Housing – Rent repayment order – House in multiple occupation – Appellant pleading guilty to offence of having control of unlicensed HMO contrary to section 72(1) of Housing Act 2004 – Respondent local housing authority applying for repayment of universal credit for HMO tenants – Appellant appealing – Whether exceptional circumstances justifying repayment of less than full amount received – Appeal dismissed
The appellant owned and ran the Cresta Hotel, Southport, a three-storey house with five letting bedrooms and a basement flat occupied by the appellant. The tenants of the rooms shared bathroom facilities and a communal kitchen but did not form part of a single household. The building was therefore a house in multiple occupation (HMO) required to be licensed under Part 2 of the Housing Act 2004. The residents were mostly people in need of emergency accommodation who obtained the appellant’s contact details from the respondent’s homelessness services. The appellant did not require a deposit and was content to accommodate tenants whose rent would be met by direct payments of universal credit. She had no previous experience of running a hotel.
The appellant had not obtained an HMO licence because she believed that a hotel did not need one. She subsequently pleaded guilty to the offence of having control of an unlicensed HMO contrary to section 72(1) of the Housing Act 2004. She was fined £5,000 with costs of £1,466 and a surcharge of £170. The respondent then notified the appellant that it proposed to apply for a rent repayment order to recover the full amount of universal credit she had received in the 12 months preceding her conviction.
The First-tier Tribunal (FTT) ordered the appellant to repay £13,293.27, the full amount of the universal credit she had received to meet the rent payable by tenants in the 12 months ending 15 August 2018. It found that the circumstances of the appellant’s case were not exceptional so as to merit any reduction.
The appellant appealed, arguing that the FTT had failed to consider the respondent’s actions in referring tenants to her. Furthermore, it had failed to deduct the utility costs she had incurred in running the property in accordance with the decision in Vadamalayan v Stewart [2020] UKUT 183 (LC); [2020] PLSCS 189.
Held: The appeal was dismissed.
(1) The amount of a rent repayment order which might be made in favour of a local housing authority was determined in accordance with section 45 of the Housing and Planning Act 2016. For the offence of having control of an unlicensed HMO, the amount had to “relate to universal credit paid” in respect of a period, not exceeding 12 months, during which the landlord was committing the offence: section 45(2). The amount must not exceed the amount of universal credit the landlord received in respect of rent under the tenancy for that period: section 45(3). Section 45(4) identified a number of matters which “in particular” the FTT was required to take into account when determining the amount to be repaid; they were the conduct of the landlord, the financial circumstances of the landlord, and whether the landlord had at any time been convicted of an offence to which Chapter 4 of the 2016 Act applied.
(2) The approach adopted in Vadamalayan was not applicable in the present case. Where a landlord had been convicted and an order was sought by a local housing authority, section 46(1) required that the amount to be repaid should be the maximum that the FTT had power to order. The matters identified in section 45(4), which included the financial circumstances of the landlord, and which had to be taken into account when determining the amount of an order where there had been no conviction, were specifically to be disregarded.
The FTT was prohibited by section 46(1) from arguing that the FTT ought to have deducted the cost of utilities from the universal credit received. The only basis on which an order for repayment might be reduced in a case to which section 46 applied was where, by reason of exceptional circumstances, it would be unreasonable to require the landlord to repay the maximum amount possible. While section 46(1) ruled out consideration of the landlord’s financial circumstances (or any of the other matters in section 45(4)) when calculating the maximum which the FTT had power to order a landlord to repay, once the FTT had calculated that sum there was nothing in section 46(5) which prevented it from taking the landlord’s financial position into account when it considered whether exceptional circumstances would make it unreasonable to require the landlord to repay the maximum sum.
Therefore, the appellant was entitled to rely on her inability to run the business at a profit in support of her submission that exceptional circumstances made it unreasonable to order the appellant to repay what was, in effect, the whole of the gross income generated by the business. No landlord conducting an HMO did so in the expectation of making a loss from the enterprise. The appeal was not a rehearing of the respondent’s application for a rent repayment order; it was a review of the FTT’s decision to make a rent repayment order. It was not for the Upper Tribunal (UT) to decide if exceptional circumstances made it unreasonable for the appellant to be required to repay the maximum amount. Whether circumstances were exceptional was a matter of assessment for the FTT. It would only be if the FTT had misdirected itself in law or had failed to take a relevant matter into account when making that assessment that the UT would be justified in interfering with its determination that circumstances were or were not exceptional.
(3) The threshold for exceptional circumstances was very high. The UT was satisfied that the FTT was fully aware of the relationship between the appellant’s business income and outgoings. The resulting imbalance might have been regarded as exceptional by some tribunals but the FTT was entitled to come to the conclusion it had on the question of exceptional circumstances. Having reached that conclusion, the FTT had no alternative but to make the order it made, requiring the repayment in full of the universal credit received in the period of 12 months during which the appellant was committing the offence. That outcome reflected the policy of the 2016 Act that a landlord who had been convicted of a relevant housing offence might not ordinarily retain rent received from public funds.
The appellant appeared in person; Jac Armstrong appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Ball v Sefton Metropolitan Borough Council
