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First-tier Tribunal (General Regulatory Chamber)


You are here: BAILII >> Databases >> First-tier Tribunal (General Regulatory Chamber) >> Ellahi Property Lettings Ltd (t/a Rent Me Now) v Wolverhampton City Council (Re Professional Regulation) [2025] UKFTT 601 (GRC) (03 June 2025)
URL: http://www.bailii.org/uk/cases/UKFTT/GRC/2025/601.html
Cite as: [2025] UKFTT 601 (GRC)

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Neutral Citation Number: [2025] UKFTT 601 (GRC)
Case Reference: FT.SL.2024.0083

First-tier Tribunal
General Regulatory Chamber
Professional Regulation

Heard at an oral hearing
Decision given on: 03 June 2025

B e f o r e :

HHJ David Dixon
Judge Armstrong-Holmes

____________________

Between:
ELLAHI PROPERTY LETTINGS Ltd
t/a Rent Me Now
Applicant
- and -

WOLVERHAMPTON CITY COUNCIL
Respondent

____________________


____________________

HTML VERSION OF DECISION
____________________

Crown Copyright ©

    Decision: Appeal is Allowed with the penalty being reduced to £7,000.

    Reasons

    Background

  1. The Respondent purports that the Appellant is a letting agent. The Respondent is the enforcement authority, which served Final Notices on the Appellant on 19th September 2024. The Final Notice imposed a financial penalty as follows:
  2. (i) For breach of the Regulation 3 requirement to be a member of an appropriate scheme on 31st July 2023, contrary to the Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc) Regulations 2019, a fine of £19,000. (The Regulations came into force on 1st April 2019.)

  3. The Appellant maintains in its appeal documents dated 21st October 2024, and letter of 23rd December 2024, that the fine is excessive. It raises procedural failings by the Respondent's initial issuing of the Notices to the wrong entity, its speed of compliance and willingness to work with the Respondent and more to justify a reduction in the penalty. Details of the level of penalties imposed by other Authorities or upheld by the Tribunal were also supplied.
  4. The Appellant indicates that on 7th February 2024 it became compliant, albeit before that it had in effect ring fenced client money by other non-authorised methods.
  5. However, the Appellant also raises the issue that but for it raising the Respondent's failings in time the current FPN would not have been issued on time, and asks whether it is fair to allow the FPN to stand as a result.
  6. A review was completed by the Respondent, where it upheld the penalty of £19,000.
  7. Prior to this FPN being levied the Respondent had commenced proceedings "against" the Appellant but to the wrong entity. The Respondent had failed to appreciate the difference legally between the two entities concerned, and eventually had to withdraw the first FPN, before issuing this one. The "Appellant" had incurred costs (legal fees of £3,666) as a result of the Respondent's actions and this is a cause of concern and an issue between the parties.
  8. This appeal has been determined at an oral hearing on 28th May 2025.
  9. The Appellant attended and was represented by Mr Akmal Ellahi, director.
  10. The Respondent attended and was represented by Richard Dewsbery of Counsel and Adam Sheen, Solicitor for the Respondent.
  11. Two bundles were supplied a trial bundle consisting of 446 pages and a bundle of Authorities.
  12. The hearing proceeded more by way of submissions than oral evidence being given. Both sides agreed that this was fair and appropriate and the Tribunal concluded it led to a more timely hearing.
  13. The Legal Framework

  14. The Client Money Protection Schemes for Property agents (Requirement to Belong to a Scheme etc) Regulations 2019, which provides as follows:
  15. 3. Requirement to belong to a client money protection scheme

    (1) A property agent who holds client money must be a member of an approved or designated client money protection scheme.

    (2) The property agent must ensure that the membership obtained results in a level of compensation being available which is no less than the maximum amount of client money that the agent may from time to time hold.

    …

    5.— Enforcement

    (1) It is the duty of every local authority in England(3) to enforce the requirements of regulations 3 and 4 in its area, subject to regulation 8(3).

    (2) A breach of regulation 3 or 4 by a property agent is taken to have occurred in each local authority area in England in which—

    (a)the agent has premises; or

    (b)housing is situated in relation to which the property agent's English letting agency work(4) or English property management work((5)) is undertaken.

    (3) A local authority in England must have regard to any guidance given by the Secretary of State about the exercise of its functions under these Regulations.

    6. Penalty for breach of the requirement to belong to a client money protection scheme

    (1) 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.

    (2) The financial penalty—

    (a)may be of such amount as the authority imposing it determines; but

    (b)must not exceed £30,000.

