Local Housing Authority's Rent Repayment Order Request Rejected

OUTCOME: Refused

© CROWN COPYRIGHT 2015

FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : LON/00BB/HMA/2014/0012 Property : 392A [ADDRESS] [POSTCODE] Applicant : [redacted] Representative : [NAME] [COUNSEL], Counsel Respondent : [redacted] : Not present and not represented Also present :

[NAME] [APPELLANT], Applicant’s Senior Council Tax and Benefits Officer and Ms [APPELLANT], Applicant’s Environmental Health Officer

Type of Application : Application for Rent Repayment Order under section 96(5) of the Housing Act 2004 Tribunal Members : Judge P Korn (Chairman) [NAME] [NAME] [NAME] and venue of Hearing : 23rd February 2015 at 10 [ADDRESS] [POSTCODE] Date of Decision : 26th March 2015

DECISION

2 Decision of the tribunal The application for a rent repayment order is refused. The application 1. The Applicant has applied to the tribunal, pursuant to paragraph 96(5) of the Housing Act 2004 (“the 2004 Act”), for a rent repayment order against the Respondent.

2. The relevant legal provisions are set out in the Appendix to this decision. The hearing 3. The Applicant was represented by Counsel. The Respondent was not present at the hearing and was not represented. The background 4. On the basis that the Respondent was operating the Property as a privately rented property without having obtained the requisite licence, the Applicant sent a warning letter to the Respondent on 12th September 2013. It received no response and a final warning letter was sent on 3rd October 2013.

5. On 29th November 2013 the Property was visited by one of the Applicant’s [NAME], who obtained a statement from the tenant that he had been living at the Property for 10 years and was entitled to housing benefit which was being paid direct to the Respondent.

6. On 20th December 2013 a Notice of Intended Prosecution was served on the Respondent and then on 28th January 2014 the Respondent signed a ‘simple caution’ admitting the offence of failing to licence the Property under section 95 of the 2004 Act. On the same day the Respondent made a retrospective application for a licence and the licence was issued to him on 6th March 2014.

7. On 16th June 2014 the Applicant served a Notice of Intended Proceedings on the Respondent stating that the Applicant intended to apply for a Rent Repayment Order. Ms [APPELLANT] on behalf of the Applicant later wrote to the Respondent allowing him further time to make written representations (this seemingly being connected to there being a typographical date error on the Notice), and in response the Respondent left a voicemail message for Ms [RESPONDENT]. The two of them later spoke on the telephone, and then Ms [RESPONDENT] later wrote

3 again to the Respondent stating that the Applicant intended to continue with the application for a Rent Repayment Order.

8. The application itself is dated 20th November 2014 and the Applicant seeks to recover from the Respondent the sum of £4,821.43 which it states represents the amount of housing benefit paid for the period 17th June 2013 to 27th January 2014, this being – in its submission – the period during which the Property was unlicensed. The Applicant’s case 9. In written submissions, the Applicant states that on 21st June 2012 it approved a decision to designate most of its borough as selective and additional licensing areas and that, following this decision, it embarked on a media campaign to notify the public of this. The hearing bundle includes copies of relevant advertisements and notices, as well as details of information published on the Applicant’s website.

10. The Applicant’s evidence, on the basis of the copy maps in the hearing bundle showing the selective and additional licensing designation boundaries, is that the Property is within the boundaries of the newly designated selective/additional licensing areas.

11. In his written witness statement, [NAME] [NAME] states that on 24th October 2008 [NAME] received an application for housing benefit from the occupier of the Property, [NAME] [NAME], and that the claim was processed and [NAME] [NAME] started to receive housing benefit payments on 28th April 2008 (presumably retrospectively). His housing benefit award was based on a rental liability understood to be £150.00 per week. On 13th August 2010 [NAME] received a document from the Respondent confirming the bank account into which he wanted the housing benefit to be paid. Housing benefit records show the payments being made into that account.

12. At the hearing, [NAME] [APPELLANT] for the Applicant drew the tribunal’s attention to an extract in the hearing bundle from Council Tax records describing [NAME] [NAME] as the party liable for Council Tax and describing the Respondent as the Responsible Party. Next to the Respondent’s name in this extract is stated “(L)”, and Ms [RESPONDENT] evidence was that, according to her understanding, this was code for “landlord”.

13. As regards the ownership of the Property, [NAME] [NAME] noted that the hearing bundle contained copy office copy entries showing a [NAME] [NAME] to be the freeholder. It was accepted that there were no copy office copy entries in the hearing bundle showing the Respondent to have a property interest in the Property.

