{"id":11181,"date":"2026-05-19T03:04:32","date_gmt":"2026-05-19T03:04:32","guid":{"rendered":"https:\/\/second-home.uk\/?p=11181"},"modified":"2026-05-19T03:04:32","modified_gmt":"2026-05-19T03:04:32","slug":"tribunal-overturns-24500-hmo-penalty-in-rack-rent-case","status":"publish","type":"post","link":"https:\/\/second-home.uk\/?p=11181","title":{"rendered":"Tribunal overturns \u00a324,500 HMO penalty in &#8216;rack rent&#8217; case"},"content":{"rendered":"<p>The Upper Tribunal has overturned a \u00a324,500 penalty issued to a landlord by Waltham Forest Council, ruling she was not in legal control of a property operated unlawfully as a house in multiple occupation (HMO).<\/p>\n<p>The case centred on the interpretation of \u2018rack rent\u2019 under section 263 of the Housing Act 2004, which determines who is legally responsible for HMO control. The term typically refers to receiving at least two-thirds of a property\u2019s rental value.<\/p>\n<h2>Management agreement dispute<\/h2>\n<p>Dr Noshaba Khiljee received a fixed \u00a33,400 per month from management company We Invest (WIL) under an agreement that explicitly prohibited HMO use. However, WIL operated the property as an HMO, collecting between \u00a37,000 and \u00a310,000 monthly from tenants after the property\u2019s HMO licence expired.<\/p>\n<p>The First-tier Tribunal initially upheld the council\u2019s penalty, calculating that Dr Khiljee received at least two-thirds of the property\u2019s rental value based on an estimated \u00a35,000 per month for a single-family home.<\/p>\n<\/p>\n<h2>Tribunal reverses decision<\/h2>\n<p>The Upper Tribunal overturned this decision, ruling that the calculation should have been based on the property\u2019s actual use as an HMO rather than its value as a single-family dwelling. The judge concluded Dr Khiljee was not receiving the relevant \u2018rack rent\u2019 and therefore could not be classified as a \u2018person having control\u2019 of the HMO.<\/p>\n<p>The ruling has implications for <a href=\"https:\/\/www.propertywire.com\/news\/uk\/buy-to-let-investors-shift-to-higher-yield-strategies\">buy-to-let investors using management agreements<\/a>, particularly those with properties that could potentially be converted to HMO use. The case follows a period of increased scrutiny on HMO operations, with <a href=\"https:\/\/www.propertywire.com\/news\/uk\/surrey-landlord-fined-5000-for-safety-breaches\">regulatory enforcement action against landlords<\/a> becoming more common across England.<\/p>\n<p>The decision clarifies that councils must assess rental income based on actual property use when determining HMO control, rather than theoretical valuations for alternative uses.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Upper Tribunal has overturned a \u00a324,500 penalty issued to a landlord by Waltham Forest Council, ruling she was not in legal control of a property operated unlawfully as a house in multiple occupation (HMO). The case centred on the interpretation of \u2018rack rent\u2019 under section 263 of the Housing Act 2004, which determines who [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":3307,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-11181","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-second-home"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Tribunal overturns \u00a324,500 HMO penalty in &#039;rack rent&#039; case - Second Home<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.propertywire.com\/news\/uk\/tribunal-overturns-24500-hmo-penalty-in-rack-rent-case\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Tribunal overturns \u00a324,500 HMO penalty in &#039;rack rent&#039; case - Second Home\" \/>\n<meta property=\"og:description\" content=\"The Upper Tribunal has overturned a \u00a324,500 penalty issued to a landlord by Waltham Forest Council, ruling she was not in legal control of a property operated unlawfully as a house in multiple occupation (HMO). The case centred on the interpretation of \u2018rack rent\u2019 under section 263 of the Housing Act 2004, which determines who [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.propertywire.com\/news\/uk\/tribunal-overturns-24500-hmo-penalty-in-rack-rent-case\/\" \/>\n<meta property=\"og:site_name\" content=\"Second Home\" \/>\n<meta property=\"article:published_time\" content=\"2026-05-19T03:04:32+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/second-home.uk\/wp-content\/uploads\/2025\/09\/0c092140-3c20-4b76-b945-256a1b280c3d_52519f63.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1024\" \/>\n\t<meta property=\"og:image:height\" content=\"682\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.propertywire.com\\\/news\\\/uk\\\/tribunal-overturns-24500-hmo-penalty-in-rack-rent-case\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/second-home.uk\\\/?p=11181\"},\"author\":{\"name\":\"admin\",\"@id\":\"https:\\\/\\\/second-home.uk\\\/#\\\/schema\\\/person\\\/4d1b4955add7c14742a3be9aaae12292\"},\"headline\":\"Tribunal overturns \u00a324,500 HMO penalty in &#8216;rack rent&#8217; 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