Tenant Wins Rent Repayment Order for Unlicensed HMO

OUTCOME: Allowed

© CROWN COPYRIGHT

FIRST-TIER TRIBUNAL [NAME] ([NAME]) Case Reference : LON/00AT/HMF/2022/0194 Type of hearing : V: [NAME] : 51 [ADDRESS] [POSTCODE] Applicant : [redacted] : [NAME] of Justice for Tenants Respondent : [redacted] : Not represented and not present at hearing Type of [NAME] :

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

Judge P [NAME] [NAME] of Hearing :

20 February 2023

Date of Decision : 20 March 2023

DECISION

2 Description of hearing

This has been a remote video hearing which has been consented to (or at least not objected 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 and all issues could be determined in a remote hearing. The documents to which we have been referred are in 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 £2,062.50 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 paid by the Applicant.

(3) The above sums must be paid by the Respondent to the Applicant within 21 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 was controlling and/or managing a house in multiple occupation (an “HMO”) which was required under the Housing Act 2004 (“the 2004 Act”) to be licensed at a time when it was let to the Applicant but was not so licensed. Therefore, according to the Applicant, the Respondent was committing an offence under section 72(1) of the 2004 Act.

3. The Applicant’s claim is for repayment of rent paid during the period 26 November 2021 to 25 April 2022 in the sum of £2,750.00. Applicant’s case 4. The Applicant states that the [NAME] was situated within an additional licensing area as designated by the London Borough of Hounslow throughout the period of claim.

5. This licensing scheme applies to all HMOs in the London Borough of Hounslow which are occupied by three or more persons in two or more households. The Applicant states that throughout the claim period the [NAME] was occupied by at least four people occupying the [NAME] as

3 their main residence and sharing a toilet, personal washing facilities and cooking facilities. These four people were not part of the same household. The appropriate HMO licence was not held during the period of claim, and no licence [NAME] was made at any point during the Applicant’s tenancy.

6. The Applicant states that the Respondent was the owner of the [NAME] and was the Applicant’s immediate landlord. The Respondent was in receipt of the rack-rent of the [NAME] or of a rent from the occupiers of the [NAME] and was therefore a person in control of or managing an unlicensed HMO.

7. The Applicant’s witness statement states that Room 1 was occupied by a [APPELLANT] from 5 February 2022 until after the end of the Applicant’s period of claim. Room 2 was occupied by a [APPELLANT] [NAME] from 5 September 2017 to 23 August 2022. Room 3 was occupied by a [NAME] [NAME] from 1 September 2021 until after the end of the Applicant’s period of claim. The Applicant occupied Room 4.

8. The Applicant’s hearing bundle contains amongst [NAME] items a rental payment calculation, proof of payment, part of the Applicant’s tenancy agreement, copy Land Registry title documents, a copy of the licensing scheme designation, copy photographs of the interior of the [NAME] and a witness statement from the Applicant. There is also an email from the local housing authority stating that the [NAME] did not have an HMO licence.

9. In relation to the Respondent’s conduct, the Applicant states that the Respondent was in breach of a number of legal duties under The Management of Houses in Multiple Occupation (England) Regulations 2006. She failed to ensure that her name, address and telephone contact number were made available to all occupiers and clearly displayed, and the Applicant never received details of her correspondence address. No smoke alarm was installed in the bedrooms, corridor or main entrance. Extremely hot and cold water was supplied when more than one tap was in use. The garden was in a poor state and filled with garbage such as mattresses, a used washing machine and rubbish. In August 2021, dampness was reported on one of the walls. The fridge in the kitchen stopped functioning during the tenancy. No remediation work was carried out until three weeks after problems were reported. The Respondent also failed to ensure that the Applicant’s deposit was protected.

10. The Respondent has not alleged that the Applicant’s own conduct has been poor.

4 Respondent’s case 11. The Respondent did not make any written submissions and was neither present nor represented at the hearing. Relevant statutory provisions 12. 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.

