Housing – House in multiple occupation – Rent repayment order – First-tier Tribunal making rent repayment order in favour of appellant tenant – Appellant claiming amount awarded too low – Appellant appealing – Whether less than full rent to be awarded in light of conduct of parties and financial circumstances of respondent landlord – Appeal allowed
The appellant had an assured shorthold tenancy of 267 St George’s Road, Coventry from 1 July 2018 for 12 months and lived there with four others in four households. Although the landlord stated on the tenancy agreement was the first respondent, the registered proprietor of the property was the second respondent and therefore she was the landlord. Throughout the 12 months of the tenancy the property was a house in multiple occupation (HMO). The appellant paid £4,482.50 in rent during his 12 months at the property.
When the tenancy agreement was signed, under the Licensing of Houses in Multiple Occupation (Prescribed Descriptions) (England) Order 2006, an HMO requiring a licence was one comprising three or more storeys, occupied by five or more persons in two or more households. From 1 October 2018, the Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018 provided that an HMO was licensable if it was occupied by five or more persons living in two or more households, without a requirement for the house to have three or more storeys.
Under section 40 of the Housing and Planning Act 2016, the First-tier Tribunal (FTT) had the power to make a rent repayment order (RRO) where a landlord had committed, amongst others things, an HMO licence offence. Under section 43, the FTT could make an RRO if it was satisfied beyond reasonable doubt that the offence had been committed and, where the application was made by a tenant, the amount was to be determined in accordance with section 44.
The appellant appealed against a decision of the FTT to make an RRO in his favour in the sum of £1,494.17 which it said represented one third of the rental profit.
The appellant appealed on the basis that the amount awarded was too low in light of the authority of Vadamalayan v Stewart [2020] UKUT 183 (LC); [2020] PLSCS 189.
Held: The appeal was allowed.
(1) In Parker v Waller [2012] UKUT 301 (LC); [2012] PLSCS 266, the tribunal considered sections 73 and 74 of the 2004 Act, which at that date gave the FTT jurisdiction to make RROs and provided that the sum to be paid had to be reasonable; he held that the amount of the rent ordered to be repaid should be such as to strip the landlord of his or her profit, and that therefore amounts paid by the landlord for example in making mortgage payments or in meeting obligations to the tenants might be deducted in order to arrive at a reasonable amount. Those provisions were replaced in England by sections 43 and 44 of the which no longer prescribed that the amount ordered to be repaid should be reasonable. Despite that, the FTT continued to make RROs on the basis devised in Parker v Waller, in the absence of more recent authority.
However, in Vadamalayan v Stewart the tribunal was able to consider the new provisions and held that even if the approach in Parker v Waller had been appropriate under the old law, it was no longer to be followed when ordering an RRO under the 2016 Act. In particular, the starting point for an RRO should be the whole of the rent for the relevant period, and the amount ordered should not generally be restricted to the landlord’s profit. The FTT’s practice of routinely deducting amounts that the landlord was paying in order to preserve his own property, such as mortgage payments, or that the landlord was obliged to make in any event under the terms of the lease, was no longer appropriate.
(2) The appellant’s argument that the RRO made by the FTT was inappropriate in light of Vadamalayan v Stewart was manifestly correct. However, the RRO would have been troubling even absent authority. It was not possible to understand the basis of the FTT’s calculation (the order made was for repayment of one third of the rent, and did not seem to be calculated by reference to the landlord’s profit); and it was not known why the FTT thought that the landlord should retain two-thirds of her profit, on the FTT’s own account of how the rationale for the sum ordered, in view of the fact that the second respondent was found to be a professional landlord.
In any event, the order made was determined on a basis that had been customary under the 2004 Act on the authority of Parker v Waller, but was unsustainable under section 44 of the 2016 Act in the light of the decision in Vadamalayan v Stewart. Accordingly, the tribunal would set aside the FTT’s order and substitute its own.
(3) The tribunal had to consider in particular the matters set out in section 44(4) of the 2016 Act which provided that, in determining the amount the tribunal had, in particular, to take into
account the conduct of the landlord and the tenant, the financial circumstances of the landlord and whether the landlord had at any time been convicted of an offence to which the Act applied.
The respondents were landlords with a portfolio of properties; the repayment of the rent claimed by the appellant was not, in the face of property ownership on that scale and in light of the profit likely to have been made from that portfolio, going to cause particular hardship. Further, a landlord with a portfolio of properties was to be expected to keep abreast of their professional and legal responsibilities. Inadvertence was not a mitigation in such a case.
However, until 1 October, and therefore for one quarter of the tenancy, the house was not a licensable HMO. Therefore, there appeared to have been a mistake of law on the part of the FTT, which noted the change in the regulations but did not consider its application in this case.
In the circumstances, the rent to be repaid was three-quarters of the rent for the year, which amounted to £3,361.87. Subtracting the sum already paid in accordance with the FTT’s order, the respondents would be ordered to pay the balance in the sum of £1,867.70 to be paid within 28 days.
The appellant appeared by its representative; the respondents appeared in person.
Eileen O’Grady, barrister
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