Tenant Secures Rent Repayment for Unlicensed HMO

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL [APPELLANT] CHAMBER ([APPELLANT]) Case Reference : LON/00AC/HMF/2018/0041 [APPELLANT] : [APPELLANT] 3, 141 [ADDRESS] [POSTCODE] Applicant : [redacted] : [NAME] of counsel Respondent : [redacted] [RESPONDENT] : [NAME] (director) Type of Application : Application by Tenants for a Rent Repayment Order Tribunal Members : Judge [APPELLANT] [NAME] and Venue of Hearing

: 20 [ADDRESS] [POSTCODE] Date of Written Reasons : 25 April 2019

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DECISION

Determination 1. The tribunal is satisfied beyond all reasonable doubt that, during the period 15 November 2017 until 9 [ADDRESS] [POSTCODE] (“the flat”) was a [NAME] (“[NAME]”). The applicant is entitled to a rent repayment order as the flat was unlicensed. The amount we order to be paid back to the applicant by the respondent is £4,010. Background 2. The flat, which is on two floors, is situated within a substantial up-market development. The flat has two bedrooms on each floor. The flat has a shared lounge, kitchen and bathroom.

3. On 19 October 2017, the respondent granted a one-year AST of [APPELLANT] 3 in the flat to the applicant. [APPELLANT] 3 is on the upper floor of the flat. The tenancy was to run for a period of 12 months from 15 November 2017 until 14 November 2018. In fact, the applicant left flat 3 on 10 September 2018. 4. [NAME] records the nature of the respondent’s business as “management of real estate on a fee or contract basis”. The sole director and shareholder is Mr [NAME].

5. Chapter 4 of the Housing and Planning Act 2016 makes provision for rent repayment orders to be made against a landlord where that landlord has committed certain offences.

6. It is common ground between the parties that if, at any material time, all four rooms in the flat were occupied as single households, the flat required licensing as an [NAME]. If only three of the rooms in the flat were so occupied, the respondent would not require such a licence.

7. It is also common ground between the parties that the flat was not licensed as an [NAME]. If it required such registration, a failure to register it would constitute an offence entitling the applicant to apply for a rent repayment order against the respondent. The legislation is set out in more detail below.

8. The applicant has made an application to the tribunal dated 12 November 2018 for a rent repayment order. The applicant’s case is that for at least some of the time during which he occupied [APPELLANT] 3 under the AST there were occupants living in each of the four rooms. The respondent denies this, and asserts that during the time the applicant occupied [APPELLANT] 3 under the AST there were occupants living only in three of the four rooms.

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The legislation 9. Where students or friends share a flat, each of them is regarded as a separate household: s.258 Housing Act 2004. 10. ss.254-260 of the 2004 Act define a mandatory [NAME]. However, the London Borough of Barnet has elected to bring into effect additional licensing throughout the borough under powers given by s.56 of the 2004 Act . This means that an [NAME] in Barnet requires a licence where the [APPELLANT] has two or more storeys, is occupied by four or more persons in two or more households and where some or all of the facilities are shared or lacking1. As stated above, it is common ground that if there are four occupiers the flat fits into this category. By s.262(6)(a) of the 2004 Act an “occupier” means a person who occupies premises as a residence (emphasis supplied). 11. s.61 of the 2004 Act requires an [NAME] to be licensed. By s.72 of the 2004 Act a person commits an offence if he is a person having control of or managing an [NAME] which is required to be licensed, but is not so licensed. By s.263 of the 2004 Act a person has control of premises if he receives the rack-rent. 12. s.40(1) Housing and Planning Act 2016 confers powers on the tribunal to make a rent repayment order where a landlord has committed an offence, including a breach of s.72 of the 2004 Act. s.40(2)(a) of the 2016 Act provides that a rent repayment order is an order requiring the landlord to repay an amount of rent paid by tenant.

13. By s.43 of the 2016 Act, the tribunal may make a rent repayment order if satisfied, beyond reasonable doubt (emphasis supplied), that a landlord has committed an offence to which Chapter 4 of the 2016 Act applies (this includes a breach of s.72 of the 2004 Act).

14. By s.44(2) of the 2016 Act, the amount of the rent repayment order must relate to rent paid during a period, not exceeding 12 months, during which the landlord was committing the offence. In this case the period is of 25 weeks from 15 November 2017 - 9 May 2018 (as explained below).

