Tenant Secures Rent Repayment Order Against Unlicensed HMO

OUTCOME: Allowed

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FIRST-TIER TRIBUNAL PROPERTY CHAMBER (RESIDENTIAL PROPERTY) Case Reference : LON/00AM/HMF/2021/0179 Property :

[ADDRESS], [POSTCODE]

Applicant: [redacted]

[NAME] [COUNSEL] : [NAME] Respondent : [redacted] : - Type of [NAME] : [NAME] for a rent repayment order by tenant - Housing and Planning Act 2016 Tribunal Member :

Judge Robert Latham Steve Wheeler MCIEH CEnvH Venue of Hearing : 10 [ADDRESS] [POSTCODE] Date of Decision : 3 March 2025 Date of Revised Decision : 7 March 2025

REVISED DECISION The Tribunal is exercising our powers under Rule 50 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 to correct typographical errors in front page of our decision, dated 3 March 2025. The corrections are highlighted in yellow.

2

Judge Robert Latham, 7 March 2025 Decision of the Tribunal 1. The Tribunal makes Rent Repayment Orders against the Respondent totalling £13,863, namely (i) [RESPONDENT]: £6,965 and (ii) [NAME]: £6,898.

2. The Tribunal determines that the Respondents shall also pay the Applicants £100 in respect of the tribunal fees which they have paid.

3. The said sums are to be paid by 14 March 2025 and are enforceable by the “[NAME] ([NAME])” who have been appointed by the Applicants to enforce this order on their behalf.

The [NAME]

1. This is one of sixteen applications for Rent Repayment Orders (“RROs”) which have been made by tenants who resided in flats at Olympic House and Simpson House. This is on a development of some 171 flats in a set of converted warehouses. There have been significant delays in determining these applications as the Respondent company was struck off. On 1 November 2024, the company was restored by order of the court.

2. On 26 July 2021, the Applicants issued this [NAME] for a rent RRO against the Respondent pursuant to section 41 of the Housing and Planning Act 2016 (“the 2016 Act”). The [NAME] relates to Flat 10 Simpson House (“the Flat”).

3. On 5 April 2023, the Tribunal gave Directions pursuant to which the Applicants have filed a Bundle of 744 pages to which reference is made in this decision. The Respondent has filed no case in response. At an early stage, [RESPONDENT], Solicitors, acted for the Respondent. They are no longer instructed. On 19 November 2024, the Tribunal gave further Directions giving the Respondent a final opportunity to file is case by 31 December. The Respondent failed to comply. The Directions provided for the [NAME] to be determined on the papers. Neither party has requested an oral hearing. The Housing Act 2004 (“the 2004 Act”)

4. The 2004 Act introduced a new system of assessing housing conditions and enforcing housing standards. Part 2 of the 2004 Act relates to the licensing of [NAME]. Section 61 provides for every prescribed HMO to be licensed. [NAME] are defined by section 254 which includes a number of “tests”. Section 254(2) provides that a building or a part of a building meets the “standard test” if:

3 “(a) it consists of one or more units of living accommodation not consisting of a self-contained flat or flats; (b) the living accommodation is occupied by persons who do not form a single household (see section 258); (c) the living accommodation is occupied by those persons as their only or main residence or they are to be treated as so occupying it (see section 259); (d) their occupation of the living accommodation constitutes the only use of that accommodation; (e) rents are payable or other consideration is to be provided in respect of at least one of those persons' occupation of the living accommodation; and (f) two or more of the households who occupy the living accommodation share one or more basic amenities or the living accommodation is lacking in one or more basic amenities.” 5. Section 56 permits a local housing authority (“LHA”) to designate an area to be subject to an additional licencing scheme. On 10 May 2018, the London Borough of Hackney (“Hackney”) introduced an Additional Licencing Scheme which applies to all [NAME] in the borough, save for those that require a licence under the mandatory scheme. The Scheme came into force on 1 October 2018 and ceased to have effect on 30 September 2023.

6. Section 263 provides: “(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 (whether directly or through an agent or trustee) rents or other payments from–

4 (i) in the case of a house in multiple occupation, persons who are in occupation as tenants or licensees of parts of the premises; and

(ii) in the case of a house to which Part 3 applies (see section 79(2)), 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 (whether in pursuance of a court order or otherwise) 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;

and includes, where those rents or other payments are received through [NAME] as agent or trustee, that other person.”

