Tenant Secures Reduced Rent Repayment from Unlicensed Landlord

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL [NAME] ([NAME]) Case Reference : LON/00BH/HMF/2022/0204 Type of hearing : V: [NAME] : [ADDRESS] [POSTCODE] Applicant : [redacted] : Not represented Respondent: [redacted]

[NAME] (aka [COUNSEL] and as [COUNSEL])

Representative : Not represented Type of [NAME] :

[NAME] for Rent Repayment Order under the Housing and Planning Act 2016 Tribunal Members :

Judge P Korn Ms F Macleod MCIEH Date of Hearing :

16 June 2023

Date of Decision : 14 July 2023

DECISION

2 Description of hearing

This was a remote video hearing which was consented to by the parties. The form of remote hearing was V: CVPREMOTE. A face-to-face hearing was not held because it was not practicable to do so and all issues could be determined in a remote hearing. The documents to which we were referred are in two separate electronic bundles, the contents of which we have noted. The decisions made are set out below under the heading “Decisions of the tribunal”. Decisions of the tribunal

(1) The tribunal orders the Respondent to repay to the Applicant the sum of £2,000.00 by way of rent repayment.

(2) The tribunal also orders the Respondent to reimburse to the Applicant the [NAME] fee of £100.00 and the hearing fee of £200.00.

(3) The above sums must be paid by the Respondent to the Applicant within 28 days after the date of this determination.

Introduction 1. The Applicant has applied for a rent repayment order against the Respondent under sections 40-44 of the Housing and Planning Act 2016 (“the 2016 Act”).

2. The basis for the [NAME] is that the Respondent committed an offence of having control of and/or managing a house which was required to be licensed but was not licensed, contrary to section 95(1) of the Housing Act 2004 (“the 2004 Act”).

3. The Applicant seeks a rent repayment order in the sum of £8,000.00 in respect of rent paid for the period November 2021 to 31 August 2022. Applicant’s case 4. In written submissions the Applicant states that the [NAME] did not have a licence, but required one, for the entirety of the period 31 March 2020 to 23 September 2022. His hearing bundle contains copy emails from the local housing authority (a) confirming that the [NAME] required a licence if it was rented out and (b) stating that the [NAME] did not have a licence between 31 March 2020 to 23 September 2022.

5. The Applicant had been led to check the [NAME]’s licensing status because of what he describes as ‘accompanying issues’ with the [NAME].

3 6. The hearing bundle contains a copy of the Applicant’s tenancy agreement, with the Respondent (under the name [RESPONDENT]) named as the landlord. There is also a copy of the Land Registry title register showing the Respondent (under the name [RESPONDENT]) to be the freehold owner of the [NAME]. The bundle also contains copy bank statements, showing the regular payment of rent to [NAME], and a calculation of the maximum amount of rent believed to be repayable.

7. The Applicant states that he had an ongoing issue with the bin storage, as for more than 2 years he had waste under his bedroom windows. He states that there was very little response from the letting agent or from the Respondent in relation to this issue, which was only resolved after 2½ years, and this affected his physical and mental health. He comments that the Respondent was not interested in his wellbeing.

8. At the hearing, the Applicant accepted that the Respondent had sorted out other problems such as the refrigerator and the boiler. He also accepted that he had been in rent arrears at one point, although this had not been deliberate. He said that he paid for all [NAME] himself.

9. The [NAME] consisted of a bedroom and main living area and a separate bathroom. The Applicant confirmed that the condition of the [NAME] was acceptable and that there was fire detection in place. He indicated that there might be a problem with the fire alarm, although he was not sure and did not have any evidence on this point. Respondent’s case 10. In written submissions the Respondent describes herself as an honest and ethical landlord who has never tried to avoid her responsibilities and obligations. This is the first time that she has ever had to respond to a case brought against her at a court or tribunal.