15. By s.44(3) of the 2016 Act in determining the amount of a 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 anytime been convicted of an offence to which Chapter 4 applies The other tenants [APPELLANT] 1 16. [APPELLANT] was granted a one-year AST of [APPELLANT] 1 (on the lower floor of the flat) from 18 January 2017. He was granted a further one-year AST on 18 March 2018.

1 See the London Borough of Barnet's Notice of Designation of an Area for Additional Licensing of Houses in Multiple Occupation (HMOs).

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Accordingly, he occupied [APPELLANT] 1 throughout the time that the applicant occupied [APPELLANT] 3. [APPELLANT] 2 17. [NAME] was granted a one-year AST of [APPELLANT] 2 (on the lower floor of the flat) from 1 November 2017. In fact, he left [APPELLANT] 2 on or around 9 May 2018.

Accordingly, he occupied [APPELLANT] 2 throughout some, but not all, of the time that the applicant occupied [APPELLANT] 3. [APPELLANT] 4 18. [NAME] was granted a one-year AST of [APPELLANT] 4 (on the upper floor of the flat) from 1 September 2016. The applicant’s case is that after the expiry of Mr [APPELLANT], and throughout the length of the applicant’s tenancy, Mr [APPELLANT] continued to occupy [APPELLANT] 4 as a residence. The respondent’s case is that although [APPELLANT] 4 was used by Mr [APPELLANT] for storage after his AST had expired, he had ceased to occupy [APPELLANT] 4 as a residence prior to the applicant’s tenancy commencing. He was simply using it for storage. As we explained above, occupation in this context means occupation as a residence, so that the use of [APPELLANT] 4 for storage would not mean there were four people in occupation of the flat. The applicants’ evidence 19. The applicant made witness statements dated 17 January 2019 and 15 March 2019 respectively. He gave oral evidence. He relied upon a witness statement made by [APPELLANT] dated 9 November 2018. [APPELLANT] did not attend the hearing. [APPELLANT]

20. The applicant relies on screenshots of conversations texted from within a [COMPANY], which included the respondent and the occupiers of the flat.

21. On 19 November 2017 (after Mr [NAME] contractual tenancy had expired), a text was sent by an unknown person referring to an offer on gym membership (there is a gym within the development) which closed that day.

22. Mr [NAME] replied: Awesome.

23. The other party texted: Something you’d be interested in? Back at the flat at 5 today so can chat then if you’re around 24. Mr [NAME] replied: Yep I am! But am out at the moment … 25. On 1 December 2017, Mr [NAME] texted at 00:24: Can we change the heating settings? Times etc. It is winter my [APPELLANT] is freezing!

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26. On 11 December 2017, Mr [APPELLANT] texted at 17:55: Is there a valve that we can do that with ourselves in case it happens again? (He was referring to the fact that the boiler had shut down because of low pressure). Could they describe which one? I had a similar problem re-occurring downstairs 27. Later, at 18:04 he texted: I used to live in one of the flats downstairs and the pressure would would (sic) go down every now and then would have to go through the process of putting pressure up every now and then 28. On 18 December 2017, Mr [NAME] texted at 21:36: Hi folk I left my keys at my friend’s! Is anyone at home? 29. On 21 December 2017, Mr [NAME] texted at 21:43: What date does our cleaner come in? 30. On 11 January 2018, Mr [NAME] texted at 23:55: I think the battery for, or the actual smoke alarm need servicing it is constantly bleeping (making it impossible to sleep but also needs looking at). 31. 2 March 2018, Mr [NAME] texted at 14:40: your new hoover has arrived will deliver when weather is better thanks. Mr [NAME] replied at 14:43: Thanks 32. On 12 March 2018, an unknown person sent a text about buying a TV for the flat for £60–£70. Mr [NAME] replied with a thumbs up emoji.

33. We need not set out each and every text message sent by Mr [NAME], as the above gives the flavour of them. Suffice it to say that there are further text messages along the same lines between 12 April 2018 and 5 July 2018 annexed to the applicant’s first witness statement. In particular, there is a text message dated 9 June 2018 when Mr [NAME] talks about recuperating at home after having had eye surgery.