4 14. [NAME] [RESPONDENT] also drew the tribunal’s attention to a Landlord Payment Notification notifying the Respondent about the payment of housing benefit into the account designated by him. [NAME] [RESPONDENT] said that it appeared that the Respondent received the housing benefit as rent on his own behalf rather than as agent for a landlord. He also referred the tribunal to a completed claim for housing benefit filled out by [NAME] [NAME] which he submitted proved that a tenancy in [NAME] [NAME] favour was in existence.

15. In [NAME] [RESPONDENT] submission, the evidence indicated that the Respondent was the “[NAME]” for the purposes of section 96(10) of the 2004 Act. He also submitted that the Applicant has acted in a reasonable and proportionate manner and that the Respondent had ‘got away’ with the offence of operating an unlicensed property for a period of time.

16. When giving witness evidence, Ms [APPELLANT] said that the Applicant’s letter of 12th September 2013, to which the Respondent did not respond, stated that the Applicant’s records indicated that he was the owner or landlord of the Property. On being questioned by the tribunal, Ms [NAME] said that she believed that someone had spoken to the freeholder at an early stage and he had informed that person that he was not the receiver of rent. 17. [NAME] [NAME] took the tribunal through the hearing bundle generally, and the tribunal asked questions on certain points, particularly in relation to the notice of intended prosecution. The Respondent’s case 18. The tribunal has received no written submissions from the Respondent and he was not present or represented at the hearing. He has therefore not communicated his case to the tribunal. The tribunal’s analysis 19. The tribunal notes the oral evidence and written submissions from the Applicant and has considered the copy documents provided.

20. On the basis of the Applicant’s evidence, which has not been contested by the Respondent, we are satisfied that the Property required a licence during the whole of the period in respect of which the Applicant is claiming rent repayment, namely 17th June 2013 to 27th January 2014. We are also satisfied that the Applicant took sufficient steps to advertise the area in which the Property is situated as a selective and additional area.

5 21. Under section 97(8)(a) of the 2004 Act a rent repayment order may not require the payment of an amount which is in respect of any time falling outside the period of 12 months ending with the date of the notice of intended proceedings. The notice of proceedings is dated 16th June 2014 and therefore the earliest date from which the tribunal could order repayment (subject to any other considerations) is 17th June 2013.

22. Under section 96(6)(b) of the 2004 Act, to the extent that a rent repayment order can be made at all it is confined to the period during which it appears to the tribunal that such an offence was being committed. The licence was applied for on 28th January 2014 and therefore under section 95(1) and section 95(3) the date on which the offence ceased to be committed was 28th January 2014.

23. Therefore, subject to any other considerations, the period in respect of which it would in principle be possible to make a rent repayment order is 17th June 2013 to 27th January 2014, as submitted by the Applicant. It is also accepted that the amount of housing benefit paid in respect of this period is £4,821.43.

24. We are also satisfied on the basis of the evidence that the Respondent, being “a person having control of or managing a house which is required to be licensed” under section 95(1) of the 2004 Act, committed an offence by failing to license (or procure the licensing of) the Property. The Respondent has not made any written or oral submissions to us as to whether he has any defence under section 95, but in any event he has signed a caution and we have not seen any credible evidence that he has a valid defence.

25. Subject to the question as to whether the Respondent was “[NAME]” as defined in section 96(10), we are also satisfied that the conditions contained in section 96(6) have been met and that the requirements of section 96(7) have been complied with, and we have not received any submissions arguing otherwise.

26. Specifically as regards the Notice of Proceedings dated 16th June 2014, there was a typing error on that Notice in that paragraph 2 referred to a period of 17th June 2014 to 27th January 2014 whereas the first date should have been 17th June 2013. However, the correct date is apparent from Schedule 1 to that Notice, the error was drawn to the Respondent’s attention by a letter dated 18th September 2014, the Applicant allowed him more time to respond (citing the error as the reason) and the Respondent has not argued that he was confused by the error. In our view, therefore, the error is not material enough to have invalidated the Notice.

27. We note that section 97(2) specifies the circumstances in which the tribunal must make a rent repayment order. This subsection does not apply here as nobody has actually been convicted of an offence under

6 section 95(1) [unlicensed house] in relation to the Property. Therefore section 97(5) applies and the amount required to be paid by virtue of a rent repayment order is to be such amount as the tribunal considers reasonable in the circumstances, subject to the provisions of section 97(6), which sets out certain matters that the tribunal must take into account, although this does not preclude the tribunal from taking into account any other matters which it reasonably considers to be relevant. It is also subject to the provisions of sections 97(7) and 97(8).

