Housing – Rent repayment order – Reasonable excuse – Appellant landlord owning flat requiring HMO licence – Appellant unaware that flat within selective licensing scheme – Appellant appealing against rent repayment order made in favour of respondent tenants – Whether appellant having reasonable excuse for controlling unlicensed house – Whether quantum of rent repayment excessive – Appeal allowed in part
The appellant was a solicitor and former owner of a three-bedroom flat at 9B Sandys Row, London, which was in an area subject to a selective licensing scheme under Part 3 of the Housing Act 2004.
The scheme required a licence to be obtained for any dwelling which was not already subject to mandatory HMO licensing, and which was occupied by two or more people sharing facilities but living in separate households. The flat was such a dwelling occupied by the respondents.
The appellant did not have the required licence and did not become aware of the selective licensing scheme. He never received information sent by the local authority to the owner’s address shown in the register of title for the flat at HM Land Registry or directly to the flat.
The respondents made a joint application to the First-tier Tribunal for rent repayment orders (RROs). The FTT ordered the appellant to repay each of the respondents £5,760, which represented 80% of the sum each of them had paid during the final 12 months of their tenancy.
The appellant appealed contending that, as he was unaware of the need to obtain a licence, he had a reasonable excuse for having control of an unlicensed house under section 95(1) of the 2004 Act. Further, the FTT erred in principle when it determined the amount of rent which he should repay.
Held: The appeal was allowed in part.
(1) To establish a defence under section 95(1), the person concerned had to show that their excuse was objectively reasonable.
It was a matter of judgment for the FTT in each case whether it was objectively reasonable for the landlord to have been ignorant of a particular fact, such as whether a selective licensing scheme was in force or whether the number of occupants had increased to the point where licensing was required: Marigold v Wells [2023] UKUT 33 (LC); [2023] PLSCS 31 applied.
The standard of management which was reasonably to be expected of landlords or property managers generally was an important measure of what was objectively reasonable.
As a solicitor (albeit not specialising in housing law) the appellant was better equipped than many landlords to keep himself informed of his responsibilities and of the relevant regulatory environment.
He did not do so and the FTT was entitled to find that he had no reasonable excuse for having managed the flat without the required licence for almost six years.
(2) Under section 44(2) of the Housing and Planning Act 2016 the amount of rent which might be the subject of an RRO had to relate to: (i) rent paid during the period mentioned in the table of offences in section 44(2); and (ii) to rent paid by the tenant in respect of that period.
While the first limitation focussed on the date the payment was made, the second was concerned with the period in respect of which it was made: Kowalek v Hassanien Ltd [2021] UKUT 143 (LC); [2021] PLSCS 110 (affirmed by the Court of Appeal: [2022] EWCA Civ 1041; [2022] EGLR 41) applied.
In determining the amount to be repaid, the FTT was required by section 44(4) to take into account: the conduct of the landlord and the tenant; the financial circumstances of the landlord; and whether the landlord had at any time been convicted of an offence to which Chapter 4 applied.
(3) The seriousness of the offence was a significant factor when determining how much rent should be ordered to be repaid. First among the factors identified in section 44(4) was the conduct of the landlord, which included the conduct which amounted to the relevant housing offence or offences; the more serious the offence, the greater the penalty.
But section 46(3)(a) excluded licensing offences from the five housing offences for which the maximum penalty was mandated: Ficcara v James [2021] UKUT 38 (LC); [2021] PLSCS 43 considered.
The FTT might, in an appropriate case, order a lower than maximum amount of rent repayment, if what a landlord did or failed to do in committing the offence was relatively low in the scale of seriousness, because of mitigating circumstances or otherwise.
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: Williams v Parmar [2021] UKUT 244 (LC); [2021] PLSCS 169, Hallett v Parker [2022] UKUT 165 (LC); [2022] PLSCS 106, Acheampong v Roman [2022] UKUT 239 (LC); [2022] EGLR 46 and Daff v Gyalui [2023] UKUT 134 (LC); [2023] PLSCS 99 considered.
(4) In the present case, had the FTT considered the relative seriousness of the section 95(1) licensing offence and other housing offences, it would have been entitled to regard this as a serious example of one of the less serious offences in respect of which an RRO could be made. There was no indication that it approached the assessment on that basis. In that respect it erred in law.
Accordingly, the FTT erred in principle in its approach to the seriousness of the appellant’s offence and its error was amplified by its irrelevant criticisms of the decisions which bound it. Those errors were sufficiently serious to undermine the FTT’s decision and to require that it be set aside.
(5) It was an important part of the Upper Tribunal’s function to promote consistent decision making. Each case was different and the decision maker had to exercise their own discretion.
But the pattern of decisions in other cases was a necessary point of reference and a relevant factor to which regard should be had: Williams v Parmar, Hallett, Aytan v Moore [2022] UKUT 27 (LC), Simpson House 3 Ltd v Osserman [2022] UKUT 164 (LC), Dowd v Martins [2022] UKUT 249 (LC), Hancher v David [2022] UKUT 277 (LC); [2022] PLSCS 172 and Irvine v Metcalfe [2023] UKUT 283 (LC) considered.
Had the offence been committed for a much shorter period, the penalty would have been equal to 50% of the rent, but the effective operation of selective licensing schemes depended on landlords keeping themselves properly informed and a prolonged failure to obtain a licence merited a higher penalty.
Accordingly, the FTT’s decision would be set aside and an order substituted that the appellant pay the respondents £4,320 each.
The parties appeared in person.
Eileen O’Grady, barrister
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