House in multiple occupation – Rent repayment order – Section 74 of Housing Act 2004 – Appellant letting out property as HMO without licence for short period before licence application made and accepted – Residential property tribunal making order for repayment of full year’s rent to respondent tenants – Whether RPT wrongly applying presumption that full amount of rent repayable unless good reasons not to do so – Whether failing to take into account relevant matters under the Act – Appeal allowed
The appellant owned a residential property in Bath, which he had previously lived in himself but which, after moving out, he later sought to rent out through an agent. In September 2011, his managing agent informed him that he needed to apply for a licence in order to let the property as a house in multiple occupation (HMO), pursuant to Part 2 of the Housing Act 2004. For various reasons, including being sent the wrong forms by the local council, the appellant did not get around to making the application. He none the less proceeded to let various rooms in the house to the respondents and two others from September/October 2011. The rent charged was an all-inclusive sum that included council tax and utility bills. At a meeting with the relevant local council in January 2012, the appellant was given the correct application form, which he submitted in February 2012. Following a pre-licence inspection, the council granted a temporary licence in March 2012 but indicated that certain works needed to be carried out to the property. A full licence was granted in April 2012.
The appellant was subsequently prosecuted for non-compliance with the statutory requirements of the Housing Act 2004 regarding HMOs and pleaded guilty to an offence of controlling or managing an unlicensed HMO, contrary to section 72(1) and (6), and was fined £585, plus a victim surcharge of £15 and £20 costs. The residential property tribunal (RPT) subsequently made rent repayment orders under section 74 of the Act, on the application of the respondents, for the repayment of 100% of the rent that each of them had paid in the 12 months preceding the date of the application, in a total amount of £7119.18.
The appellant was given leave to appeal in light of the subsequent decision of the Upper Tribunal in Parker v Waller [2012] UKUT 301 (LC); [2012] PLSCS 266. The issues were whether, in the light of that decision, the RPT had erred in law by: (i) starting from a position that full repayment of rent should be ordered unless it exercised its discretion to limit reimbursement; (ii) failing to have regard to the fact that the appellant was not a professional landlord; (iii) failing to have regard to the fact that the rent payments included charges for utilities and possibly for other services; and (iv) ordering repayment of a deposit that had already been repaid.
Held: The appeal was allowed.
Under section 74 of the 2004 Act, the amount to be repaid was such amount as the RPT considered reasonable in the circumstances, having regard to certain specified matters. Under section 74(6)(d), these included the conduct and financial circumstances of the person against whom the order was made. The RPT in the instant case had failed to exercise its discretion properly or at all and had failed to determine what payment was reasonable in the circumstances.
The RPT had applied the relevant test incorrectly by proceeding on the basis that the maximum amount of rent paid should be repaid unless there were reasons for not doing so. That was the wrong test on a true construction of section 74(5) and (6). There was no presumption that a rent repayment order should be for the total amount received by the landlord during the relevant period; instead, the RPT was to take an overall view of the circumstances in determining what amount would be reasonable. Although the cost of utilities included in the rent counted as part of the periodical payments in respect of which a rent repayment order could be made, the landlord himself would not have benefited from these and it was only in the most serious cases that they should be included in the order. The RPT had erred in deciding that the appellant should not be allowed any deduction in respect of gas, electricity, management charges and other such costs. The appellant had paid for all the outgoings of the property and the RPT should have taken those sums into account when assessing the amount of rent to be repaid. The appellant had received no benefit himself and the circumstances were not sufficiently serious to justify a different approach.
The RPT had also failed to take into account the appellant’s conduct and financial circumstances, as it was required to do under section 74(6)(d) of the Act. It had wrongly considered the only matter relevant to conduct to be that the appellant had continued to let out a property without obtaining a licence. However, in that context, it was relevant that: (i) the appellant was not a “professional landlord”, in that the property was the only one that he operated as an HMO: (ii) he had no intention of deliberately flouting the law; (iii) the period of default was relatively short; (iv) there were only minor matters of repair to put right in the property; (v) the tenants had no complaints, or at least none of any substance, and two did not even seek rent repayment orders; (vi) the rent was low and the appellant paid for everything, making the arrangement similar to “serviced accommodation”. The RPT had also failed to take into account the background circumstances as to the ownership of the property, including the fact that the appellant had his family had formerly occupied the property and that circumstances had changed only after they moved out.
So far as the appellant’s financial circumstances were concerned, the RPT had failed to take into account that the appellant made little profit on the lettings, especially when the sums in respect of capital expenditure were taken into account, such that the imposition of the orders meant that his profit for the period was negligible. Finally, although the purpose of a rent repayment order was to prevent a landlord from profiting from renting properties illegally, the appellant had in fact suffered two penalties, the fine and the rent repayment orders. The RPT should have taken into consideration the total amount that the landlord would have to pay by way of a fine and rent repayment order.
Since the RPT had erred in several material respects, it followed that the rent repayment orders should be set aside: Parker applied.
The appellant appeared in person; the respondents did not appear and were not represented.
Sally Dobson, barrister
