obligations.This should include considering:• Deterring the agent from repeating the breach;

• Deterring others from committing similar breaches; and

• Removing any financial benefit, the agent may have obtained because of committing the breach.

[68]Aggravating and mitigating factors are to be considered in each case. A non-exhaustive list of factors that local authorities may wish to consider is set out. Possible aggravating factors include:• Previous civil convictions or record of non-compliance with relevant legislation

• Obstruction of the investigation or deliberate concealment of the activity or evidence

• No reasonable attempts to comply with the Regulations- for example they have not sought to join an approved client money scheme

[69]Possible mitigating factors set out within the statutory guidance include:• Co-operation with the investigation 70.

• Reduction for early admission of the breach

• Evidence that the agent has made every reasonable effort to join an approved CMPS but is unable to do so for issues outside their control

• Limited impact of the breach i.e. where no money has been misappropriated

[70]The statutory guidance makes clear that the final determination of any financial penalty should be considered alongside the general principle that a penalty should be fair and proportionate but, in all the circumstances, act as a deterrent and remove any gain as a result of the breach.

Severity

[71]I start with a consideration of the severity of the breaches. Regulation 3 requires property agents that hold money on behalf of a client to belong to an approved or designated CMPS in order to afford protection to that client against loss, theft, misappropriation etc of their funds. It also provides that membership must be one that protects the maximum amount of client money that the agent may hold. A breach of regulation 3 is very serious.

[72]The amount of penalty for a breach of regulation 3 must not exceed £30,000. The maximum penalty reflects the serious nature of a breach of regulation 3. As Mr Ham for the Council acknowledged, this was not the most serious of breaches warranting a top of the scale starting point. There was no known loss of client money, for instance. However, it was still serious.

[73]The date of breach given in the First FN is 27 September 2021. By that time the breach had been ongoing since introduction of the requirements on 1 April 2019. This was a significant period of time. Throughout that time client money was exposed to risk of a kind that the Regulations seek to prevent. There were no safeguards in place in the event that the company became insolvent. Given that the accounts provided by the Appellant show that the company had traded at a loss in the year ending November 2020 and no separate client account had been established, the lack of client protection was not insignificant. Whilst Mr Chima sought to downplay the severity, this misunderstands the importance of the regime and the safeguards it affords to landlords and tenants alike. Compliance was not optional.

[74]Based on the information before the Council at the time of issue of the FNs, it is unsurprising that it imposed penalties of the amounts that it did given the lack of engagement from the Appellant.

[75]In submissions, Mr Ham suggested that £30,000 was pitched correctly for a medium sized business such as the Appellant with a turnover of £77,000 for the accounting period ending 30 November 2022. Although the FN was issued on 26 January 2022 (i.e. in the accounting period ending 30 November 2022), the date of breach in the First FN is 27 September 2021, which was within the previous accounting period when the turnover was £58,980. This was also the same accounting year that the NOI was issued. I bear well in mind that the Council has not produced details of how it assessed penalties with reference to turnover to ascertain a starting point.

[76]In my judgement, an appropriate starting point would be £10,000 which reflects the severity of the breach for the size of business and the corresponding risks. It is also at a level to have deterrent effect for both the business and others.

[77]Bearing in mind that £5,000 is the norm in terms of the section 83(6) breach, that is the starting point.

Aggravating factors

[78]I turn to consider aggravating factors and in doing so take care not to double count.

[79]It is an aggravating factor that the Appellant was never a member of a CMPS until the Council took enforcement action. From 1 April 2019, regulation 3 of the Regulations required property agents in the private rented sector in England who hold client money to be a member of an approved or designated CMPS. The Appellant was under a duty to comply from that date. By the time of the breach in the First FN, the breach had been ongoing for almost 2.5 years.

[80]The breach was aggravated by the Appellant falsely displaying the ‘Propertymark’ logo giving the impression that it belonged to a CMPS. The logo was removed after Propertymark confirmed on 2 December 2021 that the Appellant did not belong to its CMPS.

