Landlord Not Liable for Licensing Failure Due to Valid Notification

OUTCOME: Dismissed

1

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case reference : BIR/00FY/HMK/2024/0028 Property :

[ADDRESS], [POSTCODE]

Applicant : [redacted] : None Respondent : [redacted] : None Type of application : Application for a rent repayment order under the Housing and Planning Act 2016 Tribunal member : Judge C [NAME] [NAME] and place of hearing : 13 January 2025 at Nottingham Magistrates Court

Date of decision : 4 February 2025

DECISION

© CROWN COPYRIGHT 2024

2 Decision

We order that the Respondent must pay the Applicant the sum of £58.00 by way of a rent repayment order.

Background 1. The Applicant applied for a rent repayment order on 6 June 2024 in respect of his tenancy of [NAME] during the period 15 November 2023 until 14 June 2024. He paid monthly rent of £850.00 per month and his tenancy lasted for seven months, and so his claim is for the sum of £5,950.00.

2. Following the issue of directions, the parties provided statements with supporting documentation. A Procedural Judge directed an oral hearing which took place on 13 January 2025 at Nottingham Magistrates Court. Neither party was represented. Both explained their cases to the Tribunal.

3. This decision records the Tribunal determination of the application and the reasons for it. Law 4. Relevant parts of the Housing Act 2004 and the Housing and Planning Act 2016 are set out in the Appendix to this decision.

5. In Acheampong v Choudhury [2022] UKUT 239 (LC) (“Acheampong”), Judge Cooke commended the following approach to Tribunals when considering how much to award on a rent repayment application: a. Ascertain the whole of the rent for the relevant period;

b. Subtract any element of that sum that represents payment for utilities that only benefited the tenant, for example gas, electricity and internet access. It is for the landlord to supply evidence of these, but if precise figures are not available an experienced tribunal will be able to make an informed estimate.

c. Consider how serious this offence was, both compared to other types of offence in respect of which a rent repayment order may be made (and whose relative seriousness can be seen from the relevant maximum sentences on conviction) and compared to other examples of the same type of offence. What proportion of the rent (after deduction as above) is a fair reflection of the seriousness of this offence? That figure is then the starting point (in the sense that that term is used in criminal sentencing); it is the default penalty in the absence of any other factors but it may be higher or lower in light of the final step:

3 d. Consider whether any deduction from, or addition to, that figure should be made in the light of the other factors set out in section 44(4).

Facts and evidence

6. The parties confirmed the following agreed or uncontested facts: a. [NAME] is a top floor residential flat in a block of 25 flats in the Lace Market area in Nottingham.

b. The Respondent purchased the flat in around 2011 for £116,000. He lived in it initially, but after around 2 years he moved into a shared property elsewhere with [NAME] who is now his wife. Since then, [NAME] has mainly been let to a residential tenant. It was not initially purchased as an investment property. The Respondent uses an agent, [NAME], to manage the letting of [NAME].

c. A selective licence for [NAME] was granted to the Respondent on 29 August 2019 as required by Nottingham City Council’s first selective licensing scheme to affect the area in which [NAME] is located. That scheme expired on 31 July 2023.

d. On 30 June 2022, the Respondent put [NAME] on the market for sale. A sale was agreed on 25 February 2023 to a [NAME] at a price of £122,000. The tenant at that time vacated on 22 March 2023 and the Respondent did not re-let in anticipation of the sale completing.

e. The [NAME] pulled out on 25 September 2023. Whilst keeping [NAME] on the market for sale, the Respondent (through [NAME]) also re-let to the Applicant.

f. By this time, Nottingham City Council had introduced a new selective licensing scheme to come into force on 1 December 2023.

g. The Applicant accepted that he could not request a rent repayment order in respect of the period 15 November to 30 November 2023 as there was no selective licensing scheme in place during that period.

h. On 8 December 2023, [NAME] sent an email to Nottingham City Council attaching a pdf document (called “Scanner_20231208_110301.pdf”) containing applications for temporary exemption notices (“TENs”) for ten properties that they managed, on a form that appears to have been designed by the Council. The sixth application is the application for a TEN for [NAME] and it comprises four pages.

