We bring you two interesting reports from the world of Rent Repayment Orders. Briefly, these stem from a power under s73 and 74 of the Housing Act 2004. These sections allow a Residential Property Tribunal to award a tenant or local authority the return of rent or housing benefits where the landlord has been operating an unlicensed HMO.
Legislative Context
The provisions are a little different. For tenants the Landlord must have been convicted of operating an unlicensed HMO or the Local Authority must have already obtained an order for the return of Housing Benefit and, after this has occurred, the tenants may then apply for the return of rent for the period of 12 months preceding the date of their application to the RPT. The RPT should award such sum as they consider reasonable. For Local Authorities their is no need to wait for a conviction and they can apply directly to the RPT for the return of benefit for the 12 months preceding the service of a notice to the landlord informing him that they propose to take action. They are also entitled to the whole sum of the Benefit payments back, there is no assessment by the RPT.
Clearly the system does more for Local Authorities than tenants and, in practice, tenants often find it hard to recover a substantial sum of money because by the time a prosecution has been completed they have been out of the property for some time. In addition the RPT is extremely variable about its level of reward with variations in decisions from £5 up to 100% of the rent.
RPT
Context over, the first case of note is an RPT decision which appears to be an award of the largest ever sum on a rent repayment order. We have limited details (and should thank 24dash for the information) but the award is for £39,000 and follows on from a conviction for failure to licence in Highbury Magistrates Court in June 2012. Disturbingly, in the comments section of the story is a comment by someone stating that they were the tenant who obtained the order, doubting their ability to recover money, and asserting that the property is still being used unlawfully.
We also believe that this is the largest ever RPT award but anyone who knows different or who has more information on the case please get in touch.
Upper Tribunal
As if the above was not enough, our Rent Repayment river has burst its banks with the further downpour of an Upper Tribunal decision on the same topic. We think this is the first one and as Upper Tribunal decisions are binding on the RPT it is likely to be important.
Parker v Waller & Ors [2012] UKUT 301 (LC) is an appeal against a Southern RPT decision to award 100% of the rent for the 12 months preceding an application by the tenants, some £15,423.63.
The facts are fairly simple. P was the landlord of a property in Southsea. He failed to obtain an HMO licence. He was convicted in his absence of the offence of failing to licence and HMO under s61, Housing Act 2004 on 15 November 2010 and was fined the, surprisingly small, sum of £525 plus costs. P applied for a licence on 21 January 2011. The tenants duly applied to the RPT for repayment orders in February 2011 and the RPT awarded them the entirety of their rent back for the various periods they had lived in the property. The RPT specifically stated that they “found no reason to limit the repayment orders to less than the full amount”.
P appealed. Permission was granted by the UT specifically because of the quote above on the basis that this was an improper use of the discretion of the RPT. Their role was not to start from the maximum and then find reasons to limit it.
At the appeal P made several arguments:
First, he asserted that the period for which the Repayment Order was made should not commence earlier than the date of conviction. He was of the belief that the property was licensed and was unaware that he was committing an offence until he had received the notice of conviction. P accepted before the RPT and UT that he should have defended the matter if that was his contention but pointed to difficulties in his personal and business life which had meant him leaving the matter.
Second, the RPT was wrong to ignore the condition of the property and award the full sum. It was not in disrepair and the tenants had arguably suffered no loss. His financial circumstances had not been considered by the RPT and neither had the relatively small fine. The RPT had not made any specific findings of misconduct in his part and the purpose of repayment orders was not to create a windfall payment to tenants.
W countered the second argument at the RPT and again before the UT. He pointed out that the property had been the subject of HHSRS notices from the Council and that he had been rehoused due to disrepair. He pointed out that P was the director of a firm of local Lettings agents and therefore had no excuse for not being fully aware of the law.