34. The applicant also relies upon private [APPELLANT] between himself and Mr [APPELLANT] between 15 June 2018 and 19 August 2018. These include [APPELLANT] concerning mislaid keys to the flat, leaving food on the table at the flat, the cleaning of the flat, the accidental loss of a black blazer in the flat, the need for more dishwashing tablets at the flat, and a red blanket belonging to the applicant which had been lost from the living [APPELLANT] of the flat. It transpired that Mr [APPELLANT] had taken it for sleeping in. The applicant’s recollection is that Mr [APPELLANT] slept in the flat for some 60 days whilst he was there. [APPELLANT]

35. The applicant relies upon two [APPELLANT] on the Internet regarding the letting of the flat. In each advert the flat is described as being a four bedroomed one. He also asserts that Mr [RESPONDENT], on behalf of respondent, was conducting viewings of [APPELLANT] 2 after [NAME] left. He exhibited a text message from Mr [NAME] dated 4 June 2018 referring to a viewing.

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[APPELLANT]

36. Finally, the applicant relies upon a witness statement from [APPELLANT] dated 9 November 2018 in which he says: The Applicant, two other tenants and I all resided in the [APPELLANT]. The respondent’s evidence 37. Mr [APPELLANT] made a witness statement dated 8 March 2019. He gave oral evidence. He relied upon a witness statement made by Mr [NAME] dated 8 March 2019 and a further witness statement made by [APPELLANT] dated 8 March 2019. As already stated, [APPELLANT] did not attend the hearing. Nor did Mr [APPELLANT].

38. Mr [NAME] denies that there were four tenants living in the flat during the currency of the applicant’s tenancy. It was untrue that Mr [APPELLANT] was occupying flat 4. The only other tenants were [NAME] and [APPELLANT]. 39. [NAME] says that he only conducted a viewing because he understood the applicant would be leaving shortly. He never had any intention of moving a fourth tenant into the [APPELLANT].

40. In his witness statement, Mr [APPELLANT] says:

3. After the 31st August 2017 I was given permission to retain the keys for the [APPELLANT] I previously rented as I had several hundred books and journals in there for my work and was given permission and authority to enter the [APPELLANT] and to gain access to my books, journals and items that were in the [APPELLANT] but not to live there. It was on this basis that I visited the [APPELLANT]. On a few occasions I did stay there for convenience after researching my books.

4. Over the period of September 2017 to September 2018 I would say I only visited the [APPELLANT] some 10 to 15 times in entirety. I was not in residence in the [APPELLANT] contractually or otherwise.

41. In his second witness statement, [APPELLANT] says he seldom saw [NAME] in the [APPELLANT], he was absent away at times for months. He did not feel he could be a witness to exactly who or how many people were under contract at the [APPELLANT] and at what times.

42. Mr [APPELLANT] explained in his oral evidence that after Mr [NAME] tenancy ended on 31 August 2017 he allowed him to use [APPELLANT] 4 as a space in which to store his very considerable collection of books and journals. Mr [NAME] is an international journalist and he was also assisting the government in security matters. [APPELLANT]

43. The story advanced by Mr [APPELLANT] and Mr [APPELLANT] is very difficult to believe. Mr [NAME]

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accepted that he charged no rent or licence fee for [NAME]’s use of [APPELLANT] 4 as a storage space. He could not really explain why he was prepared to allow such a rent void, save to say that since Mr [NAME] was involved in such worthwhile work for the government it was appropriate for him not to charge for the use of the [APPELLANT].

44. We do not find this a credible explanation. Moreover, we find from the text messages overwhelming evidence that Mr [NAME] was occupying flat 4 as a residence for a significant period of time whilst the applicant was living in flat 3.

45. We are satisfied beyond all reasonable doubt that the Respondent has committed a breach of s.72 Housing Act 2004 and that is open to us to make a rent repayment order. [APPELLANT]

46. An issue arose as to the date on which Mr [NAME] tenancy of flat 2 came to an end. It was only after that date that the number of tenants fell from four to three.

47. The applicant claims that the tenancy came to an end on 30 June 2018. But what matters is not when the tenancy came to an end, but when Mr [NAME] ceased to occupy flat 2. We prefer Mr [NAME] evidence that Mr [NAME] left in the first week of May 2018.

48. We are satisfied that the respondent is the alter ego of Mr [RESPONDENT], who is the controlling mind of respondent. Between them, they are a person/company of means and can fairly be described as [NAME]. Mr [NAME] is the freehold proprietor of another flat in the development which cost £475,000 as far back as 26 March 2004. From our own knowledge of it and from the [APPELLANT] referred to in paragraph 35 above, it is clear that the development is a high end one. Mr [NAME] also told us that he owns and runs a nightclub in Leicester.