i. The first page is headed “Application for a Temporary Exemption Notice for Licensing (Mandatory / Selective / Additional) under the provisions of Parts 2 & 3 of the Housing act 2004”. Details of the Respondent and [NAME] were given on page 2. The reason for the application was set out on page 3 as “[NAME] is currently

4 being marketed for sale”. Page 4 contains a signed declaration made by the agent, Mr [NAME], stating that the information on the form is correct to the best of his knowledge and confirming that he was aware that he would be committing an offence if he was supplying false or misleading information to the local authority.

j. The Respondent’s evidence was that to the best of his knowledge, Nottingham City Council have never responded to his agents application for a TEN.

k. On 3 April 2024, Mr [NAME] sent an email to the safer housing team at the Council saying:

“I have received correspondence relating to licences that have not been applied for, and citing [NAME] as a property for which no licence application had been made. … I have applied for temporary exemptions on [[NAME]] as [it] is currently being marketed for sale. Please can you confirm this has been received and approved.”

l. The Respondent was asked what the correspondence referred to in this email related to. He said he did not know. In his statement of case, he was simply providing all the documents his agent had provided to him to assist with the preparation of his case.

m. The safer housing team forwarded Mr [NAME] email of 3 April 2024 to the selective licensing team at the Council (copied to Mr [NAME]) asking them to provide an update.

n. Their reply was dated 4 April 2024 and it asked for information on when exemption applications were made as no application relating to [NAME] could be located.

o. Mr [NAME] replied on 5 April 2024 by sending another copy of the pdf file containing the TEN applications.

p. The Applicant vacated [NAME] a few weeks before the contractual end date of his tenancy, which was 15 June 2024.

q. The Respondent told us [NAME] is still on the market and an offer to buy has recently been received. He had applied for a full selective licence in the summer of 2024, receipt of which was acknowledged by the Council on 15 July 2024.

r. The Applicant complained of two particular alleged shortcomings in the quality of [NAME] and the conduct of the Respondent. The first is that prior to taking possession he had found that the carpet was moth infested. He had drawn this to the agent’s attention, and they had assured him that there was no live infestation. On taking possession, he had discovered that this was not true and a valuable and valued coat had been severely damaged.

5 s. The Respondent’s response was to say that he had not been aware of any live infestation at the point of the letting to the Applicant, and he almost immediately instructed the agent to resolve the matter when he heard about it. [NAME] was accordingly re-carpeted in around Christmas / early new year in 2024.

t. The second complaint was that the Applicant was told that someone had entered [NAME] in around May 2024 without him being asked for consent. He did not know who it was. It may have been that his partner facilitated the access.

u. We have uncontested evidence that the Respondent incurred regular expenditure on the upkeep of [NAME] during the time that it was let to the Applicant, costing £1,592.25.

v. The Respondent has not committed any previous offences under the Housing Act 2004. He has not been contacted by the Council with regard to any claim for a financial penalty arising from the letting to the Applicant.

Discussion 7. In order to obtain a rent repayment order, an Applicant must prove to the satisfaction of the Tribunal, and beyond reasonable doubt, that the Respondent has committed one of the offences listed in the table set out in section 40(3) of the 2016 Act; in this case an offence under section 95 of the 2004 Act.

8. There is a defence to the offence in section 95(2)(a) of the 2004 Act. The defence is that the Respondent has given a notification under section 86(1) of the 2004 Act, i.e. a notification of intention to take particular steps with a view to securing that the house is no longer required to be licensed.

9. Our view is that once the notification is given, there is an absolute defence unless or until the outcome of the action that the local authority should take upon receipt of the notification (see section 86(2)) has been determined. If there is no proper basis for giving the notification, the local authority can refuse to grant temporary exemption from the requirement to license. There is a right of appeal against that decision. When that right has been exhausted, if there has been no grant of a temporary exemption, the notification will no longer be effective and will not provide a continuing defence therafter.

10. It is not for this Tribunal to determine whether the section 86(1) notification was properly given. That is the role of the local council.

11. The Applicant has not challenged the Respondent’s evidence of the actions of Mr [RESPONDENT] as summarised above. We have no basis upon which we can reject the evidence before us that on the balance of probabilities Mr [NAME] did provide Nottingham City Council with a notification under section 86(1) on 8 December 2023.