This is where it gets complicated. The UT had little choice but to embark on a consideration of the purposes of Rent Repayment Orders. In the absence of sufficient information in the rather convoluted legislation reference was made to the Hansard and in particular to the comments of Lord Bassam at the time the provisions were introduced. I am going to spare you this discussion and skip to the conclusions of the UT.
- The repayment order provisions are penal in nature. Therefore the RPT must be satisfied that it has considered all the factors set out in the legislation, any other material factors, and it must be certain on each case that there is a clear entitlement on behalf of the tenant to the money;
- In the case of tenants the landlord will already have been fined by the magistrates in most cases. Therefore the RPT must take this into account and consider the total amount that will be paid by the landlord. It is accepted that this may create an unhappy tension between the fine and RRO. The RPT should have regard to the fine awarded by the magistrates Court as against the maximum fine level of £20,000 and should consider this is a reflection of the seriousness of the offence. However, the RPT is entitled to come to a different view on seriousness from the magistrates;
- There is no presumption that a Repayment Order should be for the full sum paid during the relevant period. The RPT must take an overall view of what is reasonable.
- The total length of the offence is relevant when considering the seriousness of it;
- The fact that the tenants have had the use of the property during the order period is not relevant or is a minor issue. It is the essence of the provisions that the tenant should have rent returned. Therefore the tenant will always obtain something of a windfall. Reduction in this regard should only be made if the tenant has been guilty of some misconduct.
- Utility payments which are included in the rent can be included in a Repayment Order as they fall within the ambit of the legislation. However, they should only be included in the most serious cases;
- Conduct and financial circumstances should be considered by the RPT. However, a property professional should expect to be dealt with more harshly.
Turning to the particular facts of the case the UT held that the RPT had been wrong to assume that the period of payment should end with the date of the tenant’s application. They had not in fact had enough information on this point to come to any settled conclusion. However, the UT considered the payment period ended on the date that the license application was made, that was 21 January 2011. However, the UT stated that P was “clearly wrong” in asserting that the payment period could only begin from the date of his conviction. He was clearly committing the offence prior to that date. However, the RPT again made a mistake in failing to find precisely when the period commenced. The RPT was wrong to take as its starting point an award of 100% rent to the tenants and then consider whether that should be reduced. It should make a reasonable award taking into account the relevant factors. Repayment Orders for occupiers should be contrasted with those for Housing Benefit. The RPT was again wrong to ignore P’s financial circumstances, his payment of utility bills, and the seriousness of the offence, they must weigh all material considerations. Finally, the RPT were not wrong to refuse to order salted or staged payments as they had no power to do so.
Appeal allowed. The UT remade the decision itself and reduced the sum awarded to the tenants to 75% of the rent for a shorter period ending with the date of the licence application.
It is worth noting from the further comments on this case that the RPT are therefore required to make clear decisions on:
- That the offence was committed, simple in most situations;
- What the start and end dates of the payment period are with reference to the application dates and the offence dates;
- How serious the offence was;
- The appropriate amount to award taking into account all material factors;
- Whether the tenant’s conduct means that a deduction should be made.
This is a pretty thorough and detailed decision. It clearly sets out how the RPT should consider and calculate Repayment Orders. I would expect this decision to come to characterise how RPT repayment order decisions are made in future.
The Parker case is interesting and must make it likely, I suppose, that the amount awarded in the Camden students’ case could be successfully appealed.
Though you indicate that “75% of the rent for a shorter period ending with the date of the licence application” was ordered by the Upper Tribunal in the Parker case, it was actually 75% of the profit made by Mr Parker that was ordered minus the amount he had been ordered to pay at the conclusion of the prosecution.
The judge calculated the profit by deducting costs paid out by Mr Parker (including council tax and electricity). The only costs he did not deduct were Mr Parker’s purported mortgage costs as he seems to have thought that Mr Parker had an unreasonably large mortgage recently taken out on the property.
The judgment suggests that if the mortgage costs are in line with the mortgage taken out when the property was purchased then they would be reasonably deductible from the rent before a profit figure is produced.