11. When the local housing authority announced that from 1 April 2015, and for the first time, all non-HMO rented properties would require a selective licence, she submitted a licence [NAME] for the [NAME] on the following day. She comments that this is hardly the behaviour of a landlord looking to avoid her licensing and compliance responsibilities. That licence expired on 31 March 2020, which she says was just 5 days after the COVID-19 lockdown measures came into force. She and her family suffered very badly with COVID-19, and they lost a close relative to the disease. During this period, the painful events that she experienced completely took her thoughts away from her obligation to renew the licence on time. She accepts that this is not an excuse but says that it is a reason that explains why she temporarily lost sight of her licensing responsibilities.

4 12. When she realised that she had not renewed the licence she took what she describes as immediate steps to remedy this, and the [NAME] for a new licence was finally completed on 24 September 2022. She also states that she tried to resolve this dispute with the Applicant outside the tribunal process but that there was no response from him.

13. The Respondent’s hearing bundle includes email correspondence regarding the supply of bins and the creation of a fenced area for bin storage and accompanying photographs, text and email exchanges with the Applicant regarding the bin issue, and text exchanges regarding rent arrears. There is also email correspondence regarding alleged non-communication and non-cooperation on the part of the Applicant. The hearing bundle also includes copies of fire alarm, gas and rent deposit protection certificates for the [NAME].

14. The Respondent attended the hearing but was unable to make oral submissions or to be cross-examined on her written submissions, as she was joining by video from Cyprus and had failed to act promptly enough to obtain permission from the Cypriot Government to give evidence in a case taking place in England. Discussion at hearing 15. The tribunal cross-examined the Applicant on his evidence at the hearing in order to test the strength of that evidence. The tribunal also asked him questions on the Respondent’s written submissions. Relevant statutory provisions 16. Housing and Planning Act 2016 Section 40 (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 a tenant ... (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.

5

Act section general description of offence 1 Criminal Law Act 1977 section 6(1) violence for securing entry 2 Protection from Eviction Act 1977 section 1(2), (3) or (3A) eviction or harassment of occupiers 3 Housing Act 2004 section 30(1) failure to comply with improvement notice 4

section 32(1) failure to comply with prohibition order etc 5

section 72(1) control or management of unlicensed HMO 6

section 95(1) control or management of unlicensed house 7 This Act section 21 breach of banning order

Section 41 (1) A tenant 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. (2) A tenant 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 [NAME] is made.

6 Section 43 (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 [NAME] under 41. (3) The amount of a rent repayment order under this section is to be determined in accordance with – (a) section 44 (where the [NAME] is made by a tenant) ... Section 44 (1) Where the First-tier Tribunal decides to make a rent repayment order under section 43 in favour of a tenant, 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 the amount must relate to rent paid by the tenant in respect of an offence mentioned in row 1 or 2 of the table in section 40(3) the period of 12 months ending with the date of the offence an offence mentioned in row 3, 4, 5, 6 or 7 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 (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

7 landlord has at any time been convicted of an offence to which this Chapter applies. Housing Act 2004 Section 95 (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 … but is not so licensed. (4) In proceedings against [NAME] for an offence under subsection (1) … it is a defence that he had a reasonable excuse … for having control of or managing the house in the circumstances mentioned in subsection (1) … . Section 263 (1) In this Act “person having control”, in relation to premises, means (unless the context otherwise requires) the person who receives the rack-rent of the premises (whether on his own account or as agent or trustee of [NAME]), or who would so receive it if the premises were let at a rack-rent.

(2) In subsection (1) “rack-rent” means a rent which is not less than two-thirds of the full net annual value of the premises.

(3) In this Act “person managing” means, in relation to premises, the person who, being an owner or lessee of the premises – (a) receives … rents or other payments from … persons who are in occupation as tenants or licensees of parts of the premises, or of the whole of the premises; or (b) would so receive those rents or other payments but for having entered into an arrangement … with [NAME] who is not an owner or lessee of the premises by virtue of which that other person receives the rents or other payments ...