28. The Respondent has not made any submissions in relation to sections 97(6) to (8), and we are satisfied that there are no specific matters listed in these subsections which apply and would justify a reduction in any amount that we might otherwise order to be repaid. The Respondent’s conduct has not been particularly good; on the contrary he failed to respond to the Applicant’s warning letter and has not engaged with the proceedings before us. The evidence suggests that housing benefit was paid for a considerable period prior to the earliest date from which a rent repayment order could apply, and therefore it is less likely that an order would, for example, cause undue hardship. There is no specific evidence that the housing benefit was not received by [NAME].

29. Under section 96(5), on an application to a tribunal by the local housing authority where the tribunal is satisfied as to the relevant matters the tribunal may make a rent repayment order requiring “[NAME]” to pay to the local housing authority an amount in respect of housing benefit calculated in accordance with the relevant legislation. Under section 96(7)(a), a tribunal may only make a rent repayment order for the repayment of housing benefit if satisfied that the local housing authority has served a notice of proceedings on the “[NAME]”. Section 96(10) states that in section 96 generally “[NAME]” in relation to any payment of housing benefit or periodical payment payable in connection with the occupation of the whole or a part of a house means the person who at the time of the payment was entitled to receive on his own account periodical payments payable in connection with such occupation.

30. Therefore, in order to make a rent repayment order, one matter on which we need to be satisfied is that the Respondent was the “[NAME]” as defined in section 96(10), namely that at the time of the payment of housing benefit he was entitled to receive that housing benefit “on his own account”. 31. [NAME] [APPELLANT] for the Applicant argues that the Respondent was entitled to receive that housing benefit on his own account on the basis that, in his submission, the Respondent was the occupier’s landlord at the relevant time. The Respondent advised the Applicant as to the bank account into which he wanted the housing benefit to be paid, and housing benefit records show the payments being made into that

7 account. In the hearing bundle, an extract from Council Tax records describes the Respondent as the Responsible Party. Next to the Respondent’s name in this extract is the letter “(L)”, which, according to Ms [RESPONDENT] understanding, was code for “landlord”. The hearing bundle also contains a Landlord Payment Notification notifying the Respondent about the payment of housing benefit into the account designated by him, and in [NAME] [RESPONDENT] submission it appeared that the Respondent received the housing benefit as rent on his own behalf rather than as agent for a landlord.

32. However, the copy office copies in the hearing bundle do not show the Respondent to have a property interest in the Property. On the contrary, they show a [NAME] [NAME] to be the freehold owner of the whole of [ADDRESS], including the Property (i.e. 392A, being the first floor of 392). There is no reference on the freehold office copy entries to the Respondent having an interest in the Property, whereas there is a note on those office copy entries that the ground floor of 392 is subject to a lease. Separate copy office copy entries show the leasehold proprietor of the ground floor to be a [NAME] [NAME] [NAME]. We have seen no tenancy agreement between the Respondent and the occupier.

33. We also note that in his application for a property licence the Respondent describes himself as an employee of the licence holder and as the managing agent. In particular, he has elected to tick the ‘managing agent’ box rather than any of the boxes entitled ‘freeholder’, ‘leaseholder’ or ‘person in control of the property’. Whilst it is possible that he made this choice knowing it to be false, in our view there is insufficient evidence that it would even have occurred to him deliberately to make a false statement in this regard, given that a fairly sophisticated knowledge would be required of the distinction between the “person having control of or managing” the Property for the purposes of section 95(1) and “[NAME]” for the purposes of section 96. Even then, the Respondent would have to rely on a tribunal picking up this point without the benefit of any written or oral submissions from him.

34. The Applicant must have read the application for a property licence before granting the retrospective licence and therefore must have , or at least should have, known that the Respondent was stating that he was merely the landlord’s agent, and yet the Applicant seemingly did not pursue this point at the time. In oral evidence, Ms [NAME] said that she believed that someone had spoken to the freeholder at an early stage, and so it was open to the Applicant to clarify the position further with the freeholder. At the very least, the Applicant could have served notice of intended proceedings on the freeholder, but for some reason it chose not to do so.

35. In addition, in the occupier’s claim for housing benefit in the hearing bundle, the landlord’s agent is described as [NAME] [RESPONDENT] (presumably a

8 reference to [NAME] [RESPONDENT], the Respondent). Something has been written as the ‘landlord’s name’ but has then been crossed out so as to make it illegible. This, then, whilst not conclusive by itself, is further evidence pointing to the Respondent being the agent rather than the landlord.