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 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 a person 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. 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.

6 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 landlord has at any time been convicted of an offence to which this Chapter applies. Housing Act 2004 Section 72 (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 … but is not so licensed. (5) In proceedings against a person 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 another person), or who would so receive it if the premises were let at a rack-rent.

7 (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 [NAME] payments from— (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 [NAME] payments but for having entered into an arrangement (whether in pursuance of a court order or otherwise) with another person who is not an owner or lessee of the premises by virtue of which [NAME] receives the rents or [NAME] payments;

and includes, where those rents or [NAME] payments are received through another person as agent or trustee, [NAME]. Tribunal’s analysis 13. The Applicant’s uncontested evidence is that the [NAME] was not licensed at any point during the period of the claim. A licence was required, according to the Applicant, because the [NAME] was in an additional licensing area as designated by the local housing authority and it met the requirements for it to need a licence.

14. Having considered the Notice of Designation in the hearing bundle we are satisfied that the [NAME] was within the area of designation and that it will have needed an HMO licence if and for so long as it was being occupied by at least 3 people in 2 or more households. Having considered the Applicant’s uncontested evidence, including the Applicant’s witness statement, exchanges of WhatsApp messages and [NAME] material contained in the hearing bundle, we are satisfied beyond reasonable doubt that for at least part of the period of claim there were at least 3 occupiers, that the [NAME] required an HMO licence and that it was not licensed.

15. As to whether the [NAME] required a licence for the whole of the period of claim, the evidence provided by the Applicant on this point is slightly thin, with the Applicant’s explanation at the hearing being that the [NAME] occupiers did not want to get involved in this [NAME] as they were worried that it would affect their relationship with the Respondent. However, it has been open to the Respondent to contest the Applicant’s evidence but she has not done so. Therefore, we are satisfied on the balance of probabilities that the [NAME] required a

8 licence for the whole of the period of claim. In the case of Williams v Parmar (2021) UKUT 0244 (LC), the Upper Tribunal determined (at paragraph 31) that, whilst the criminal offence itself needed to be proved beyond reasonable doubt, once this was established the tribunal only needed to be satisfied on the balance of probabilities as to the length of the period of commission of the offence. On the basis of the Applicant’s uncontested evidence, we are satisfied beyond reasonable doubt that a licence was required and was not obtained for at least part of the period of claim, and we are satisfied on the balance of probabilities that a licence was required and was not obtained for the remainder of the period of claim.

16. We are also satisfied on the basis of the evidence before us that the Respondent was the landlord for the purposes of the 2016 Act and that she was a “person having control” of the [NAME] and/or a “person managing” the [NAME], in each case within the meaning of section 263 of the 2004 Act. The defence of “reasonable excuse” 17. Under section 72(5) of the 2004 Act, it is a defence that a person who would otherwise be guilty of the offence of controlling or managing a house which is licensable under Part 2 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.

18. In this case, the Respondent has not argued that she had a reasonable excuse, and we see no reason to conclude that she did on the evidence before us. The offence 19. 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. The offence of control or management of an unlicensed HMO under section 72(1) of the 2004 Act is one of the offences listed in that table.

20. 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. Having determined that the Respondent did not have a reasonable excuse for failing to license the [NAME], we are satisfied beyond reasonable doubt that an offence has been committed under section 72(1), that the [NAME] was let to the Applicant at the time of commission of the

9 offence and that the offence was committed in the period of 12 months ending with the day on which the [NAME] was made. Process for ascertaining the amount of rent to be ordered to be repaid 21. Based on the above findings, we have the power to make a rent repayment order against the Respondent.

22. 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.

23. 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 does not dispute that the rental amounts claimed were in fact paid by the Applicant.