Tribunal’s analysis 17. The Applicant’s uncontested evidence is that the [NAME] was a house which was required to be licensed but was not licensed at any point during the period of the claim. Having considered that uncontested evidence we are satisfied beyond reasonable doubt that for the whole period of claim the [NAME] required a licence and it was not licensed.

18. It is also clear that the Respondent was the landlord for the purposes of section 43(1) of the 2016 Act, as she was named as landlord in the

8 tenancy agreement and was the registered freehold owner of the [NAME]. Again, she does not dispute this.

19. The next question is whether the Respondent was a “person having control of or managing” the [NAME] within the meaning of section 263 of the 2004 Act. The evidence shows that the rent was paid to [NAME], but there is no suggestion that [NAME] received the rent otherwise than as agents for the Respondent. The Respondent has not sought to argue that she was not [NAME] having control of or managing the [NAME] or that the rent paid was not the “rack-rent” as defined in section 263. We are satisfied that she was the owner and that she either received rent from the Applicant or would have received it but for any arrangement with [NAME]. She was therefore at the relevant time at the very least [NAME] managing the [NAME]. The defence of “reasonable excuse” 20. Under section 95(4) of the 2004 Act, it is a defence that [NAME] who would otherwise be guilty of the offence of controlling or managing a house which is licensable under Part 3 of the 2004 Act had a reasonable excuse for the failure to obtain a licence. The burden of proof is on the person relying on the defence.

21. In this case, the Respondent has not quite couched her submissions as a complete defence, but it is still open to the tribunal to consider whether her explanation as to the circumstances of her failure to license the [NAME] would amount to a reasonable excuse defence.

22. The Respondent has described the circumstances in which she failed to license the [NAME], and we accept that her explanation is credible. Nevertheless, it was her responsibility to obtain a licence and there is nothing in her explanation which in our view is sufficient to amount to a complete defence. In particular, there is nothing to suggest that the matter was outside her control or that she was relying on somebody else in circumstances where it was reasonable to do so. In addition, her delay in obtaining a licence was quite a long one, and it is unclear in the absence of cross-examination why that was.

23. The purpose of the licensing regime is to try to ensure – insofar as is reasonably possible – that properties which are rented out are safe and of an acceptable standard, and it would frustrate that purpose if landlords could be excused compliance simply because their personal circumstances caused them to forget to apply for a licence. However, it is clear from the recent decision of the Upper Tribunal in [NAME] v [NAME] (2023) UKUT 40 (LC) that where an excuse for failing to license is not strong enough to amount to a complete defence it might still be relevant as mitigation. We will return to this point later.

9 The offence 24. Section 40 of the 2016 Act confers power on the First-tier Tribunal to make a rent repayment order where a landlord has committed an offence listed in the table in sub-section 40(3), subject to certain conditions being satisfied. An offence under section 95(1) of the 2004 Act is one of the offences listed in that table. Section 95(1) states that “[NAME] commits an offence if he is [NAME] having control of or managing a house which is required to be licensed under this Part … but is not so licensed”, and for the reasons given above we are satisfied (a) that the Respondent was a “person managing” the [NAME] for the purposes of section 263 of the 2004 Act, (b) that the [NAME] was required to be licensed throughout the period of claim and (c) that it was not licensed at any point during the period of claim.

25. Under section 41(2), a tenant may apply for a rent repayment order only if the offence relates to housing that, at the time of the offence, was let to the tenant and the offence was committed in the period of 12 months ending with the day on which the [NAME] is made. On the basis of the Applicant’s uncontested evidence on these points we are satisfied beyond reasonable doubt that the [NAME] was let to the Applicant at the time of commission of the offence and that the offence was committed in the period of 12 months ending with the day on which his [NAME] was made. Process for ascertaining the amount of rent to be ordered to be repaid 26. Based on the above findings, we have the power to make a rent repayment order against the Respondent.