  16. The permitted grounds of appeal are (a) that the decision to impose the financial penalty was based on an error of fact; (b) the decision was wrong in law; (c) the amount of the financial penalty is unreasonable; or (d) the decision was unreasonable for any other reason. The Tribunal may quash, confirm or vary the Final Notice which imposes the financial penalty.
  17. Bundled Evidence

  18. The Respondent provided an expanded Respondent's Notice (p348) after the Appellant's letter of December 2024, where it explains its position. In summary the Respondent avers that not having CMP is always regarded as a very serious breach. It suggests that the fact that the Appellant didn't join a scheme until approached by the Respondent is an aggravating factor. The Respondent asserts that its failings in prosecuting the correct entity is irrelevant.
  19. The Respondent indicates that the penalty imposed was fair and proportionate given the length of the Appellant's trading, the size of the business, and the ease with which membership could have been obtained. The Respondent seems to indicate that as the Regulations have been in force since April 2019 there is a 4 year period when cover was not in place. A n incident where a tenant complained about a forced entry is referred to, but little real detail is given, and no indication of the weight that the Respondent gave to that is provided.
  20. The Respondent provided a copy of its sanction documentation; Appendix 1, p145, which sets out the categorisation criteria and Appendix 8, at p157 of the Bundle, sets out the relevant tables.
  21. The Respondent says the Appellant's culpability is at least medium, "and with the lengthy trading history and size of the Appellant" the Respondent argues that the culpability is "high." In terms of harm the Respondent suggests it is at least medium risk
  22. The Appellant provides a considerable body of information as to the level of penalties imposed by Authorities across the country. The information provided is interesting but not binding on the Tribunal. The penalty imposed here is one of the highest provided, however all cases are fact specific and therefore the information is not of the most assistance.
  23. The Appellant has also provided its financial accounts for the year to 2023, showing a profit of £79,198, a drop from the year before. An accountant letter explains that £75,000 of that sum was "intercompany recharges" and the actual profit was £23,457.
  24. Submissions

  25. The Respondent argues that the Appellant has been a letting agent for some time and should have been aware of its responsibilities to be aware of the schemes. The Respondent argues that the penalty is appropriate bearing in mind the factors considered to mitigate its value.
  26. The Respondent through Mr Dewsbery argued:
  27. a. In terms of culpability the Appellant was in the high or very high bracket. He sought to rely upon the long period since the rules came into force and the size of the Appellant entity to justify the same. He was pressed to explain how it was a flagrant disregard, intentional or wilful blindness case and he repeated similar points to before, saying that the Appellant was trying to maximise profit and therefore it's a actions were deliberate in effect.
    b. In terms of harm it was argued that the Appellant's client base was mainly vulnerable low income type households and even accepting 100 tenancies (the figure the Appellant offered) it would have a high risk of an adverse effect on tenants, thus it was a Cat 1 – High likelihood of harm case.
    c. It was argued that the Appellant had tried to hide his illegal activities through its trading name, that there were previous issues concerning police action over an eviction and there was obstruction in the investigation which aggravated matters. In terms of mitigation the Appellant had no previous breaches and had complied, but these matters were tempered considerably.
    d. The Respondent averred the effect of its analysis was that this was a very high culpability, Category 1 case with a starting point of £20,000. The mitigation reduced that to £19,000, which the Council viewed as just and appropriate.
  28. The Appellant accepted that it was in breach, but remained upset that the Respondent had brought proceedings against Mr Ellahi personally. The Appellant felt that the Respondent had been aggressive and the tone of correspondence was unhelpful.
  29. The Appellant argued:
  30. a. It had tried to comply and had encountered considerable difficulties registering due to the need to formally ring fence funds but banks being unwilling to do so;
    b. It indicated that a novel approach to HMRC to become registered was required at one stage, and the whole process was complicated and stressful. Whilst the actual registration had only taken a couple of days the process behind it was anything but simple.
    c. Despite the process issues the Appellant indicated it had traded over many years without any issues, it had no debts and had always provided a good service;
    d. It disputed the Respondent's suggestion that its client base was largely vulnerable, indicating it had been over a decade ago, but not now where it dealt to a largely professional tenant market;
    e. The eviction issue raised by the Respondent was a mystery to the Appellant who had no knowledge of any such issue and no contact with the police;
    f. The Appellant suggested in terms of culpability that it fell within the low bracket as considerable efforts were made to comply. It argued that in terms of harm it was in effect in the medium to low section as no actual harm was caused.
    g. The Appellant asked the Tribunal to reduce any penalty to reflect the costs of the original prosecution, the stress of the whole procedure and to consider if a penalty was required at all.
  31. The Appellant argues the penalties will have a substantial impact upon them. They argue cooperation, the size of their enterprise, full compliance and more should result in lower penalties, if any are appropriate.
  32. The Appellant drew the Tribunal's attention to the fact that 4 cases for breach of Reg 3 have been commenced by the Respondent and all of the penalties have been in the range £19,000 to £20,000.
  33. Decision Reasons