49. We consider it appropriate to order a repayment of rent paid between 15 November 2017 and 9 May 2018 when Mr [NAME] left. This is a total of 25 weeks. We do not agree with the way in which the applicant has tried to calculate the amount to be repaid. We do not take account of the deposit which was paid upfront. The rent was £8,340 per annum. We will make an order in respect of 25 weeks out of the 52 weeks of the year, which comes rounded up to £4,010.00. Name: [APPELLANT]: 25 April 2019 [APPELLANT] i. If a party wishes to [APPELLANT] this decision to the Upper Tribunal ([NAME]) then a written application for permission must be made to the First-tier Tribunal at the [NAME] which has been dealing with the case.

ii. The application for permission to [APPELLANT] must arrive at the [NAME]

within 28 days after the Tribunal sends written reasons for the decision to the person making the application.

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

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

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FIRST-TIER TRIBUNAL [APPELLANT] CHAMBER ([APPELLANT]) Case reference : LON/00AC/HMF/2018/0041 [APPELLANT] : [APPELLANT] 3, 141 [ADDRESS] [POSTCODE] Applicants : [redacted] : [NAME] of counsel Respondent: [redacted]

[COMPANY] [RESPONDENT] : [NAME] (director) Type of application : Application by Tenant for a Rent Repayment Order Tribunal members : Judge S [APPELLANT] [NAME] and venue of hearing : 20 [ADDRESS] [POSTCODE] Date of decision : 25 April 2019 Date of costs decision : 2 September 2019

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Decision of the Tribunal 1. The hearing in these proceedings took place on 20 March 2019. On 25 April 2019, we made the substantial decision. We found that the applicant was entitled to a rent repayment order of £4,010.00. This is less than the sum of £6,253.00 which is the amount the applicant asked to be awarded in the penultimate paragraph of his case summary dated 17 January 2019

The applicant’s application for costs

2. On 22 May 2019, the applicant made an application for costs against the respondent under rule 13(1)(b)(iii) of the Tribunal Procedure ([APPELLANT] Chamber) (First–tier Tribunal Regulations 2013. This provides:

The Tribunal may make an order in respect of costs only … if a person has acted unreasonably in bringing, defending or conducting proceedings in … a leasehold case …

3. The respondent has not replied to the application.

4. The jurisdiction to award costs under rule 13 has been examined recently by the Upper Tribunal in [ADDRESS] (1985) [COMPANY] v Alexander [2016] UKUT 290 (LC), [2016] [NAME] 34.

5. The head note in [NAME] reads as follows:

(1) [ADDRESS] of [APPELLANT] guidance on what constitutes “unreasonable” conduct in the context of wasted costs applies in FTT proceedings for the purposes of r.13(1)(b), rather than this term having a wider interpretation, Ridehalgh v Horsefield [1994] Ch 205 applied. The test for unreasonable conduct may be expressed in different ways. Would a reasonable person in the position of the party have conducted themselves in the manner complained of? Or, is there a reasonable explanation for the conduct complained of?

(2) A systematic or sequential approach to applications under r.13(1)(b) should be adopted. At the first stage the question is whether the person has acted unreasonably. At the second stage it is essential for the tribunal to consider whether, in light of the unreasonable conduct it has found, it ought to make an order for costs or not. If so, the third stage is what the terms of the order should be. At both the second and third stages the tribunal is exercising a judicial discretion in which it is required to have regard to all relevant circumstances. Whether the party whose conduct is criticised has had access to legal advice is relevant at the first stage of the enquiry, as the behaviour of an unrepresented party with no legal knowledge should be judged by the standards of a reasonable person who does not have legal advice; it may also be relevant, though to a lesser degree, at the second and

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third stages, without allowing it to become an excuse for unreasonable conduct. At the third stage, a causal connection with the costs sought is to be taken into account, but the power is not constrained by the need to establish causation.

(3) Applications under r.13(1)(b) should not be regarded as routine, should not be abused to discourage access to the tribunal and should not be allowed to become major disputes in their own right. They should be dealt with summarily, preferably without the need for a further hearing, and after the parties have had the opportunity to make submissions. Those submissions are likely to be better framed in light of the tribunal’s substantive decision rather than in anticipation of it, and applications at interim stages or before the substantive decision should not be encouraged.