7. Section 63 provides for [NAME] applications for an HMO licence:

“(1) An [NAME] for a licence must be made to the local housing authority.

(2) The [NAME] must be made in accordance with such requirements as the authority may specify.

(3) The authority may, in particular, require the [NAME] to be accompanied by a fee fixed by the authority.”

8. Section 72 specifies a number of offences in relation to the licencing of [NAME]. The material parts provide:

“(1) A person commits an offence if he is a person having control of or managing an HMO which is required to be licensed under this Part (see section 61(1)) but is not so licensed. ……..

(4) 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) (a temporary exemption notice), or

(b) an [NAME] for a licence had been duly made in respect of the house under section 63,

and that notification or [NAME] was still effective (see subsection (8)).

….

5 (8) For the purposes of subsection (4) a notification or [NAME] 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 …. grant a licence, in pursuance of the notification or [NAME].

9. It is to be noted that there may be more than one person who may commit an offence under section 72 as having "control of" or "managing" an HMO. However, when it comes to the [NAME] of a RRO, this can only be made against the "landlord". The Housing and Planning Act 2016 (“the 2016 Act”)

10. Part 2 of the 2016 Act introduced a raft of new measures to deal with "rogue landlords and property agents in England". Chapter 2 allows a banning order to be made against a landlord who has been convicted of a banning order offence and Chapter 3 for a data base of rogue landlords and property agents to be established. Section 126 amended the 2004 Act by adding new provisions permitting [NAME] to impose Financial Penalties of up to £30,000 for a number of offences as an alternative to prosecution.

11. Chapter 4 introduces a new set of provisions relating to RROs. An additional five offences have been added in respect of which a RRO may now be sought. In the decision of Kowelek v Hassanein [2022] EWCA Civ 1041; [2022] 1 WLR 4558, [NAME] LJ summarised the legislative intent in these terms (at [23]): “It appears to me, moreover, that the Deputy President’s interpretation of section 44 is in keeping with the policy underlying the legislation. Consistently with the heading to part 2, chapter 4 of part 2 of the 2016 Act, in which section 44 is found, has in mind “rogue landlords” and, as was recognised in Jepsen v Rakusen [2021] EWCA Civ 1150, [2022] 1 WLR 324, “is intended to deter landlords from committing the specified offences” and reflects a “policy of requiring landlords to comply with their obligations or leave the sector”: see paragraphs 36, 39 and 40. “[T]he main object of the provisions”, as the Deputy President had observed in the UT (Rakusen v Jepsen [2020] UKUT 298 ([NAME]), [2021] HLR 18, at paragraph 64; reversed on other grounds), “is deterrence rather than compensation”. In fact, the offence for which a rent repayment order is made need not have occasioned the tenant any loss or even inconvenience (as the Deputy President said in Rakusen v Jepsen, at paragraph 64, “an unlicensed HMO may be a perfectly satisfactory place to live”) and, supposing damage to have been caused in some way (for example, as a result of a failure to repair), the tenant may be able to recover compensation for it in other proceedings. Parliament’s principal concern was thus not to ensure that [NAME] could recoup any particular amount of rent by way of

6 recompense, but to incentivise landlords. The 2016 Act serves that objective as construed by the Deputy President. It conveys the message, “a landlord who commits one of the offences listed in section 40(3) is liable to forfeit every penny he receives for a 12- month period”. Further, a landlord is encouraged to put matters right since he will know that, once he does so, there will be no danger of his being ordered to repay future rental payments.” 12. Section 40 provides: “(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

(b) pay a local housing authority an amount in respect of a relevant award of universal credit paid (to any person) in respect of rent under the tenancy.”

13. Section 40(3) lists seven offences “committed by a landlord in relation to housing in England let by that landlord”. The seven offences include the offence of “control or management of unlicenced HMO” contrary to section 72(1) of the 2004 Act.

14. Section 41 deals with applications for RROs. The material parts provide: “(1) [NAME] or a local housing authority may apply to the First-tier Tribunal for a rent repayment order against a person who has committed an offence to which this Chapter applies.

(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 [NAME] is made.