6 12.

Accordingly, we must determine that the Respondent did not commit an offence under section 95 of the 2004 Act from 8 December 2023.

13. We must decide whether the defence expired at some point before the Applicant’s tenancy ended. Of course, the whole point of a notification under section 86(1) is that there is a time limit to the period for which the Respondent is exempt from licensing. But if a local authority simply fails to respond to the application, we cannot see a basis for determining that the defence comes to an end. It will come to an end if the TEN is granted (see section 86(3)), and it will come to an end if it is refused (at the expiry of the appeal process under section 86(7), but it seems to us that until one of these outcomes arises, the notification remains in place as a defence under section 95(3)(a) of the 2004 Act.

14. There is support in section 95 itself for this view. Sub-section (7(a) confirms that a notification under section 86(1) is still effective if the local authority have not decided whether to grant a TEN. Section 95(3) confirms that the defence exists on the giving of the notification and on the notification remaining “effective”, which applies whilst the local authority have not decided their response to the notification.

15. As the evidence is that the local authority never responded to the application for a TEN, our view is that the defence exists for the whole of the rest of the period for which the Applicant seeks a rent repayment order.

16.

Accordingly, we refuse the application for a rent repayment order for the period 8 December 2023 to 15 June 2024.

17. There remains a short period from 1 December 2023 to 7 December 2023 during which [NAME] was not licensed. During this period, there had been no application for a TEN, nor did the Respondent claim that there were any other defences. We therefore determine that we are satisfied beyond reasonable doubt that an offence under section 95 of the 2004 Act was being committed during this period.

18. Making a rent repayment order is discretionary. Although the amount we can order will be small, we cannot see a reason not to make an order in respect of 1 December to 7 December 2023, and we will do so.

19. The maximum amount we can order is the rent for that period which we calculate to be £195.61 (daily rent £27.94 x 7). We need to deduct any utility payments made by the landlord which only benefit the tenant. The parties agreed that the only utility to which this applied is water rates. These are included in the service charge payable by the Respondent and appear to amount to around £1.50 per week, which we deduct.

20. We need to determine what proportion of the remaining £194.12 should be paid by way of rent repayment. We consider this offence not to have been at the higher end of seriousness. The Respondent only has one

7 property and is not a professional investor. He has kept [NAME] maintained.

21. We consider the correct proportion of the maximum possible rent repayment appropriate in this case to be 25%, taking into account Upper Tribunal guidance as set out in Newell v Abbott [2024] UKUT 181 (LC). That produces a rent repayment amount at this stage of the calculation of £48.53 (25% of £194.12).

22. There are no issues regarding the Applicant’s conduct raised by the Respondent. The Applicant did raise the problems he experienced with moth infestation. It does appear from the documents that the Respondent’s agents made an incorrect assumption when advising the Applicant there was no active moth infestation at the beginning of the tenancy. On the other hand, the Respondent quickly accepted responsibility, and [NAME] was re-carpeted fairly quickly. We take account of this conduct in the final calculation as per paragraph 25 below.

23. We do not regard the alleged unauthorised entry into [NAME] in May 2024 as a factor which we should take into account. The evidence that it occurred was highly circumstantial and the evidence was that the entry may have been permitted. We are reluctant to make a finding that there was a breach of the Applicants right to quiet enjoyment on the basis of this evidence.

24. The Respondent provided evidence of his finances. He is not a wealthy man. Had the quantum of the order we are considering been of a higher order, we would have considered this question in more detail, but as the Respondent has apparently re-let [NAME] at the same rent as the Applicant paid, we are confident that he has the means to pay the amount we order.

25. The Respondent should pay to the Applicant the sum of 25% of £194.12, i.e. the sum of £48.53, to which we add 20% of that sum to reflect conduct, of £9.70, making a total sum which we order to be repaid to the Applicant by way of a rent repayment order of £58.23 which we round down to £58.00.

26. We have considered whether we should order the reimbursement by the Respondent of the fees paid to the Tribunal by the Applicant, being an application fee of £110 and a hearing fee of £220.

27. We consider that the Respondent should reimburse the application fee of £110. The Respondent did not hold a licence or have exemption from licensing when the Applicant was granted a tenancy, but at that point he did not need one. But he know he would need a licence from 1 December 2023 and did not apply for one in time. It was reasonable for the Applicant to bring the application. We order the Respondent to repay to the Applicant the application fee of £110.00.

