Consultation outcome

Draft guidance note 7: Sections 226-235 – Penalties (enforcement power)

Updated 29 February 2024

Applies to England

	Applicable
PRP (For profit)	yes
PRP (Not for profit)	yes
PRP (Registered charity)	yes
Local authority	yes

Type of power: enforcement power 

Scope 

1 - This power enables the regulator to issue penalties to registered providers to penalise specific failures. The amount of such penalties can be unlimited, apart from where a penalty is imposed in response to an offence committed by a registered provider under Part 2 of the Act. 

When the regulator will use this power 

2 - Section 227 of the Act sets out the grounds where the regulator can use this power, which are: 

• the registered provider has failed to meet a standard under section 193, 194 or 194C of the Act

• the affairs of the registered provider have been mismanaged ^{[footnote 1]}

• the registered provider has failed to comply with an enforcement notice 

• the registered provider has given an undertaking under section 125 of the Act and failed to comply with it 

• the registered provider has failed to pay an annual fee under section 117(1)(b) of the Act 

• an offence under Part 2 of the Act has been committed by the registered provider 

• the registered provider: -
  i) does not have a health and safety lead designated under section 126A of the Act; or 
  ii) has failed to meet a requirement under section 126C of the Act; or 
  iii) the functions of the health and safety lead are not being carried out

• the registered provider has failed to comply with directions or a request under section 198C of the Act 

• the registered provider has failed to comply with a performance improvement plan notice; and  

• the registered provider has failed to comply with the duty in section 218B(4) of the Act to provide a copy of a performance improvement plan. 

3 - Along with being satisfied that one of the above circumstances applies, the regulator will consider whether it is appropriate to issue a penalty. This will involve considering all the relevant circumstances of the case including but not limited to whether other powers should be exercised at the same time, or instead of imposing a penalty.

Process for using the power

4 - If the regulator is satisfied that one or more of the grounds in section 227 of the Act have been met, it will decide the amount of the penalty taking into account the circumstances of the case including but not limited to: 

• the registered provider’s financial situation 

• whether the amount will impact on the registered provider’s ability to provide services 

• whether multiple issues led to the regulator’s decision to impose a penalty 

• the seriousness of the issue(s) that led to the regulator’s decision to impose a penalty 

• the impact that the issue(s) that led to the regulator’s decision to impose a penalty has had on tenants, or has the potential to have 

• the number of tenants affected or likely to be affected 

• duration of the issue(s) that led to the regulator’s decision to impose a penalty 

• whether reasonable efforts were made to address the issue(s) that led to the regulator’s decision to impose a penalty 

• the approach that the registered provider has taken to resolving the issue(s) that led to the regulator’s decision to impose a penalty, for example whether they have been co-operative and sought to remedy the issue(s); and 

• whether the issues that led to the regulator’s decision to impose a penalty could undermine confidence in the sector.

5 - Before imposing a penalty, the regulator must issue a pre-penalty warning to the registered provider as detailed in section 230 of the Act the pre-penalty warning must set out: 

• that the regulator is considering imposing a penalty 

• the grounds on which the regulator thinks a penalty could be imposed 

• any indication the regulator is able to give of the likely amount of the penalty 

• details about the representations process (set out in section 231 or the Act) including: 
  i) the period during which the registered provider may make representations to the regulator, which must be at least 28 days and begin on the date the provider receives the pre-penalty warning notice
  ii) that representations may relate to whether the penalty should be imposed, or the amount of any penalty that may be imposed. 

• an indication whether or to what extent the regulator would accept a voluntary undertaking instead of, or in mitigation of, imposing a penalty 

• details about enforcement of the penalty (as set out at section 234 of the Act) 

• explain that if the regulator decides to issue the penalty notice the registered provider has a statutory right of appeal to the High Court (as set out at section 235 of the Act)

6 - As required by section 230(2) and (3) of the Act, the regulator will inform Homes England, the GLA (where the registered provider owns land in Greater London) and any other relevant stakeholders that a pre-penalty warning has been issued. 

7 - The regulator will consider any representations made by the registered provider, provided they comply with the process as set out in the pre-penalty warning. 

8 - After considering any representations made, should the regulator decide to impose a penalty, it will issue a penalty notice to the provider as set out at section 228(2) of the Act, the penalty notice will include the following: 

• the grounds on which the penalty is imposed 

• the amount of the penalty – the regulator will consider whether there should be a discount if the penalty is paid before or on the date specified in the penalty notice in accordance with section 234(5) of the Act 

• how the penalty must be paid 

• the period within which the penalty must be paid 

• any interest or additional penalty which is payable in the event of late payment 

• whether the registered provider is required to publish information about the penalty and the manner of that publication 

• details about enforcement of the penalty (as set out at section 234 of the Act) 

• explain that the registered provider has a statutory right of appeal to the High Court (as set out at section 235 of the Act).

9 - The regulator will send a copy of the penalty notice to Homes England and the GLA (where relevant).

How the proceeds of penalties will be used by the regulator 

10 - The regulator may retain a sum representing the direct costs associated with imposing and enforcing the penalty along with a reasonable share of expenditure incurred by the regulator in connection with this as set out at section 233(2) of the Act as set out at section 233(2) of the Act.  

11 - As set out at Section 233(3) of the Act any remainder of the monies received by way of penalty will be paid to Homes England for it to be used for purposes which appear to it to amount to investment in social housing. 

Appeal process 

12 - There is a statutory right of appeal to the High Court, which must be brought within the period of 28 days beginning with the day on which the registered provider is given the penalty notice. 

13 - The appeal may relate to the amount of the penalty, its imposition or both.  

14 - The requirement to pay the penalty is suspended during the appeal period (as defined in section 235(5) of the Act) and the regulator may not charge interest or impose additional penalties during this period.

1. Mismanagement has a specific meaning in the Act and is defined in section 275: ‘Mismanagement in relation to the affairs of a registered provider’ means managed in breach of any legal requirements (imposed by or under an Act or otherwise). ↩