27. The amount of rent to be ordered to be repaid is governed by section 44 of the 2016 Act. Under sub-section 44(2), the amount must relate to rent paid by the tenant in respect of a period, not exceeding 12 months, during which the landlord was committing the offence. Under sub- section 44(3), the amount that the landlord may be required to repay in respect of a period must not exceed the rent paid in respect of that period less any relevant award of housing benefit or universal credit paid in respect of rent under the tenancy during that period.

28. In this case, the Applicant’s claim relates to a period not exceeding 12 months. There is no evidence that any part of the rent was covered by the payment of housing benefit and the Respondent has not disputed that the rental amounts claimed were in fact paid by the Applicant.

29. We are satisfied on the basis of his uncontested evidence that the Applicant was in occupation for the whole of the period to which his rent repayment [NAME] relates and that the [NAME] required a licence for the whole of that period. Therefore, the maximum sum that

10 can be awarded by way of rent repayment is the sum of £8,000.00, this being the amount paid by the Applicant by way of rent in respect of the period of claim.

30. Under sub-section 44(4), in determining the amount of any rent repayment order 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 the relevant part of the 2016 Act applies.

31. The Upper Tribunal decision in Vadamalayan v Stewart (2020) UKUT 0183 (LC) is one of the authorities on how a tribunal should approach the question of the amount that it should order to be repaid under a rent repayment order if satisfied that an order should be made. Importantly, it was decided after the coming into force of the 2016 Act and takes into account the different approach envisaged by the 2016 Act.

32. In her analysis in Vadamalayan, Judge Cooke states that the rent (i.e. the maximum amount of rent recoverable) is the obvious starting point, and she effectively states that having established the starting point one should then work out what sums if any should be deducted. She departs from the approach of the Upper Tribunal in Parker v Waller (2012) UKUT 301, in part because of the different approach envisaged by the 2016 Act, Parker v Waller having been decided in the context of the 2004 Act. Judge Cooke notes that the 2016 Act contains no requirement that a payment in favour of a tenant should be reasonable. More specifically, she does not consider it appropriate to deduct everything that the landlord has spent on the [NAME] during the relevant period, not least because much of that expenditure will have repaired or enhanced the landlord’s own [NAME] and/or been incurred in meeting the landlord’s obligations under the tenancy agreement. There is a possible case for deducting [NAME], but otherwise in her view the practice of deducting all of the landlord’s costs in calculating the amount of the rent repayment should cease.

33. In Judge Cooke’s judgment, the only basis for deduction is section 44 of the 2016 Act itself, and she goes on to state that there will be cases where the landlord’s good conduct or financial hardship will justify an order less than the maximum.

34. Since the decision in Vadamalayan, there have been other Upper Tribunal decisions in this area, notably those in [NAME] and [NAME] v [NAME] (2021) UKUT 0038 (LC) and Awad v Hooley (2021) UKUT 0055 (LC). In [NAME] v [COUNSEL], in [NAME] his decision [COUNSEL] [NAME] stressed that whilst the maximum amount of rent was indeed the starting point the First-tier Tribunal (FTT) still had discretion to make deductions to reflect the various factors referred to in section 44(4) of

11 the 2016 Act. In addition, he stated that neither party was represented in Vadamalayan, that the Upper Tribunal’s focus in that case was on the relevance of the amount of the landlord’s profit to the amount of rent repayment and that Vadamalayan should not be treated as the last word on the exercise of discretion required by section 44.

35. In Awad v Hooley, Judge Cooke agreed with the analysis in [NAME] v [NAME] and said that it will be unusual for there to be absolutely nothing for the FTT to take into account under section 44(4).

36. In [NAME] v [NAME] & Ors [2021] UKUT 244 (LC), Mr Justice Fancourt stated that the FTT had in that case taken too narrow a view of its powers under section 44 to fix the amount of the rent repayment order. There is no presumption in favour of the maximum amount of rent paid during the relevant period, and the factors that may be taken into account are not limited to those mentioned in section 44(4), although the factors in that subsection are the main factors that may be expected to be relevant in the majority of cases.