8 28. We do not order the Respondent to repay the hearing fee. Unfortunately for the Applicant, it has turned out that there is a sound legal basis upon which no licence was required from 8 December 2023 until the end of the Applicant’s tenancy. The Applicant should have realised (perhaps by taking advice or consulting the Council) that the Respondent’s case had merit and was likely to substantially succeed at the point he paid the hearing fee. With hindsight, steps should have been taken to compromise or withdrawn the application before he incurred the fee. We do not think it would be fair for the Respondent to have to reimburse it. Appeal

29. Any appeal against this decision must be made to the Upper Tribunal (Lands Chamber). Prior to making such an appeal the party appealing must apply, in writing, to this Tribunal for permission to appeal within 28 days of the date of issue of this decision (or, if applicable, within 28 days of any decision on a review or application to set aside) identifying the decision to which the appeal relates, stating the grounds on which that party intends to rely in the appeal, and stating the result sought by the party making the application.

Judge C [NAME] First-tier Tribunal (Property Chamber)

9 Appendix

The Law

Housing Act 2004

The relevant provisions of the Housing Act 2004, so far as this application is concerned are as follows-

79 Licensing of houses to which this Part applies

(1) This Part provides for houses to be licensed by local housing authorities where—

(a) they are houses to which this Part applies (see subsection (2)), and

(b) they are required to be licensed under this Part (see section 85(1)).

(2) This Part applies to a house if—

(a) it is in an area that is for the time being designated under section 80 as subject to selective licensing, and

(b) the whole of it is occupied either—

(i) under a single tenancy or licence that is not an exempt tenancy or licence under subsection (3) or (4)…

85 Requirement for Part 3 houses to be licensed

(1) Every Part 3 house must be licensed under this Part unless—

(a) it is an HMO to which Part 2 applies (see section 55(2)), or

(b) a temporary exemption notice is in force in relation to it under section 86, or…

(c ) a management order is in force in relation to it under Chapter 1 or 2 of Part 4.

86. Temporary exemption from licensing requirement

(1) This section applies where [NAME] having control of or managing a Part 3 house which is required to be licensed under this Part (see section 85(1)) but is not so licensed, notifies the local housing authority of his intention to take particular steps with a view to securing that the house is no longer required to be licensed.

(2) The authority may, if they think fit, serve on that person a notice under this section (“a temporary exemption notice”) in respect of the house.

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(3) If a temporary exemption notice is served under this section, the house is (in accordance with section 85(1)) not required to be licensed under this Part during the period for which the notice is in force.

(4) A temporary exemption notice under this section is in force—

(a) for the period of 3 months beginning with the date on which it is served, or

(b) (in the case of a notice served by virtue of subsection (5)) for the period of 3 months after the date when the first notice ceases to be in force.

(5) If the authority—

(a) receive a further notification under subsection (1), and

(b) consider that there are exceptional circumstances that justify the service of a second temporary exemption notice in respect of the house that would take effect from the end of the period of 3 months applying to the first notice,

the authority may serve a second such notice on the person having control of or managing the house (but no further notice may be served by virtue of this subsection).

(6) If the authority decide not to serve a temporary exemption notice in response to a notification under subsection (1), they must without delay serve on the person concerned a notice informing him of—

(a) the decision,

(b) the reasons for it and the date on which it was made,

(c) the right to appeal against the decision under subsection (7), and

(d) the period within which an appeal may be made under that subsection.

(7) The person concerned may appeal to the appropriate tribunal against the decision within the period of 28 days beginning with the date specified under subsection (6) as the date on which it was made.

(8) Such an appeal—

(a) is to be by way of a re-hearing, but

11 (b) may be determined having regard to matters of which the authority were unaware.

(9) The tribunal—

(a) may confirm or reverse the decision of the authority, and

(b) if it reverses the decision, must direct the authority to issue a temporary exemption notice with effect from such date as the tribunal directs.