[81]This was not the only breach. The Appellant was also in breach of section 83(6) of the Act. The Act came into force in 2015. As originally enacted, section 83(6) contained a duty, where an agent holds money on behalf of person to whom the agent provides services as part of that work, to display or publish with the list of fees a statement of whether the agent is a member of a CMPS. Following the introduction of the regulatory requirement for CMPS membership in 2019, the duty changed to require a statement of membership and the name of the scheme. As the Council stated, there had been a breach of section 83(6) since 2015.

[82]The Appellant had been in the business of property lettings since 2004 when the company was established. This was not a new company, and it was being run by Mr Chima, an experienced letting agent. Clearly, as a professional business, the Appellant should have known of the requirements for registration with a CMPS and the duty to publicise with the list of fees a statement of membership of that scheme.

Mitigating factors

[83]The representations from the Appellant maintain that each penalty is disproportionate essentially due to four factors(i) limited duration before compliance

(ii) steps taken to obtain compliance

(iii) absence of consumer loss harm

(iv) the financial position of the business.

[84]These points are addressed below, leaving the financial position of the business for assessment as part of the overall assessment of reasonableness and proportionality.

[85]The Appellant did not make representations in response to the NOI. There was minimal cooperation with the Council. I have not been satisfied that Mrs Dhote spoke to the Council on 28 October 2021 or that the Appellant emailed the Council the day before. Even if those things did occur, neither demonstrates active engagement with the Council. An Accountant was then appointed for the company to deal with the requirements. The only recorded contact with the Council is a brief email from the Appellant’s Accountant to say that registration was in process. From the evidence before me there was no further update on progress or notification to the Council of any difficulty in securing a client account. The responsibility was that of the company. It cannot divest responsibility by instructing an accountant and leaving it to them to communicate with the Council. It was incumbent upon the Appellant to check and ensure that all necessary matters were in hand.

[86]While there were no previous breaches, the breaches in these FNs were ongoing from the time of statutory implementation of the requirements.

[87]Mr Chima insisted he had acted quickly to rectify the breaches and blames others for delay. The Appellant did not join a CMPS until 21 January 2022. This was not quick and client money remained at risk. The Appellant has produced a long line of emails with the company’s Bank. If the company was having difficulty in opening a client account, then this could easily have been relayed to the Council. The email trail shows that the Appellant chased up the Bank, but it is limited mitigation. When faced with a substantial financial penalty, the emails do not portray a sense of urgency. The Appellant could have expedited matters by engaging with the Council. As Ms Cosgrove said, the Council asked for updates and could have suggested where a client account could be obtained quickly.

[88]It is a poor explanation that Mr Chima and Mrs Dhote were working from home. Quite how that affected registration was not clear. I am similarly not swayed by the argument that progress with the Bank was slow due to the Covid-19 pandemic. It does not help the Appellant’s case that even during this appeal it has been suggested that CMPS registration was in progress, or had been obtained, when its application had in fact lapsed.

[89]The most notable mitigation is that CMPS membership was in place by the time the First FN was issued. There is nothing before the Tribunal indicating that the Appellant obtained financial benefit from failing to register with a CMPS. In respect of the Second FN, the Appellant had published its list of fees following the NOI and before issue of the FN.

[90]Other mitigation is that there is no record of previous breaches or complaints. The breaches have been admitted albeit only explicitly so during the appeal.

Assessment of the penalties

[91]Whilst the Council said that the penalties had been set with reference to Upper Tribunal decisions, they have not been cited. The penalties need to be set at a level that reflects the public benefit in ensuring compliance with the legislative requirements whilst being proportionate to the scale of the business and the severity of the failure and taking account of the aggravating and mitigating factors. Ultimately, a penalty should be fair and proportionate.

[92]For both breaches there are aggravating and mitigating factors. To a large extent there is a neutralising effect.