24. We are satisfied that the Applicant was in occupation for the whole of the period to which the rent repayment [NAME] relates and that the [NAME] required a licence for the whole of that period. Therefore, the maximum sum that can be awarded by way of rent repayment is the sums set out in paragraph 3 above, namely £2,750.00, this being the amount paid by the Applicant by way of rent in respect of the period of claim.

25. 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.

26. 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.

27. 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

10 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.

28. 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.

29. Since the decision in Vadamalayan, there have been [NAME] Upper Tribunal decisions in this area, notably those in [NAME] and others v [NAME] (2021) UKUT 0038 (LC) and Awad v Hooley (2021) UKUT 0055 (LC). In [NAME] v [COUNSEL], in [NAME] his decision [COUNSEL] QC 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 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.

30. 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).

31. In Williams v Parmar & 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.

32. Mr Justice Fancourt went on to state in Williams 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

11 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.

33. In Hallett v [NAME] and others [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.

34. In its decision in [NAME] v Roman and others [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 [NAME] types of offence in respect of which a rent repayment order may be made and compared to [NAME] 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 [NAME] factors set out in section 44(4).

35. Adopting the [NAME] approach, the whole of the rent in this case means the whole of the rent paid by the Applicant out of the Applicant’s own resources, which is the whole of the rent in this case as no part of the rent was funded by housing benefit. Also in this case, there is no evidence of the Respondent having paid [NAME]. Therefore, after going through the first two stages of the [NAME] approach the figure remains at £2,750.00.

36. As regards the seriousness of the 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

12 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.

37. As for the seriousness of this offence compared to others of the same type, in our view it was reasonably serious but far from being the worst of its type. There is some evidence of issues relating to smoke alarms, which is a significant issue by itself, but there is no [NAME] evidence of serious safety issues. The [NAME] was not overall in bad condition, but there is credible evidence of problems with the fridge, erratic water temperature, damp and the condition of the garden. There is also credible evidence that the Respondent failed to protect the Applicant’s deposit.

38. Taking the above factors together, we consider that the starting point for this offence should be 70% of the maximum amount of rent payable.

39. 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 40. There is no evidence before us of the Applicant’s conduct having been anything [NAME] than good.

41. As regards the Respondent’s conduct, there is the failure to obtain a licence over a considerable period of time, and no mitigating circumstances that have been brought to our attention. There is also no evidence that the Respondent takes licensing issues seriously, and the Respondent has completely failed to engage with these proceedings. There are also the issues referred to in paragraph 37 above, although these should not be taken into account at this stage of the analysis as this would lead to double counting. Financial circumstances of the landlord 42. There is no evidence before us regarding the Respondent’s financial circumstances.

13 Whether the landlord has at any time been convicted of a relevant offence 43. The Respondent has not been convicted of a relevant offence. [NAME] factors 44. It is clear 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. We are not persuaded that there are any [NAME] specific factors which should be taken into account in determining the amount of rent to be ordered to be repaid. Amount to be repaid 45. 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 set out at paragraph 35 above. As for the third stage, namely the seriousness of the offence, this reduces the amount to 70% of that sum, subject to the section 44(4) factors.

46. There is nothing to deduct for the Applicant’s conduct as there is no evidence before us that the Applicant’s conduct was anything [NAME] than good. The Respondent’s conduct has not been so good, for the reasons set out in paragraph 41 above. In our view, this justifies increasing the repayment award from 70% to 75% of the maximum amount payable.

47. The Respondent has not at any time been convicted of a relevant offence, but it is clear from the Upper Tribunal decision in [NAME] v [NAME] that this by itself should not be treated as a credit factor. We have no evidence regarding the Respondent’s financial circumstances.

48. Therefore, taking all of the factors together, we consider that the rent repayment order should be for 75% of the maximum amount of rent payable, namely £2,062.50. Cost applications 49. 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 the [NAME] fee of £100.00 and the hearing fee of £200.00.

50. 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

14 appropriate in the circumstances to order the Respondent to reimburse these fees.

Name:

Judge P [NAME]:

20 March 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.