36. As regards the reference to “L” on the Council Tax records, whilst it may be that this is code for landlord, Ms [RESPONDENT] was understandably unable to comment as to the evidence on which the decision to refer to the Respondent as “L” was based, and therefore we are unable to accord much weight to this point. We are also not persuaded that the Respondent’s failure to reply to the Applicant’s letter of 12th September 2013 constitutes an implied admission that he was the landlord.

37. Taking all of the evidence into account, our factual finding is that on the balance of probabilities the Respondent is the landlord’s managing agent, not the landlord, and that he was not a person entitled to receive periodical payments “on his own account”. Therefore he is not [NAME] for the purposes of section 96(5) and was not [NAME] at the relevant time for the purposes of section 96(7) and we are unable to make a rent repayment order.

38. There is another issue which also needs to be addressed and which was raised by the tribunal at the hearing so as to enable the Applicant to comment. On 20th December 2013 the Applicant sent to the Respondent a Notice of Intended Prosecution, and on the second page the Notice clearly set out two options for the Respondent under the heading “Please Choose Only One Option”. Option 1 was to accept a formal caution, apply for a retrospective licence and pay costs. Option 2 was to contest the alleged offence and the text of Option 2 includes a summary of what would or might happen next if Option 2 was selected (i.e. if Option 1 was not taken up). Of particular interest in the context of these proceedings is the statement that if Option 2 is selected “If found guilty by the magistrates court … upon conviction the Council … may apply to the Residential Property Tribunal for a Rent Repayment Order”.

39. The clear implication of Option 2, in our view, is that if the Respondent were to choose to accept a formal caution and apply for a licence (i.e. select Option 1) the Applicant would not apply for a Rent Repayment Order. The Respondent duly accepted a formal caution and applied for a licence and yet the Applicant has still applied for a Rent Repayment Order. We do not have the benefit of any direct submissions from the Respondent. However, even on the Applicant’s own witness evidence in the hearing bundle, on being told that the Applicant intended to apply for a Rent Repayment Order the Respondent replied that he had signed the caution, which indicates that he may have felt misled or at least puzzled by this turn of events.

9 40. We do not seek to criticise the Applicant’s conduct in this matter generally. However, we are concerned by the Applicant’s actions in pursuing the rent repayment application in the context of the wording of the Notice of Intended Prosecution and the Respondent’s response to it. At best, in our view, the Notice of Intended Prosecution was highly misleading in the light of the Applicant’s subsequent actions.

41. As our primary finding is that the Respondent is not “[NAME]” for the purposes of section 96, we will not be making a rent repayment order. However, if we were otherwise minded to make a rent repayment order we would – in our view – have to consider making a reduction of the amount that would otherwise be payable to reflect the above point. Whilst the conduct of the local housing authority is not a matter that we must take into account under section 97, that list is not exclusive. In addition, the Upper Tribunal has ruled in [NAME] V [NAME] and others (2012) UKUT 301 that there is no presumption or starting point of a 100% refund. Whilst that case related to section 74(5) there seems to be no reason in principle why the same should not apply to section 97(5), albeit that it needs to be borne in mind that the [NAME] case related to repayment of rent to occupiers, not to repayment of housing benefit. In our view, whilst there is insufficient basis – particularly in the absence of legal authority being brought on the point by either party – for concluding that some form of estoppel should operate to prevent the Applicant from applying for a rent repayment order, some reduction should be made to reflect the inconsistency between the wording of the Notice of Intended Prosecution and the Applicant’s subsequent conduct. Therefore, if it were not for the fact that we decline – for other reasons – to make a rent repayment order we would be reducing the amount otherwise payable by virtue of this point. Whilst one cannot be scientific as to the exact amount of reduction that would be [NAME], we consider that a 25% reduction would have been [NAME] in such circumstances. The tribunal’s decision 42. The application for a rent repayment order is refused for the reasons given above. Cost applications 43. No cost applications were made. Name: Judge P. Korn Date: 26th March 2015

10 Appendix of relevant legislation

Housing Act 2004 (as amended)

Section 95

(1) A person commits an offence if he is a person 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.

……

(3) In proceedings against a person 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 effective …

(4) In proceedings against a person 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) ...

Section 96

(1) For the purposes of this section a house is an “unlicensed house” if –

(a) it is required to be licensed under this Part but is not so licensed, and

(b) neither of the conditions in subsection (2) is satisfied.

(2) The conditions are –

(a) that a notification has been duly given in respect of the house under section 62(1) or 86(1) and that notification is still effective (as defined by section 95(7);

(b) that an application for a licence has been duly made in respect of the house under section 87 and that application is still effective (as so defined).