15. Section 43 provides for the [NAME] of RROs: “(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).”

7 16. Section 44 is concerned with the amount payable under a RRO made in favour of tenants. By section 44(2) that amount “must relate to rent paid during the period mentioned” in a table which then follows. The table provides for repayment of rent paid by the tenant in respect of a maximum period of 12 months. Section 44(3) provides (emphasis added): “(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.

17. Section 44(4) provides: “(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.”

18. Section 47(1) provides that an amount payable to [NAME] under a RRO is recoverable as a debt. 19. In [NAME] v Roman [2022] UKUT 239 ([NAME]); [2022] HLR 44, Judge Elizabeth Cooke gave guidance on the approach that should be adopted by Tribunals:

“20. The following approach will ensure consistency with the authorities:

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

8 (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:

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).

21. I would add that step (c) above is part of what is required under section 44(4)(a). It is an assessment of the conduct of the landlord specifically in the context of the offence itself; how badly has this landlord behaved in committing the offence? I have set it out as a separate step because it is the matter that has most frequently been overlooked."

20. These guidelines have recently been affirmed by [NAME], the Deputy President, in Newell v Abbott [2024] UKUT 181 ([NAME]). He reviews the RROs which have been assessed in a number of cases. The range is reflected by the decisions of [COMPANY] v Osserman [2022] UKUT 164 ([NAME]) and [NAME] v [NAME] [2022] UKUT 165 ([NAME]), the Deputy President distinguished between the professional “rogue” landlord, against whom a RRO should be made at the higher end of the scale (80%) and the landlord whose failure was to take sufficient steps to inform himself of the regulatory requirements (25%).

21. The Deputy President provided the following guidance (at [57]): “This brief review of recent decisions of this Tribunal in appeals involving licensing offences illustrates that the level of rent repayment orders varies widely depending on the circumstances of the case. Awards of up to 85% or 90% of the rent paid (net of services) are not unknown but are not the norm. Factors which have tended to result in higher penalties include that the offence was committed deliberately, or by a [NAME] or an individual with a larger property [NAME], or where tenants have been exposed to poor or dangerous conditions which have been prolonged by the failure to licence. Factors tending to justify lower penalties include inadvertence on the part of a smaller landlord, property in good condition such that a licence would have been granted without additional work being required, and mitigating factors which go some way to explaining the offence, without excusing it, such as the failure of a letting agent to warn of the need for a licence, or personal incapacity due to poor health.” 22. The Deputy President added (at [61]):

9 “When Parliament enacted Part 2 of the 2016 Act it cannot have intended tribunals to conduct an audit of the occasional defaults and inconsequential lapses which are typical of most landlord and tenant relationships. The purpose of rent repayment orders is to punish and deter criminal behaviour. They are a blunt instrument, not susceptible to fine tuning to take account of relatively trivial matters. Yet, increasingly, the evidence in rent repayment cases (especially those prepared with professional or semi-professional assistance) has come to focus disproportionately on allegations of misconduct. Tribunals should not feel that they are required to treat every such allegation with equal seriousness, or to make findings of fact on them all. The focus should be on conduct with serious or potentially serious consequences, in keeping with the objectives of the legislation. Conduct which, even if proven, would not be sufficiently serious to move the dial one way or the other, can be dealt with summarily and disposed of in a sentence or two.” The Background 23. On 19 September 2015, [NAME] moved into occupation of the Flat. The Tribunal has not been provided with details of the terms of this initial tenancy or the other tenants with whom he shared the Flat.

24. On 28 November 2017 (p.33-42), there is a Memorandum of Agreement recording that [NAME] and [NAME] were occupying the Flat pursuant to an assured shorthold tenancy for a term of 12 months which ran from 1 May 2017 at a rent of £2,318.34 and a monthly water charge of £46.

25. On 29 March 2018, [NAME[NAME] moved in, replacing [NAME]. There is a Deed of Assignment (at p.45-46). The Flat had three bedrooms and the tenants shared a kitchen and two bathrooms. None of the tenants were related to each other. They all lived as separate households. They occupied the Flat as their primary residences.