  34. At the material time of inspection the Appellant was not a member of a registered scheme; it was therefore in breach of Reg 3, as the Appellant accepts. The law was changed some time ago and a professional letting agent is rightly expected to be aware of the rules and to abide by them. Here there was a failure.
  35. There is no material available to the Tribunal to say that the Appellant was deliberately flouting the rules. There was no evidence that the Respondent had commenced an awareness campaign or similar as other Authorities have. There was no basis on the evidence provided to show any degree of knowledge.
  36. The Respondent was entirely within the remits of its responsibilities to issue a Notice of Intent as a result of the breach and leaving aside the error over the person to serve, acted properly in our view. The Notice was issued in time and whilst the Appellant has a complaint about the overall position it does not affect the validity of the relevant Notice. The relevant notice was issued within the 6 month period, albeit just.
  37. The Respondent's failure to issue in the correct name was not as was argued an unfortunate mistake in the Tribunal's view. Further simple investigation of the position, on the submissions the Tribunal heard, with Rightmove or similar would have ascertained the corporate identity of the Appellant. Actual simple communication with the Appellant may also have been a useful first step. This error by the Respondent seemed to the Tribunal to overshadow a fair approach.
  38. As there was a breach the Authority was obliged to consider the type, duration and severity of the same, and then set against that the Appellant's response to and cooperation in rectifying the breach. The Respondent should also then considered the financial situation of the Appellant in fixing the penalties alleged.
  39. The Tribunal looked with care at the approach taken by the Authority and it seems that they had been somewhat harsh, and based the decision on assumption rather than evidence. To place the case in the very high culpability bracket involves assessing knowledge in a way that is not consistent with the evidence available. The acceptance by Mr Dewsbery during the hearing that this was an omission to act where reasonable steps would have revealed the true position type scenario, i.e. medium culpability was a fair and proper one. The attempt thereafter to try and climb back up the guideline was not. To suggest that the size of the Appellant's business increases culpability is simply wrong, and is a failure to understand the Respondent's own drafted guidance. There is not and was not a basis, on the materials deployed, to say that this was anything other than medium culpability case in the Tribunal's view.
  40. This is a clear case of an agent failing to act by omission. The ring fencing is accepted to have taken place, and whilst this is not appropriate, was at least an attempt to safeguard clients. This sort of behaviour in the Tribunal's view shows an attempt to comply not to disregard tenant/landlord safety.
  41. The Respondent says the level of harm is at least medium risk, albeit argued at the hearing it was high. The Respondent's argument that there were multiple vulnerable clients that boosted matter to high was not made out on the evidence. The Tribunal was impressed by the frankness of the Appellant, and accepted without any difficulty the submissions that the clients concerned were not vulnerable. The Tribunal agrees that there was a possibility that tenants or landlords would be substantially undermined by the failing to join a CMP, and as a result it is a Cat 2 case. It is not a high case.
  42. This puts this case in the Cat 2 medium range of £5000 to £20000, with a starting point of £10500. Looking at the guidance there are no aggravating factors in this case, despite the way the Respondent sought to press things. There was simply no evidence of an attempt to gain financially, nor was there evidence of concealment. The Respondent's failing to investigate properly is not a basis for saying the Appellant acted incorrectly.
  43. In light of the Appellant's evidence in relation to the alleged eviction issue, the Tribunal ignored that matter completely. The Appellant was treated as an entity of good character.
  44. There are several mitigating issues: no previous issues; voluntarily remedied the issue; co-operation; all of which reduce the starting point. It seems to the Tribunal that the appropriate penalty should have been set at a considerably lower level. Having said that it has to be remembered that it took around 7 months to achieve compliance, albeit an explanation was provided regarding the complications.
  45. Further to this, whilst strictly not relevant to the penalty here, the Respondent's behaviour in pursuing the wrong Appellant is a factor that should have been considered. On a wider totality approach some account should have been given to the Respondent's failing, and this would reduce the penalty, albeit not to the degree the Appellant would wish for.
  46. Bearing in mind all of the above the Tribunal believes that a penalty of £7,000 would have been appropriate. This reflects the starting point and then downward adjustments for compliance, attempts at co-operation and the Respondent's actions.
  47. The Tribunal has looked at the Appellant's accounts with care, and note a relatively healthy trading balance. Whilst it is asserted that the company would struggle to meet the original penalty imposed, the Tribunal is not convinced that £7,000 is unaffordable. The balance between a penalty that brings homes the consequences of non-compliance and one that causes considerable business complications is often a difficult one, but here the sum indicated seems in the Tribunal's considered view to fit the merits of this case.
  48. Accordingly, the Appeal is allowed. The penalty is adjusted to reflect the Respondent's own guidance that was simply not followed. The new penalty is £7,000, which needs to be paid within 28 days, subject to any arrangements the parties wish to come to.
  49. No further directions are required.
  50. The Tribunal feels it right to indicate that the Respondent's approach here was not the most helpful. If initially the Respondent had contacted the Appellant about matters the issue over entity would not have arisen. Working with the Appellant may well have led to a better understanding of issues, and indeed quicker compliance. Correspondence may have been levelled in a less legalistic way. Lawyers are used perhaps to overly aggressive correspondence, lay people are not. A different approach may be more useful. This isn't to say bringing an action was inappropriate, only that there are, as with most things, better ways to achieve a solution.
  51. The "coincidence" of all other similar penalties being deemed by this Respondent at the very high culpability Category 1 type level suggests a failure to properly look at the printed guidance, and the Respondent needs in future to carefully apply its own materials fully, base decisions on evidence and not jump to conclusions.
  52. (Signed)

    HHJ David Dixon
    Dated: 28th May 2025

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