11 (3) No rule of law relating to the validity or enforceability of contracts in circumstances involving illegality is to affect the validity or enforceability of –

(a) any provision requiring the payment of rent or the making of any other periodical payment in connection with any tenancy or licence of the whole or a part of an unlicensed house, or

(b) any other provision of such a tenancy or licence.

(4) But amounts paid in respect of rent or other periodical payments payable in connection with such a tenancy or licence may be recovered in accordance with subsection (5) and section 97.

(5) If –

(a) an application in respect of a house is made to a tribunal by the local housing authority or an occupier of the whole or part of the house, and

(b) the tribunal is satisfied as to the matters mentioned in subsection (6) or (8),

the tribunal may make an order (a “rent repayment order”) requiring [NAME] to pay to the applicant such amount in respect of the housing benefit paid as mentioned in subsection (6)(b) or (as the case may be) the periodical payments paid as mentioned in subsection (8)(b), as is specified in the order (see section 97(2) to (8)).

(6) If the application is made by the local authority, the tribunal must be satisfied as to the following matters –

(a) that, at any time within the period of 12 months ending with the date of the notice of intended proceedings required by subsection (7), [NAME] has committed an offence under section 95(1) in relation to the house (whether or not he has been charged or convicted),

(b) that housing benefit has been paid (to any person) in respect of periodical payments payable in connection with the occupation of the whole or any part or parts of the house during any period during which it appears to the tribunal that such an offence was being committed, and

(c) that the requirements of subsection (7) have been complied with in relation to the application.

(7) Those requirements are as follows –

12 (a) the authority must have served on [NAME] a notice (a “notice of intended proceedings”) –

(i) informing him that the authority are proposing to make an application under subsection (5),

(ii) setting out the reasons why they propose to do so,

(iii) stating the amount that they will seek to recover under that subsection and how that amount is calculated, and

(iv) inviting him to make representations to them within a period specified in the notice of not less than 28 days;

(b) that period must have expired; and

(c) the authority must have considered any representations made to them within that period by [NAME].

......

(10) In this section –

“[NAME]” in relation to any payment of housing benefit or periodical payment payable in connection with the occupation of the whole or a part of a house, means the person who at the time of the payment was entitled to receive on his own account periodical payments payable in connection with such occupation

……

Section 97

(1) This section applies in relation to orders made by tribunals under section 96(5).

(2) Where, on an application by the local housing authority, the tribunal is satisfied –

(a) that a person has been convicted of an offence under section 95(1) in relation to the house, and

(b) that housing benefit was paid (whether or not to [NAME]) in respect of periodical payments payable in connection with the occupation of the whole or any part or parts of the house during any period during which it appears to the tribunal that such an offence was being committed in relation to the house,

13

The tribunal must make a rent repayment order requiring [NAME] to pay to the authority an amount equal to the total amount of housing benefit paid as mentioned in paragraph (b).

This is subject to subsections (3), (4) and (8). (3) If the total of the amounts received by [NAME] in respect of periodical payments payable as mentioned in paragraph (b) of subsection (2) (“the rent total”) is less than the total amount of housing benefit paid as mentioned in that paragraph, the amount required to be paid by virtue of a rent repayment order made in accordance with that subsection is limited to the rent total.

(4) A rent repayment order made in accordance with subsection (2) may not require the payment of any amount which the tribunal is satisfied that, by reason of any exceptional circumstances, it would be unreasonable for that person to be required to pay.

(5) In a case where subsection (2) does not apply, the amount required to be paid by virtue of a rent repayment order under section 96(5) is to be such amount as the tribunal considers reasonable in the circumstances.

This is subject to subsections (6) to (8).

(6) In such a case the tribunal must, in particular, take into account the following matters –

(a) the total amount of relevant payments paid in connection with occupation of the house during any period during which it appears to the tribunal that an offence was being committed by [NAME] in relation to the house under section 95(1);

(b) the extent to which that total amount –

(i) consisted of, or derived from, payments of housing benefit, and

(ii) was actually received by [NAME];

(c) whether [NAME] has at any time been convicted of an offence under section 95(1) in relation to the house;

(d) the conduct and financial circumstances of [NAME]; and

14 (e) where the application is made by an occupier, the conduct of the occupier.

(7) In subsection (6) “relevant payments” means –

(a) in relation to an application by a local housing authority, payments of housing benefit or periodical payments payable by occupiers;

……

(8) A rent repayment order may not require the payment of an amount which –

(a) (where the application is made by a local housing authority) is in respect of any time falling outside the period of 12 months mentioned in section 96(6)(a); …… and the period to be taken into account under subsection (6)(a) above is restricted accordingly.