Upper Tribunal: sole director not liable for HMO penalty merely because of his position

The Upper Tribunal (Lands Chamber) has cancelled a financial penalty on a company's sole director, holding that consent under section 251 of the Housing Act 2004 cannot be inferred solely from his position as sole director.

In Tariq Khuja & Anor v Cherwell District Council [2026] UKUT 363 (LC), decided on 25 September 2026, Upper Tribunal Judge Elizabeth Cooke considered when a company director can be penalised alongside the company for a housing offence.

Background

OX1 Limited owns The Blarney Stone in Banbury, three flats above commercial premises. Mr Khuja is its sole director. The company let the flats and used a managing agent. Cherwell District Council inspected in August 2023 and later alleged breaches of the Licensing and Management of Houses in Multiple Occupation (Additional Provisions) (England) Regulations 2007. It served notices of intention on both the company and Mr Khuja. In July 2024 it imposed a penalty of £24,975 on each.

The First-tier Tribunal found the property was an HMO and that the breaches had occurred. It reduced each penalty to £11,000 (with £1,000 added to the company's and £1,000 to Mr Khuja's for different reasons). It held that the company's breaches were with Mr Khuja's consent because he was sole director, shareholder and the directing mind of the company.

The question

Section 251 makes a director liable as well as the company where the offence is proved to have been committed with his consent or connivance, or to be attributable to his neglect. Mr Khuja appealed on two grounds: that consent was not made out, and that the First-tier Tribunal failed to avoid double-counting.

The decision

The Upper Tribunal allowed the appeal and cancelled the penalty on Mr Khuja.

The reasoning

Liability does not follow simply from being a director. Drawing on an earlier Court of Appeal decision about directors' consent to a company's offence, the judge held that to prove consent, directly or by inference, it must be shown that the director knew the facts that make up the offence. An inference of consent must be an inference of actual knowledge. A finding that a director ought to have known, or that compliance was within his area of responsibility, may indicate neglect but is not a finding of consent.

The First-tier Tribunal had not analysed section 251 or whether Mr Khuja knew of the defects, and there appeared to be no evidence that he knew before 8 August 2023. The breaches were omissions rather than company decisions.

On double-counting, the judge noted that the First-tier Tribunal had not been made aware of Sutton v Norwich City Council [2021] EWCA Civ 20 and had not considered the problem when setting the amount. The point would have merited careful consideration for the reasons given in Sutton. There, the Court of Appeal said that with a solvent one-man company the owner might be expected to be the poorer by the total of the penalties on himself and the company. Mr Khuja is the sole director and shareholder of OX1 Limited. The judge said ground 2 would have succeeded even if ground 1 had failed.

The judge refused to send the case back to the First-tier Tribunal, saying it would be possibly futile, disproportionate and unfair. The company's penalty stands.

Sources

• Tariq Khuja & Anor v Cherwell District Council [2026] UKUT 363 (LC), Upper Tribunal (Lands Chamber), 25 September 2026