Housing – Rent repayment order (RRO) – Award – Appellant landlord appealing against rent repayment orders made in favour of respondent tenants of houses in multiple occupation (HMOs) – Whether First-tier tribunal adopting correct approach in determining amount of RRO – Appeals allowed
Rent repayment orders (RROs) were made by the First-tier Tribunal (FTT) in two cases because the landlords had committed licensing offences under the Housing Act 2004 by being in control of a house in multiple occupation (HMO) which was required to be licensed and was not.
In the Choudhury appeal, the appellant landlord let a self-contained basement flat in 184 North End Road, London, W14 to two tenants from 14 July 2019. The property was in an area designated under a selective licensing scheme, and the appellant did not apply for a licence until August 2021. The respondent tenants left the property in March 2021 and applied for an RRO for the period 13 February 2020 to 12 February 2021 in the full amount for the 12 months of £18,000.
In the Acheampong appeal, the appellant held a leasehold interest in 695 Lordship Lane, London N22, which was a flat in a purpose-built block. The respondents were four tenants of the flat, who occupied it for different periods but all left in April 2020. They applied to the FTT for an RRO on the basis that the flat was an HMO that was required to be licensed and was not.
Each appeal raised the same point, namely the approach to be taken by the FTT in deciding how much a landlord should pay by way of an RRO. The appeals were determined on written representations.
Held: The appeals were allowed.
(1) In Parker v Waller [2012] UKUT 301 (LC); [2012] PLSCS 266, the Upper Tribunal (UT) held that in considering the amount to be repaid under an RRO, introduced in the 2004 Act, the FTT should deduct the landlord’s expenditure as the effect of the order was to take from the landlord the profit element of the rent.
In Vadamalayan v Stewart [2020] UKUT 183 (LC); [2020] PLSCS 189, the UT held that under the provisions of the Housing and Planning Act 2016, which were now the relevant provisions for England, the landlord’s expenditure was not to be deducted; the order should be for the repayment of the rent regardless of what the landlord had spent on the property. However, where the rent included payments for utilities, it would usually be appropriate to deduct a sum representing that payment; a sum the tenant paid the landlord for utilities was not really rent. Therefore, Parker v Waller was no longer relevant to the calculation of RROs.
(2) However, Vadamalayan was not authority for the proposition that the maximum amount of rent was to be ordered under an RRO subject only to limited adjustment for the factors specified in section 44(4): (a) the conduct of the parties; (b) the landlord’s financial circumstances; and (c) where the landlord had been convicted of a housing offence.
An order in the maximum possible amount would be made only in the most serious cases or where some other compelling and unusual factor justified it. The seriousness of the offence was a relevant factor, as it was expressly provided that the conduct of the landlord was to be taken into consideration. If the starting point was the proposition that the order would be for the maximum amount unless the section 44(4) factors indicated that a deduction could be made, the FTT would be unable to adjust for the seriousness of the offence (because the commission of an offence was bad conduct and could not justify a deduction). It would in effect have fettered its discretion. Instead, the FTT had to look at the conduct of the parties and arrive at an order for repayment of an appropriate proportion of the rent: Williams v Parmar [2021] UKUT 244 (LC); [2021] PLSCS 169 considered.
There were no rules as to the amount to be repaid. But if the landlord was ordered to repay the whole of the rent (after deduction of any payment for utilities), without consideration of the seriousness of the offence, or in a case that was far from the most serious of its kind, it was likely that something had gone wrong and the FTT had failed to take into consideration a relevant factor: Wilson v Arrow [2022] UKUT 27 (LC) and Hallett v Parker [2022] UKUT 165 (LC); [2022] PLSCS 106 considered.
(3) The approach to be adopted to decision making by the FTT was to: (i) ascertain the whole of the rent for the relevant period; (ii) subtract any element of that sum that represented payment for utilities that only benefited the tenant, for example gas, electricity and internet access; (iii) consider how serious the offence was, both compared to other types of offence in respect of which an RRO might be made and compared to other examples of the same type of offence and what proportion of the rent (after deductions) was a fair reflection of the seriousness of the offence; and (iv) consider whether any deduction from, or addition to, that figure should be made in the light of the other factors in section 44(4).
Step (iii) was part of what was required under section 44(4)(a). It was an assessment of the conduct of the landlord specifically in the context of the offence itself; and how badly the landlord had behaved in committing the offence.
(4) In Choudhury, the FTT had fettered its discretion by taking as a starting point the proposition that the order would be for the maximum amount unless the section 44(4) factors indicated that a deduction could be made so that it would be unable to adjust for the seriousness of the offence.
Accordingly, the FTT’s decision would be set aside. The full payment needed to be adjusted to subtract any payment for utilities and, absent any other factors, the appellant would be ordered to make repayment of 75% of the rent, being £12,600.
(5) In Acheampong, the FTT started with the maximum rent, and then made a deduction because the appellant had been a good landlord. It treated the maximum amount as the default penalty and gave no attention to the seriousness of the offence.
The FTT’s decision as to the amount of the RRO would be set aside. The UT was not able to substitute its own decision as the evidence about the value of the utilities paid as part of the rent was contested. The matter would be remitted to the FTT for determination of the amount of the RRO.
Eileen O’Grady, barrister
Click here to read a transcript of Acheampong v Roman and others; Choudhury v Razak and another