95 Offences in relation to licensing of houses under this Part

(1) [NAME] commits an offence if he is [NAME] having control of or managing a house which is required to be licensed under this Part (see section 85(1)) but is not so licensed. (2) …

(3) In proceedings against [NAME] for an offence under subsection (1) it is a defence that, at the material time—

(a) a notification had been duly given in respect of the house under section 62(1) or 86(1), or

(b) an application for a licence had been duly made in respect of the house under section 87, and that notification or application was still be effective (see subsection (7)).

and that notification or application was still effective.

(4) In proceedings against [NAME] for an offence under subsection (1) or (2) it is a defence that he had a reasonable excuse—

(a) for having control of or managing the house in the circumstances mentioned in subsection (1), or

(b) for failing to comply with the condition, as the case may be.

…

(7) For the purposes of subsection (3) a notification or application is “effective” at a particular time if at that time it has not been withdrawn, and either—

(a) the authority have not decided whether to serve a temporary exemption notice, or (as the case may be) grant a licence, in pursuance of the notification or application, or

12 (b) if they have decided not to do so, one of the conditions set out in subsection (8) is met. (8) The conditions are—

(a) that the period for appealing against the decision of the authority not to serve or grant such a notice or licence (or against any relevant decision of [F3the appropriate tribunal]) has not expired, or

(b) that an appeal has been brought against the authority’s decision (or against any relevant decision of such a tribunal) and the appeal has not been determined or withdrawn.

(9) In subsection (8) “relevant decision” means a decision which is given on an appeal to the tribunal and confirms the authority’s decision (with or without variation).

Housing and Planning Act 2016

The relevant provisions of the Housing and Planning Act 2016, so far as this application is concerned, are as follows –

40 Introduction and key definitions

(1) This Chapter confers power on the First-tier Tribunal to make a Rent Repayment Order where a landlord has committed an offence to which this Chapter applies.

(2) A rent repayment order is an order requiring the landlord under a tenancy of housing in England to—

(a) repay an amount of rent paid by [NAME], or …

(3) A reference to ‘an offence to which this Chapter applies’ is to an offence, of a description specified in the table, that is committed by a landlord in relation to housing in England let by that landlord.

Act Section General description of offence 6 Housing Act 2004 Section 95(1) control or management of unlicensed house

41 Application for rent repayment order

(1) [NAME] or a local housing authority may apply to the First-tier Tribunal for a rent repayment order against [NAME] who has committed an offence to which this Chapter applies.

13 (2) [NAME] may apply for a rent repayment order only if —

(a) the offence relates to housing that, at the time of the offence, was let to the tenant, and

(b) the offence was committed in the period of 12 months ending with the day on which the application is made.

…

43 Making of rent repayment order

(1) The First-tier Tribunal may make a rent repayment order if satisfied, beyond reasonable doubt, that a landlord has committed an offence to which this Chapter applies (whether or not the landlord has been convicted).

(2) A rent repayment order under this section may be made only on an application under section 41.

(3) The amount of a rent repayment order under this section is to be determined in accordance with—

(a) section 44 (where the application is made by [NAME]);

44 Amount of order: tenants

(1) Where the First-tier Tribunal decides to make a rent repayment order under section 43 in favour of [NAME], the amount is to be determined in accordance with this section.

(2) The amount must relate to rent paid during the period mentioned in the table.

If the order is made on the ground that the landlord has committed an offence mentioned in row 3, 4, 5, 6, or 7 of the table in section 40(3) the amount must relate to rent paid by the tenant in respect of a period, bot exceeding 12 months, during which the landlord was committing the offence an offence mentioned in row …6… of the table in section 40(3) a period, not exceeding 12 months, during which the landlord was committing the offence

(3) The amount that the landlord may be required to repay in respect of a

period must not exceed—

(a) the rent paid in respect of that period, less

14 (b) any relevant award of universal credit paid (to any person) in respect of rent under the tenancy during that period.

(4) In determining the amount, the Tribunal must, in particular, take into account—

(a) the conduct of the landlord and the tenant,

(b) the financial circumstances of the landlord, and

(c) whether the landlord has at any time been convicted of an offence to which this Chapter applies.

51 Housing benefit: inclusion pending abolition

(1) In this Chapter a reference to universal credit or a relevant award of universal credit includes housing benefit under Part 7 of the Social Security Contributions and Benefits Act 1992.