26. Thereafter, there were various variations to the joint tenancy, On 30 January 2019, [NAME] replaced [NAME[NAME]. There is a deed of assignment at p.47-48. It is not entirely clear when [NAME[NAME] had moved into occupation of the Flat. On 23 July 2019, [NAME[NAME] replaced [NAME]. There is a deed of assignment at p.47-48 27. On 31 July 2019, the Respondent granted the Applicants and [RESPONDENT[NAME] an assured shorthold tenancy of the Flat. The tenancy was for a term of 12 months from 1 August 2019 at a monthly rent of £2,361.66. There was also a monthly water charge of £46. On 31 January 2020, [NAME[NAME] left the Flat. He was replaced by [NAME[NAME]. There is a deed of assignment, dated 6 February at p.47-48. On 31 July 2020, [NAME] and [NAME] vacated the Flat.

10 28. At all material times after 1 October 2018, the Flat required a licence, but it was not until 30 November 2020, that the Respondent applied for a licence. This was after the Applicants had vacated the Flat. [NAME[NAME] has made a witness statement in support of the Applicants. However, he has not applied for a RRO himself.

29. The Applicants complain of a number of maintenance issues. They complain that the bathrooms were plagued with recurring mould, the lifts were out of order for extended periods of time, building security doors being broken for extended periods of time and plumbing and appliance issues. Maintenance for these issues was often performed poorly. The maintenance company forgot to book in repairs until prompted multiple times. They sent workmen who performed poor quality work, which often led to multiple visits being required to fix small items. issues. There were additional issues with the professionalism of the lettings agency, who would repeatedly state they would be carrying out landlord inspections. The Applicants arranged to be present, but the landlord failed to attend. and similar, which we wanted to be present for, only to not turn up on the day. The Applicants have provided a number of emails at p.26-32, 43-44, 49-50 and 78-88. The Offence of control or management of an unlicenced HMO 30. The Tribunal is satisfied beyond reasonable doubt that the Respondent is guilty of an offence of under section 72(1) of the 2004 Act, of having control of or managing an HMO which is required to be licensed under but was not so licensed. The offence was committed over the period 1 October 2018 to 31 July 2020. The Assessment of the RRO 31. The Applicants seek RROs totalling £18,482.90 for the period of 12 months from 6 February 2019: (i) [NAME] seeks a RRO in the sum of £9,285.90, relying on payments made between 6 February 2019 and 8 January 2020. He has provided no evidence of bank statements.

(ii) [NAME] seeks a RRO in the sum of £9,197 relying on payments made between 15 February 2019 and 10 January 2020. He has provided no evidence of bank statements.

32. The Tribunal must first determine the whole of the rent of the relevant period. We are satisfied that the relevant period is 6 February 2019 to 5 February 2020. Rent of £28,080 was payable during this period, namely six months at £2,318.34 and six months at £2,361.66. A third share of this is £9,360. Neither Applicant is claiming more than this. None of the tenants were in receipt of universal credit.

11 33. We are then required to consider the seriousness of the offence. The Upper Tribunal considers licencing offences to be less serious than other offences for which RROs can be imposed. We are dealing with a [NAME]. There is evidence that the Respondent has failed to licence a [NAME] number of flats. The Respondent can only be characterised as a rogue landlord.

34. We are finally required to have regard to the following: (a) The conduct of the landlord. We consider that the disrepair and maintenance issues are moderate aggravating factors.

(b) The conduct of the tenant. There is no criticism of the conduct of the tenants.

(c) The financial circumstances of the landlord. This is a [NAME].

(d) Whether the landlord has at any time been convicted of an offence to which this Chapter applies. There is no relevant conviction.

35. The Applicants refer us to the decision in 8 Simpson House (LON/00AM/HMF/2020/0236) when a FTT made a RRO of £18,421, namely 65% of the rent. On 23 June 2022 (reported at [2022] UKUT 164 ([NAME])), [NAME], the Deputy President increased the RRO to £22,500, namely 80% of the rent. This is not strictly a conviction. Further, the aggravating factors in this case and the landlord’s conduct in connection with this appeal, are not relevant to the RRO which we are required to determine.

36. Taking all relevant factors into account, we make RROs in the sum of 75% of the rent, namely (i) [NAME]: £6,965.

(ii) [NAME]: £6,898.

[NAME], 3 March 2025

RIGHTS OF APPEAL

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

12 2. 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].

3. If the [NAME] is not made within the 28 day time limit, such [NAME] 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 [NAME] for permission to appeal to proceed despite not being within the time limit.

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