[93]In terms of the First FN, the Tribunal keeps well in mind that regulation 3 contains an important requirement designed to be enforced under the Regulations and with financial consequences for non-compliance. It is expected that there will be strict compliance with rules that are in place to protect the public. The Act is intended to reduce harm and the risk of harm to consumers from letting agents. The aim of enforcement action is ultimately to secure compliance. That was achieved. I consider that a 15% reduction of £1,500 should be made to reflect the fact that CMPS membership was obtained before issue of the FN. That would result in a penalty of £8,500 before consideration of affordability.

[94]In respect of the Second FN, it was the evidence of both Council witnesses that it had reduced the penalty from £5,000 specified in the NOI to £4,000 because the Appellant had published a list of its fees and membership of a redress scheme. A £500 allowance was made for each. The requirement to publish details of a redress scheme is within section 83(7) of the Act whereas the NOI was for failure to publish a statement indicating membership of a CMPS with a list of fees under section 83(6). Therefore, it appears that account was taken of compliance before it occurred in arriving at £4,000. Even if that was not the case, I consider a reduction to £4,000 to be a reasonable adjustment that is also in line with the two First-tier Tribunal decisions drawn to my attention by the Council.

[95]The first is a First-tier Tribunal decision in Bensons Limited v Westminster City Council (PR/2019/0082 and 0083) from 2020. In that case, a financial penalty of £3,500 was upheld for breach of the duty to publish details of the agents’ fees on their website and a further £4,000 for failing to publicise those fees in their office. The second is another First-tier Tribunal decision also from 2020 in Dav properties Limited (T/A Lord Estates) v Westminster City Council (PR/2019/0068 & 0069). In that case, a penalty of £9,000 was reduced to £8,000 (£4,000 per breach) for breaches of section 83(6) of the Act.

[96]Other First-tier Tribunal decisions do not bind this Tribunal. They are informative, but it is important that every case is determined on its individual facts and merits.

[97]Upper Tribunal decisions are binding upon this Tribunal. In London Borough of Camden v F Ltd

[2017] UKUT 349 (AAC)

the Upper Tribunal although dealing with other provisions within section 83, accepted at [27-29] that Schedule 9 of the Act provides for reasonableness as a consideration in the approach to be taken, including in relation to the amount of any penalty. It does not limit matters that may be included in representations to the local authority after the notice of intent has been served. A local authority would be acting unreasonably if it failed to consider any change of circumstances, and any change of circumstances should properly be taken into account in relation to any penalty. The UT further accepted the company’s submission that it would be wrong to prevent a letting agent from being able to rely on the fact that it has now remedied the breaches identified in the notice of intent.

[98]While accepting those arguments, the Upper Tribunal chose to put it this way: “The overall purpose is to protect consumers. If letting agents are not in compliance, they should be encouraged to come into compliance. Allowing changes of circumstances that are beneficial to consumers to be taken into account before the final notice is issued contributes to this.” [29]

[99]I turn to the issue of affordability. The Appellant suggested that the penalties could lead to the company going out of business. Whilst acknowledging that the Appellant was not legally represented, this point was asserted without reference to supporting evidence. The accounts now provided show that the Appellant operated at a loss in the year ending 30 November 2020 but made a £19,000 profit in the 2021 year-end, covering the period when the NOI was issued and dates given for the breaches. The company again suffered a loss the following year ending 30 November 2022. The Appellant continued to trade at the date of the hearing.

[100]In setting the figure of £10,000 for the First FN, account has been taken of the company turnover. An adjustment has been made to £8,500 to reflect compliance with regulation 3. Taking into account affordability from the financial information provided, in my judgement it is fair and proportionate to reduce the amount of the financial penalty in the First FN to £7,500 and £3,500 in the Second FN. This results in total penalties of £11,000.

[101]This strikes the right balance in acknowledging the seriousness of each breach, the need to uphold these important consumer protection provisions, serving as a deterrent to the Appellant and other letting agents whilst also recognising the mitigating factors and circumstances specific to this case.

Conclusion

[102]The amount of the financial penalties was unreasonable. The penalty for the First FN shall be reduced from £20,000 to £7,500. The penalty for the Second FN shall be reduced from £4,000 to £3,500. To this extent the appeals succeed. Signed: Judge Saward Date: 28 July 2026