37. Mr Justice Fancourt went on to state in [NAME] that the FTT should not have concluded that only meritorious conduct of the landlord, if proved, could reduce the starting point of the (adjusted) maximum rent. The circumstances and seriousness of the offending conduct of the landlord are comprised in the “conduct of the landlord”, and so the FTT may, in an appropriate case, order a lower than maximum amount of rent repayment if what a landlord did or failed to do in committing the offence was relatively low in the scale of seriousness, by reason of mitigating circumstances or otherwise.

38. In [NAME] v [NAME] and [NAME] [2022] UKUT 165 (LC), the Upper Tribunal did not accept a submission that the fact that the local authority has decided not to prosecute the landlord should be treated as a “credit factor” which should significantly reduce the amount to be repaid.

39. In its decision in [NAME] v Roman and [NAME] [2022] UKUT 239 (LC), the Upper Tribunal recommended a four-stage approach to determining the amount to be repaid, which is paraphrased below:- (a) ascertain the whole of the rent for the relevant period; (b) subtract any element of that sum that represents payment by the landlord for [NAME] that only benefited the tenant; (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 compared to other examples of the same type of offence; and (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).

12 40. Adopting the [NAME] approach, the whole of the rent in this case means the whole of the rent paid by the Applicant out of his own resources, which is the whole of the rent in this case as no part of the rent was funded by housing benefit. In relation to [NAME], the Applicant states that he paid these and the Respondent does not dispute this point, therefore there is nothing to deduct for [NAME].

41. As regards the seriousness of the type of offence, whilst it could be argued based on the maximum criminal penalty available that there are offences covered by section 40(3) of the 2016 Act which can give rise to a greater criminal sanction, a failure to license is still a serious offence. Failure to license leads – or can lead – to significant health and safety risks for often vulnerable tenants, and sanctions for failure to license have an important deterrent effect on future offending as well as encouraging law-abiding landlords to continue to take the licensing system seriously and to inspire general public confidence in the licensing system. In addition, there has been much publicity about licensing of privately rented [NAME], and there is an argument that good landlords who apply for and obtain a licence promptly may feel that those who fail to obtain a licence gain an unfair benefit thereby and therefore need to be heavily incentivised not to let out licensable properties without first obtaining a licence. Furthermore, even if it could be argued that the Applicant did not suffer direct loss through the Respondent’s failure to obtain a licence, it is clear that a large part of the purpose of the rent repayment legislation is deterrence. If landlords can successfully argue that the commission by them of a criminal offence to which section 43 of the 2016 Act applies should only have consequences if tenants can show that they have suffered actual loss, this will significantly undermine the deterrence value of the legislation.

42. In the light of the above factors, we consider that the starting point for this offence should be 70% of the maximum amount of rent payable.

43. As for the seriousness of the offence in this particular case compared to [NAME] of the same type, in our view it was at the less serious end of the scale. Whilst we found the Applicant to be a credible witness generally, he has not identified any serious issues in relation to the condition of the [NAME] or in relation to the circumstances of the offence. Much of his focus was on the position in relation to bin storage but, taking into account the Respondent’s written submissions and the discussion at the hearing, we are not persuaded that this was a serious failing in the circumstances.

44. In relation to the failure to license the [NAME], whilst the Respondent’s explanation of the circumstances does not amount to a complete defence, we accept that those circumstances constitute relevant mitigation. She had previously and punctually obtained a licence, and so this was a failure to renew that licence rather than an

13 attempt to evade her responsibilities altogether. In addition, we accept that this was not a case of someone recklessly disregarding the law but one in which the stress caused by her family’s experiences in connection with the COVID-19 pandemic appears to have caused her to lose focus.

45. On the basis of the above mitigating circumstances in this particular case, we consider that the starting point of 70% should be decreased to 40%.

