Housing – House in multiple occupation – Rent repayment order – Appellant owning purpose-built student accommodation – Local authority introducing additional licensing scheme – Appellant failing to licence for three years – Respondent tenants obtaining rent repayment orders – Appellant appealing – Respondents cross-appealing – Whether appellant having reasonable excuse defence – Whether local authority wrongly failing to consult appellant before introducing additional licensing – Appeal and cross-appeal dismissed
North Lodge was one of three student housing blocks providing a total of 1,446 units of accommodation in Hackney owned by the appellant. The respondents were students who occupied individual rooms in two flats at North Lodge during the 2020/21 academic year.
In February 2019, the local authority designated the whole of the borough including North Lodge as an area of additional licensing under section 56 of the Housing Act 2004. It applied to all houses in multiple occupation (HMOs) which were not already subject to mandatory licensing under section 55(2)(a) of the 2004 Act.
The appellant did not become aware of the designation when it came into force and continued to manage the building without licensing the individual HMOs within it. The appellant was subsequently found to have been in control of the flats as unlicensed HMOs, which was an offence contrary to section 72 of the 2004 Act.
The respondents applied to the First-tier Tribunal (FTT) for rent repayment orders under section 44 of the Housing and Planning Act 2016. They claimed the full amount they had each paid during the 12-month period in respect of which an order could be made. The FTT made awards in amounts which varied from £3,042 to £4,370 and totalled just over £23,000.
The appellant appealed, contending it had a reasonable excuse for having been in control of the unlicensed HMOs and that the rent repayment orders ought not to have been made. The respondents were dissatisfied with the orders and cross-appealed.
Held: The appeal and cross-appeal were dismissed.
(1) Any suggested failure of the local authority to take account of the particular circumstances of purpose-built student accommodation when designing the additional licensing scheme was not a reasonable excuse for the appellant’s failure to comply with the scheme, once it was introduced. In any event, the evidence did not establish what the policy makers had or had not taken into account.
Under section 56(3) of the 2004 Act, the local authority was not obliged to consult any individual landlord, merely to take reasonable steps to consult persons who were likely to be affected by the designation.
(2) The appellant was in the position of many landlords who discovered that they had been committing an offence because they were unaware that a licensing scheme, mandatory or additional, applied to their property.
Generally, the bigger a landlord’s business, the more difficult it would be to provide a reasonable explanation for failing to keep up to date. In this case, the appellant was one of the largest providers of student accommodation in the country. It had signed up to a code of management practice which specifically required providers of student housing to be aware of HMO licensing requirements and ensure they complied with them.
The burden of proving a reasonable excuse fell on the person seeking to rely on it, and that burden could not be discharged without relevant evidence of what that person did in the particular circumstances. By focussing on the alleged absence of consultation with interested parties, the appellant concentrated its evidence on the wrong target: IR Management Ltd v Salford City Council [2020] UKUT 81 (LC); [2020] PLSCS 47 considered.
(3) The appellant had argued that the FTT failed to give adequate reasons for setting the award at 50% of the net rent paid by the tenants and to explain why it was ordering repayment of a sum greater than the 25% ordered by the Upper Tribunal in Hallett v Parker [2022] UKUT 165 (LC); [2022] PLSCS 106.
However, the facts of that case were strikingly different from this case and the FTT was entitled to assess the appropriate penalty for this offence committed by this landlord at 50% without commenting on the earlier case.
(4) In assessing penalties, fairness and the maintenance of respect for the law both required that tribunals adopted a consistent approach, even if, within a settled framework, one panel might be more influenced than another by a particular factor or one might be disposed to be more lenient or more punitive than another: Parker v Waller [2012] UKUT 301 (LC); [2012] PLSCS 266, Vadamalayan v Stewart [2020] UKUT 183 (LC); [2020] PLSCS 189, Williams v Parmar [2021] UKUT 244 (LC); [2021] PLSCS 169 and Acheampong v Roman [2022] UKUT 239 (LC); [2022] EGLR 46 considered.
However, fairness to individual tenants was not a relevant consideration in the quantification of rent repayment orders. The regime introduced by the 2016 Act was not intended to compensate tenants for a wrong suffered; it was intended to deter and punish landlords who failed to comply with their obligations and to encourage compliance in the future: Kowalek v Hassanein Ltd [2022] EWCA Civ 1041; [2022] EGLR 41 considered.
(5) In the context of a scheme of penalties which had to relate to rent paid, there would never be equivalence between the sums to be repaid to individual tenants in different circumstances. That was the consequence of the statutory scheme and the priority given to the objective of deterrence.
The calculation of the amount of the order had to relate to the total amount of the rent paid in some way. Thus, the amount might be a proportion of the rent paid, or the rent paid less certain sums, or a combination of both. Each assessment took as its starting point the amount of rent paid by the tenant during the relevant period: Williams v Parmar considered.
(6) It was for individual tribunals, guided by binding appellate decisions, to determine the appropriate relationship between rent paid and to be repaid in the cases before them. But in making that determination one of the relevant circumstances which the tribunal should have regard to, where it arose on the facts, was that the landlord had made payments for utilities consumed by the tenant.
Payments made for utilities were different from payments made on furnishing or property maintenance because the latter equipped or preserved the landlord’s property while the former did not. The decision maker was entitled to take account of that expenditure when determining the amount to be repaid.
Paul Whatley (instructed by Walker Morris LLP) appeared for the appellant; George Penny (instructed by Flat Justice CIC) appeared for the respondents.
Eileen O’Grady, barrister
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