Housing – Rent repayment order – House in multiple occupation (HMO) – Appellant freeholder failing to obtain HMO licence – Respondent tenants applying for rent repayment orders – First-tier Tribunal (FTT) making orders sought – Whether FTT adopting correct approach to seriousness of offence and amount of rent to be repaid – Appeal allowed in part
The appellant owned the freehold of 10 Omega Works, Haringey, London N4, one of a large number of Victorian warehouses on the Crusader Industrial Estate. It was divided into four “units”. The appellant operated a fashion studio from unit 10A. Unit 10D was a self-contained flat on the first floor; she let rooms within the unit on assured shorthold tenancies between 2017 and 2020.
Part 2 of the Housing Act 2004 required houses in multiple occupation (HMOs) specified in the Licensing of Houses in Multiple Occupation (Prescribed Descriptions) (England) Order 2018 to be licensed; and section 72(1) provided that it was an offence to manage or be in control of an HMO which was required to be licensed and was not.
The respondents each occupied rooms for different lengths of time and applied for rent repayment orders under section 41 of the Housing and Planning Act 2016. The appellant argued that the use of the property was for “warehouse living”, which she wanted to portray as mixed business and residential use so that an HMO licence was not required.
The First-tier Tribunal (FTT) found that unit 10D met the “standard test” for being an HMO in section 254 of the 2004 Act, because the tenants were using it only as living accommodation, as required by their tenancy agreement. Therefore, at all material times it was an HMO which required a licence.
The FTT rejected the appellant’s defence of reasonable excuse. It was satisfied that the appellant had committed the section 72 offence and the rent repayment orders would be made. The appellant appealed. The appeal was determined on written representations.
Held: The appeal was allowed in part.
(1) Following the decision in Williams v Parmar [2021] UKUT 244 (LC); [2021] PLSCS 169, it was well established that the FTT in assessing the amount of a rent repayment order was not to take the full amount of the rent (less payments for utilities) as a starting point, subject only to deduction for good conduct on the part of the landlord, poor conduct by the tenants, or the landlord’s financial circumstances.
That approach failed to consider the seriousness of the offence, which was a crucial element of the landlord’s conduct. Accordingly, in Acheampong v Roman [2022] UKUT 239 (LC); [2022] PLSCS 152 the tribunal endeavoured to provide some practical guidance for the FTT.
(2) The correct approach to the assessment of the amount of rent to be repaid that was consistent with the authorities was to ascertain the whole of the rent for the relevant period; and subtract any element of that sum that represented payment for utilities that only benefited the tenant, for example gas, electricity and internet access. It was for the landlord to supply evidence of those, but if precise figures were not available an experienced tribunal would be able to make an informed estimate.
It was then necessary to consider how serious the offence was, both compared to other types of offence in respect of which a rent repayment order might be made (and whose relative seriousness could be seen from the relevant maximum sentences on conviction) and compared to other examples of the same type of offence and decide what proportion of the rent was a fair reflection of the seriousness of the offence. That figure was then the starting point (in the sense used in criminal sentencing); it was the default penalty in the absence of any other factors but it might be higher or lower in light of the final step. Finally, the tribunal should consider whether any deduction from, or addition to, that figure should be made in the light of the other factors set out in section 44(4) of the 2004 Act: Acheampong followed.
(3) In the present case, the FTT had treated the maximum possible order as the default order, from which only deductions had been made, which was precisely what Williams v Parmar said should not be done. The respondents said that the award was correct in light of the condition of the property, but that was to miss the point; the FTT’s reasoning started in the wrong place, and the FTT failed to give any consideration to the seriousness of the offence.
Accordingly, its decision would be set aside and the Upper Tribunal (UT) would substitute its own decision, following the approach in Acheampong.
(4) The first step was to ascertain the whole of the rent for the relevant period and then deduct any payments made by the landlord for the tenants’ benefit, in particular the utility bills. The appellant had not provided any information about the amount she actually paid in respect of utilities, if any. Therefore, no adjustment could be made for utilities.
Next the seriousness of the offence had to be considered and the appropriate percentage of the rent to reflect that seriousness, in order to generate a starting point. The offence under section 72(1) of the 2004 Act was not one of the more serious of the offences for which a rent repayment order could be made. And this was not one of the most serious examples of the section 72(1) offence; in particular, whilst some improvements were clearly needed at the property, there was no suggestion that the property would not have qualified for an HMO licence had one been sought.
However, it was clear from the FTT’s findings about credibility that the offence was committed deliberately; the appellant chose not to apply for a licence even though she had been told by her architect that she needed one.
The final step was to consider whether any adjustments were to be made in light of the other factors set out in section 44(4). There was no evidence that the appellant had any relevant convictions. In granting permission to appeal the UT said that there was no permission to appeal the FTT’s findings about the conduct of the landlord and the tenants and the landlord’s financial circumstances. The FTT took the view that none of those factors justified a reduction in the amount to be paid. Accordingly, the amounts to be repaid to the tenants were 65% of the sums determined by the FTT which was appropriate to reflect the seriousness of the offence.
Eileen O’Grady, barrister
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