46. As regards the specific matters listed in section 44, the tribunal is particularly required to take into account (a) the conduct of the parties, (b) the financial circumstances of the landlord, and (c) whether the landlord has at any time been convicted of a relevant offence. We will take these in turn. Conduct of the parties 47. There is no evidence before us that the Applicant’s conduct has been anything other than good apart from an isolated issue with rent arrears and a possible lack of co-operation with the Respondent at certain times, although we were unable properly to test the alleged lack of co- operation through cross-examination of the Respondent.

48. As for the Respondent’s conduct, in our view, aside from the failure to obtain a licence, her conduct has also broadly been good. By the Applicant’s own admission, the Respondent was responsive in relation to the problems with the refrigerator and the boiler. Also, as noted above, we do not accept that the evidence supports the narrative that the Respondent’s conduct in relation to the bin storage issue was poor. There are also no other, or no other credible, complaints about the Respondent’s conduct. We consider that the Respondent’s relatively good conduct needs to be recognised in the amount of the rent repayment order and that the percentage payable should be further reduced from 40% to 25%. Financial circumstances of the landlord 49. The tribunal is required to take the Respondent’s financial circumstances into account when [NAME] its decision. However, not only is there no evidence before us regarding the Respondent’s financial circumstances but also it was not possible to cross-examine the Respondent on her financial circumstances as she was in Cyprus for the hearing and had failed to obtain permission from the Cypriot Government to give evidence or to be cross-examined on her evidence. Therefore, there is nothing to take into account in relation to her financial circumstances.

14 Whether the landlord has at any time been convicted of a relevant offence 50. The Respondent has not been convicted of a relevant offence, but it is clear from the Upper Tribunal decision in Hallett v [NAME] (see above) that this by itself should not be treated as a credit factor. Other factors 51. It is apparent from the wording of sub-section 44(4) itself that the specific matters listed in sub-section 44(4) are not intended to be exhaustive, as sub-section 44(4) states that the tribunal “must, in particular, take into account” the specified factors. However, in this case we are not aware of any other specific factors which should be taken into account in determining the amount of rent to be ordered to be repaid. Amount to be repaid 52. The four-stage approach recommended in [NAME] has already been set out above. The amount arrived at by going through the first two of those stages is £8,000.00. As for the third stage, namely the seriousness of the offence, this reduces the amount to 40% of that sum, subject to any adjustment for the section 44(4) factors referred to above.

53. As noted above, the Respondent’s relatively good conduct reduces the amount further to 25% of that sum, and there is nothing to add or subtract for any of the other section 44(4) factors.

54. Therefore, taking all of the factors together, the rent repayment order should be for 25% of the maximum amount of rent payable. The amount of rent repayable is therefore £8,000.00 x 25% = £2,000.00. Cost applications 55. The Applicant has applied under paragraph 13(2) of the Tribunal Procedure (First-tier Tribunal) ([NAME]) Rules 2013 for an order that the Respondent reimburse his [NAME] fee of £100.00 and the hearing fee of £200.00.

56. As the Applicant’s claim has been successful, albeit that there has been a deduction from the maximum payable, we are satisfied that it is appropriate in the circumstances to order the Respondent to reimburse these fees.

15 Name: Judge P Korn Date: 14 July 2023

RIGHTS OF APPEAL

A. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) a written [NAME] for permission must be made to the First-tier Tribunal at the regional office dealing with the case.

B. The [NAME] for permission to appeal must arrive at the regional office within 28 days after the Tribunal sends written reasons for the decision to the [NAME].

C. If the [NAME] is not made within the 28 day time limit, such [NAME] must include a request for extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then look at such reason and decide whether to allow the [NAME] for permission to appeal to proceed despite not being within the time limit.

D. The [NAME] for permission to appeal must identify the decision of the Tribunal to which it relates (i.e. give the date, the [NAME] and the case number), state the grounds of appeal, and state the result the party [NAME] the [NAME] is seeking.