Landlord and tenant – Rent repayment order – Determination – Appellants appealing against amount awarded under rent repayment order (RRO) where respondent landlord failed to obtain required licence – Whether maximum amount of RRO including rent paid when licensing offence not being committed – Whether appellants’ rent arrears taken into account when determining amount of RRO – Appeal dismissed
In 2018, the respondent company acquired a long lease of flat 13, 130 Kilburn Park Road, London, NW6. On 26 February 2019, the respondent granted the appellants an assured shorthold tenancy of the flat for 24 months at a rent of £3,553.33 per month. They paid three months’ rent in advance and a tenancy deposit of £4,920, which was held under a tenancy deposit scheme.
From 1 June 2018, the building fell within an area of selective licensing under the Housing Act 2004. The respondent had no licence when it let the flat to the appellants. In August 2019, the appellants stopped making regular payments of rent and the respondent commenced possession proceedings which came before the county court for the first time on 28 January 2020.
On 10 January 2020, the appellants applied to the First-tier Tribunal (FTT) for a rent repayment order (RRO) under section 40(1) of the Housing and Planning Act 2016, seeking repayment of £23,819.98, which was agreed to be the full amount of the rent paid between 26 February 2019 and the date of the application.
The application for an RRO was served on the respondent by the FTT on 25 January 2020. On 27 January, it applied for a licence, which was granted on 23 March 2020.
The appellants vacated the flat on 24 March 2020 without making any further payments of rent. The FTT decided, particularly in light of the rent arrears and the absence of a licence, that there should be a reduction of 50% from the maximum figure, giving a final figure of £11,909.99. The Upper Tribunal (UT) upheld that decision: [2021] UKUT 143 (LC); [2021] PLSCS 110. The appellants appealed.
Held: The appeal was dismissed.
(1) The effect of section 44(2) of the 2016 Act, in the view of the deputy president of the UT, was to “[limit] the amount of rent which may be the subject of a rent repayment order in two quite different respects”. He explained that the first limitation focused on when the payment was made: the amount had to relate to rent paid during the period mentioned in the table. The second limitation was provided by the requirement in the table heading that “the amount must relate to rent paid by the tenant in respect of” the appropriate period. That focused on the period in respect of which the payment was made – what the payment was for, not when it was made. Both conditions had to be satisfied before a sum paid as rent could be the subject of an RRO.
That interpretation of section 44 was in keeping with the policy underlying part 2 of chapter 4 of the 2016 Act (which included section 44) which had in mind rogue landlords. As recognised in Jepsen v Rakusen [2021] EWCA Civ 1150; [2021] EGLR 3, it was intended to deter landlords from committing the specified offences and reflected a policy of requiring landlords to comply with their obligations or leave the sector. The main object of the provisions was deterrence rather than compensation. In fact, the offence for which an RRO was made need not have occasioned the tenant any loss or even inconvenience: an unlicensed property might be a perfectly satisfactory place to live and, supposing damage to have been caused in some way (for example, as a result of a failure to repair), the tenant might be able to recover compensation in other proceedings.
(2) Parliament’s principal concern was thus not to ensure that a tenant could recoup any particular amount of rent by way of recompense, but to incentivise landlords. The 2016 Act, as construed by the deputy president, served that objective. It conveyed the message that a landlord who committed one of the offences listed in section 40(3) was liable to forfeit every penny he received for a 12-month period. Further, a landlord was encouraged to put matters right since he would know that, once he did so, there would be no danger of his being ordered to repay future rental payments.
In all the circumstances, the maximum amount of an RRO had to be determined without regard to rent which, while it might have discharged indebtedness which arose during the period specified in section 44(2), was not paid in that period.
(3) Section 44(4) of the 2016 Act referred to “the conduct of… the tenant” in general terms, and there was no warrant for understanding it to mean “the conduct of… the tenant other than failure to pay rent”.
In the present case, the order made against the appellants by the county court (after the Upper Tribunal hearing) confirmed that, as the FTT had understood to be the position when it made the RRO, there were substantial rent arrears. Moreover, it was not apparent that, when the application for an RRO was before the FTT, there was any dispute between the parties as to what rent had been paid and what was outstanding, and the appellants’ failure to pay rent was unexplained. In the circumstances, the FTT was plainly entitled to have regard to the arrears when considering what the RRO should be. There was no need for the FTT to await the outcome of the county court proceedings: Regalgrand Ltd v Dickerson & Wade [1996] 29 HLR 620; [1996] EGCS 182 and Awad v Hooley [2021] UKUT 55 (LC); [2021] PLSCS 51 considered.
(4) In another case, it might be appropriate for the application for an RRO to be heard only after a claim for rent in the county court had been determined or, alternatively, for the proceedings in the FTT and the county court to be heard together: an FTT judge was also a judge of the county court by virtue of section 5(2) of the County Courts Act 1984. It was likely to make sense to adopt such a course where there was a dispute as to the existence or extent of rent arrears which were the subject of pending county court proceedings and which could be thought material to the size of an RRO.
Justin Bates and Brooke Lyne (instructed by Mishcon de Reya LLP) (acting pro bono) appeared for the appellants; Mathew McDermott and Robert Winspear (instructed by Benchmark Solicitors LLP) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Kowalek and another v Hassanein Ltd