6. Turning to the actual words used by the Upper Tribunal, the following paragraphs are germane:

24. … “Unreasonable” conduct includes conduct which is vexatious, and designed to harass the other side rather than advance the resolution of the case. It is not enough that the conduct leads in the event to an unsuccessful outcome. The test may be expressed in different ways. Would a reasonable person in the position of the party have conducted themselves in the manner complained of? Or Sir [NAME] “acid test [in Ridehalgh v Horsefield [1994] Ch 205]: is there a reasonable explanation for the conduct complained of?

28. At the first stage the question is whether a person has acted unreasonably. A decision that the conduct of a party has been unreasonable does not involve an exercise of discretion but rather the application of an objective standard of conduct to the facts of the case. If there is no reasonable explanation for the conduct complained of, the behaviour will properly be adjudged to be unreasonable, and the threshold for the making of an order will have been crossed. A discretionary power is then engaged and the decision maker moves to a second stage of the inquiry. At that second stage it is essential for the tribunal to consider whether, in the light of the unreasonable conduct it has found to have been demonstrated, it ought to make an order for costs or not; it is only if it decides that it should make an order that a third stage is reached when the question is what the terms of that order should be.

29. Once the power to make an order for costs is engaged there is no equivalent of CPR 44.2(2)(a) laying down a general rule that the unsuccessful party will be ordered to pay the costs of the successful party. The only general rules are found in section 29(2)-(3) of the 2007 Act, namely that “the relevant tribunal shall have full power to determine by whom and to what extent the costs are to be paid”, subject to the tribunal’s procedural rules. Pre-eminent amongst those rules, of course, is the overriding objective in rule 3, which is to enable the tribunal to deal with cases fairly and justly. This includes dealing

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with the case ‘in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties and of the Tribunal.’ It therefore does not follow that an order for the payment of the whole of the other party’s costs assessed on the standard basis will be appropriate in every case of unreasonable conduct.

30. At both the second and the third of those stages the tribunal is exercising a judicial discretion in which it is required to have regard to all relevant circumstances. The nature, seriousness and effect of the unreasonable conduct will be an important part of the material to be taken into account, but other circumstances will clearly also be relevant; we will mention below some which are of direct importance in these appeals, without intending to limit the circumstances which may be taken into account in other cases.

7. The issue in proceedings is whether at the material times there were three persons in occupation of the flat (as the respondent contended) or four (as the applicant contended).

9. The tribunal had no hesitation in finding in favour of the applicant. The text messages attached to the applicant’s witness statement dated 15 March 2019 were compelling evidence that the applicant’s case was true. The respondent’s account of why [NAME]’s [APPELLANT] was being used was found not to be a credible explanation.

10. In our judgment, this case is far removed from one where the tribunal has to give anxious consideration as to whose evidence is to be preferred. In this case the evidence went all one way. We consider that applying an objective standard to the conduct of the respondent in defending these proceedings, the respondent was acting unreasonably.

11. The applicant also complains about the respondent’s failure to comply with the timetable for providing documents. It is true that it provided documents out of time, but we do not consider any prejudice was so caused and do not find that the conducting of the proceedings was so unreasonable that the first stage of [ADDRESS] is engaged.

12. As to the second stage, we consider that, in the light of the unreasonable defence of these proceedings, an order for costs should be made.

13. As to the third stage, although the applicant did not recover all that he asked for, he was the successful party. It is not normal practice to reduce the costs payable by the losing party simply because the winning party has not been awarded as much as he was claiming.

14. The applicant’s statement of costs is in the sum of £5,284.62 including VAT. The respondent has not taken issue with any aspect of it, and we find it both a reasonable and proportionate amount. Accordingly, the respondent must pay this sum to the applicant’s solicitors are within 14 days of receipt of this decision.

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Name: [APPELLANT]: 2 September 2019

[APPELLANT]

i. If a party wishes to [APPELLANT] this decision to the Upper Tribunal ([NAME]) then a written application for permission must be made to the First-tier Tribunal at the [NAME] which has been dealing with the case.

ii. The application for permission to [APPELLANT] must arrive at the [NAME] within 28 days after the Tribunal sends written reasons for the decision to the person making the application.