Appendix 1: the process for determining the level of penalty to set

Step one - determining the category

The Council will determine the breach category using only the culpability and category of harm factors below.  Where a breach does not fall squarely into a category, individual factors may require a degree of weighting to make an overall assessment. Other discretionary factors may also be applied in order to reflect consistency and may consider decisions in other UK jurisdictions where they contain some relevant and persuasive content.

Culpability

Very high:

Where the Landlord or Agent intentionally breached, or flagrantly disregarded, the law or has/had a high public profile and knew their actions were unlawful.

High:

Actual foresight of, or wilful blindness to, risk of a breach but risk nevertheless taken.

Medium:

Breach committed through act or omission which a person exercising reasonable care would not commit.

Low:

Breach committed with little fault, for example, because:

• significant efforts were made to address the risk although they were inadequate on the relevant occasion
• there was no warning/circumstance indicating a risk
• failings were minor and occurred as an isolated incident

Harm

The following factors relate to both actual harm and risk of harm.  Dealing with a risk of harm involves consideration of both the likelihood of harm occurring and the extent of it if it does.

Category 1 - high likelihood of harm

• serious adverse effect(s) on individual(s) and or having a widespread impact due to the nature and or scale of the Landlord's or Agent's business
• high risk of an adverse effect on individual(s) - including where persons are vulnerable

Category 2 - medium likelihood of harm

• adverse effect on individual(s) (not amounting to Category 1)
• medium risk of an adverse effect on individual(s) or low risk of serious adverse effect
• tenants and or legitimate landlords or agents substantially undermined by the conduct
• the Council's work as a regulator is inhibited
• ·tenant or prospective tenant misled

Category 3 - low Likelihood of harm

• low risk of an adverse effect on actual or prospective tenants
• public misled but little or no risk of actual adverse effect on individual(s)

Stockton-on-Tees Borough Council will define harm widely and victims may suffer financial loss, damage to health or psychological distress (especially vulnerable persons). There are graduations of harm within all of these categories.

The nature of harm will depend on the personal characteristics and circumstances of the victim and the assessment of harm will be an effective and important way of taking into consideration the impact of a particular breach on the victim.

In some cases no actual harm may have resulted and Stockton-on-Tees Borough Council will be concerned with assessing the severity of the misconduct; it will consider the likelihood of harm occurring and the gravity of the harm that could have resulted.

Harm to the Community

Some breaches cause harm to the community at large (instead of or as well as to an individual victim) and may include economic loss, harm to public health, or interference with the administration of justice.

Step two - Starting point and category range 

Having determined the category that the breach falls into, Stockton-on-Tees Borough Council will refer to the following starting points to reach an appropriate level of civil penalty within the category range. Stockton-on-Tees Borough Council will then consider further adjustment within the category range for aggravating and mitigating features.

Obtaining financial information

The statutory guidance advises that local authorities can use their powers to, as far as possible, make an assessment of a Landlord or Agent's assets and any income (not just rental or fee income) they receive when determining an appropriate penalty. Stockton-on-Tees Borough Council will use such lawful means as are at its disposal to identify where assets might be found.

In setting a financial penalty, Stockton-on-Tees Borough Council may conclude that the Landlord or Agent is able to pay any financial penalty imposed unless it has obtained, or the Landlord or Agent has supplied, any financial information to the contrary.  

The subject of a Final Notice, or a Notice of Intent where the subject does not challenge it, will be expected to disclose to Stockton-on-Tees Borough Council such data relevant to his/her financial position to facilitate an assessment of what that person can reasonably afford to pay.  Where Stockton-on-Tees Borough Council is not satisfied that it has been given sufficient reliable information, Stockton-on-Tees Borough Council will be entitled to draw reasonable inferences as to the person's means from evidence it has received, or obtained through its own enquiries, and from all the circumstances of the case, which may include the inference that the person can pay any financial penalty.

Starting points and ranges

The tables in Appendices 4 to 9  give the starting points, minimum and maximum financial penalties for each harm category and level of culpability for each type of breach:

• appendix 4 first breach in respect of a Prohibited Payment
• appendix 5 second and subsequent breach in respect of a Prohibited Payment
• appendix 6 breach of Publication of Fees requirements
• appendix 7 reach in respect of membership of a Redress Scheme
• appendix 8 breach in respect of membership of a Client Money Protection Scheme
• appendix 9 breach of transparency requirements of membership of a Client Money Protection Scheme (Regulation 4)

Context

Below is a list of some, but not all factual elements that provide the context of the breach and factors relating to the Landlord or Agent. Stockton-on-Tees Borough Council will identify whether any combination of these, or other relevant factors, should result in an upward or downward adjustment from the starting point. In particular, relevant recent convictions are likely to result in a substantial upward adjustment.  In some cases, having considered these factors, it may be appropriate to move outside the identified category range which will not exceed the statutory maximum permitted in any case.

Factors increasing seriousness

Aggravating factors:

• previous breaches of the TFA 2019 or relevant letting agency legislation
• previous convictions, having regard to:
  • the nature of the offence to which the conviction relates and its relevance to the current breach
  • the time that has elapsed since the conviction

Other aggravating factors may include:

• motivated by financial gain
• deliberate concealment of illegal nature of activity
• established evidence of wider or community impact
• obstruction of the investigation
• record of poor compliance
• refusal of advice or training or to become a member of an Accreditation Scheme

Factors Reducing Seriousness or Reflecting Personal Mitigation

• no previous or no relevant or recent breaches 
• no previous convictions or no relevant/recent convictions
• steps voluntarily taken to remedy problem
• high level of co-operation with the investigation, beyond that which will always be expected
• good record of relationship with tenants
• self-reporting, co-operation and acceptance of responsibility
• good character and or exemplary conduct
• mental disorder or learning disability, where linked to the commission of the breach
• serious medical conditions requiring urgent, intensive or long-term treatment and supported by medical evidence

Step three - general principles to consider in setting a penalty

Stockton-on-Tees Borough Council will finalise the appropriate level of penalty so that it reflects the seriousness of the offence and Stockton-on-Tees Borough Council will take into account the financial circumstances of the Landlord or Agent if representations are made by the Landlord or Agent following the issue of a Notice of Intent.

The level of financial penalty should reflect the extent to which the conduct fell below the required standard. The financial penalty should meet, in a fair and proportionate way, the objectives of punishment, deterrence and the removal of gain derived through the commission of the breach; it should not be cheaper to breach than to take the appropriate precautions and a fundamental principle involved is that there should be no financial gain to the perpetrator from the commission of the breaches.

If issuing a financial penalty for more than one breach, or where the offender has already been issued with a financial penalty, Stockton-on-Tees Borough Council will consider whether the total penalties are just and proportionate to the offending behaviour and will have regard to the factors in Step Eight.

Step four - issue notice of intent

In respect of prohibited payments, publication of fees etc and client money protection membership and transparency requirements, Stockton-on-Tees Borough Council will issue a Notice of Intent before the end of the period of 6 months beginning with the first day on which Stockton-on-Tees Borough Council has sufficient evidence of the breach.  In respect of redress membership, the Notice of Intent must be served within 6 months of the date on which SBC is first satisfied of the failure to comply with Article 3 or Article 5.  If the breach is ongoing the 6-month deadline continues until the breach ceases.  A Notice of Intent can be served spontaneously.

While there are slight variations in the statutory requirements according to which breach is being addressed a Notice of Intent will contain the amount of the proposed penalty, the reason for imposing the penalty and information about the right to make representations concerning the penalty.  In respect of the TFA 2019, the date of service is also required on the Notice of Intent.

Step five - consideration of representations and review of financial penalty where appropriate 

Stockton-on-Tees Borough Council will review the penalty and, if necessary, adjust the initial amount reached at Step Four, and represented in the Notice of Intent, to ensure that it fulfils the general principles set out below.

Any quantifiable economic benefit(s) derived from the breach, including through avoided costs or operating savings, should normally be added to the total financial penalty arrived at in step two, providing it doesn't increase the penalty over the prescribed maximum.  Where this is not readily available, Stockton-on-Tees Borough Council may draw on information available from enforcing authorities and others about the general costs of operating within the law.  Whether the penalty will have the effect of putting the offender out of business will be relevant but in some serious cases this might be an acceptable outcome.

Step six - reductions

Stockton-on-Tees Borough Council  will consider any factors which indicate that a reduction in the penalty is appropriate and in so doing will have regard to the following factors relating to the wider impacts of the financial penalty on innocent third parties, such as (but not limited to):

• the impact of the financial penalty on the Landlord or Agent's ability to comply with the law or make restitution where appropriate
• the impact of the financial penalty on employment of staff, service users, customers and the local economy

The following factors will be considered in setting the level of reduction. When deciding on any reduction in a financial penalty, consideration will be given to:

• the stage in the investigation or thereafter when the offender accepted liability
• the circumstances in which they admitted liability
• the degree of co-operation with the investigation

The maximum level of reduction in a penalty for an admission of liability will be one-third.  In some circumstances there will be a reduced or no level of discount. This may occur for example where the evidence of the breach is overwhelming or there is a pattern of breaching conduct.

Any reduction should not result in a penalty which is less than the amount of gain from the commission of the breach itself.

Step seven - additional actions 

In all cases Stockton-on-Tees Borough Council will consider whether to take additional action.  This may include further enforcement action itself or a reference or referral to other organisations where appropriate.

Step eight - totality of breaching conduct

Where more than one financial penalty has been considered, Stockton-on-Tees Borough Council will consider the guidance from the Sentencing Council's definitive guideline on 'Offences Taken into Consideration and Totality' which appears to Stockton-on-Tees Borough Council to be an appropriate reference and guide.

As the total financial penalty is inevitably cumulative, Stockton-on-Tees Borough Council will determine the financial penalty for each individual breach based on the seriousness of the breach and taking into account the circumstances of the case including the financial circumstances of the Landlord or Agent so far as they are known, or appear, to Stockton-on-Tees Borough Council .

For example:

Where a Landlord or Agent is to be penalised for two or more breaches or where there are multiple breaches of a repetitive kind, especially when committed against the same person, it will often be appropriate to impose a financial penalty for the most serious breach which reflects the totality of the conduct where this can be achieved within the maximum penalty for that breach.  No separate penalty should be imposed for the other breaches.  Where a Landlord or Agent is to be penalised for two or more breaches that arose out of different incidents, it will often be appropriate to impose separate financial penalties for each breach. Stockton-on-Tees Borough Council should add up the financial penalties for each breach and consider if they are just and proportionate.  If the aggregate amount is not just and proportionate Stockton-on-Tees Borough Council should consider whether all of the financial penalties can be proportionately reduced.  Separate financial penalties should then be imposed.

Where separate financial penalties are imposed, Stockton-on-Tees Borough Council must take care to ensure that there is no double-counting.

Step nine - recording the decision 

The officer making a decision about a financial penalty will record their decision giving reasons for coming to the amount of financial penalty that will be imposed.