Our grateful thanks to Alasdair McClenahan of Justice for Tenants for a copy of this decision and his notes.
Mrs Elanga Longane et al v Frank Mukahanana and Wealth Harbour Consulting Ltd LON/00AH/HMG/2018/0002 (Copy of decision)
This FTT decision on a rent repayment order application raises a couple of interesting issues.
First, when is an application for a licence actually made by a landlord.
Second, who should a rent repayment order be made against where the ostensible landlord is a company, but the property is owned by the sole director of the company.
The joint tenants of the property had an assured shorthold tenancy starting on 15 July 2017. Under the tenancy agreement, the landlord was said to be Wealth Harbour Consulting Ltd. It was signed by Mr Mukahanana on behalf of WHC. Rent was paid the the managing agent, Hamptons International.
The property was within Croydon Council’s selective licensing area. The property was not licensed and apparently no application taken by Croydon until 14 August 2018, which was a month after the tenants had left, on 14 July 2018.
The tenants brought an application for a rent repayment order under s.42 Housing and Planning Act 2016, against both WHC and Mr Mukahanana.
The landlord didn’t attend, but in written submissions ran two lines of defence.
A licence application had been submitted in July 2017, but they had been unable to pay the fee due to problems with Croydon’s payment system. They had been signed up to the council’s mailing list in respect of private rented property licences, so thought the application was made. When they contacted the council in February 2018 they were told it would be some time before the council processed the application. They were told in August 2018 that no fee had been taken when the application was made. This amounted to a defence that the application had been made (s.95(3)(b) Housing Act 2004) or under s.95(4) that they had a reasonable excuse for not completing the application, and it was for the applicants to show, to the criminal standard, that it was not reasonable.
They also said that WHC was the landlord, not Mr M.
The Tribunal found that there was no application made, or reasonable excuse for not completing the application.
In line with s.87(3) Housing Act 2004, the Council did not accept that an application had been made until the required fee dad been paid. So, no application had been made, as it was not complete.
There was no ‘reasonable excuse’. The automated response to the initial licence application stated “if you paid for your licence using credit or debit card, you will receive a receipt separately to this email. This receipt will only be received and your application processed once your payment has been processed’. The landlord was therefore on notice that payment had not been received and the application not processed.
On the issue of ‘who is the landlord?’:
The applicants had argued that Mr M might be using WHC to circumvent the legislation, as an award against WHC only might just see WHC liquidated. More cogently, the applicants argued via s.251 Housing Act 2004 that an award should be made against Mr M on the basis that an offence had been committed by a body corporate with the consent of or connivance of, or attributable to any neglect on the part of a director of the body corporate, such that the director personally as well as the body corporate commits the offence.
However, the FTT took the view that the issue was not just who had committed the offence, but who is the person against whom an RRO should be made – the ‘appropriate person’ under s.96(5) HA 2004, which, under s.96(10) is defined as ‘the person who at the time of the (rental) payment was entitled to receive that payment on his own account’. S.251 did not widen the meaning of ‘the appropriate person’.
But, given that s.40(1) of the H&PA 2016 conferred power on the FTT to make an RRO where a landlord had committed a relevant offence, the RRO needed to be made against ‘the landlord’.
So, who was the landlord?
While WHC was named as the landlord in the tenancy agreement, there was no evidence that WHC had any property interest in the property. Mr M and Susan Mukahanana jointly owned the property and there was no evidence put forward of any lease to WHC. As WHC had no interest, it cold not be more than the agent of the landlord.
The RRO could therefore be made against Mr M as (one of two joint) landlord. Susan M had not been named in the application so no order could be made against her, but as the porperty was held jointly, Mr M was liable in full for any order.
The amount of the RRO – it could only be for the period of 12 months for the period prior to the application having been made. The application was made on 2 October 2018. The tenancy had ended on 14 July 2018. So the relevant period was 2 October 2017 to 14 July 2018. The rent for that period was £21,211.64.
(Note added 28 September 2019 – this decision dated from January 2019. There was a widespread issue with FTTs stating that the 12 month period was the 12 months back from date of application. This is not a correct interpretation. See this FTT appeal decision on the point from May 2019. The correct interpretation is that an application must be made within 12 months of the end of a relevant offence being committed, but the RRO can be for up to 12 months rent for the period of the offence. In this case, that would have been for the full July 2017-July 2018 period.)
The was no presumption that the RRO should be for the total amount of rent received, but rather such amount as it considers reasonable in the circumstances’. There was no conviction against the landlord and, licence aside, the landlord’s conduct during the tenancy was at ‘the better end of the scale’, the order was for repayment of 20% of rent – £4,242.33
Comment
On the ‘who is the landlord?’ point, it is of course entirely possible for a property owner to set up a company to be landlord, precisely to avoid personal financial liability for any breach. It doesn’t matter if the property owner is the sole director and shareholder. Absent fraud, this is legitimate. To that extent, the argument on that point raised by Justice for Tenants for the applicants really doesn’t go anywhere.
Moreover, we know from Bruton v London & Quadrant Housing Trust (1999) UKHL 26; (2000) 1 AC 406 that it is perfectly possible for a landlord to grant a tenancy that exceeds their own interest in the property, so it would not be necessary for WHC to have a lease of the property to be the landlord.
However, as there was no evidence of any interest being granted to the company at all, even to the extent of a licence agreement, the Tribunal’s decision is probably sound. Nonetheless, it points to what could be a difficult and complex issue in some cases, particularly with the iffy end of the landlord market.
On the amount of rent to be repaid, the Tribunal’s comments in relation to the Upper Tribunal decision in Parker v Waller and others (2012) UKUT 301 (LC), and the relation between the Housing Act 2004 and Housing & Planning Act 2016 suggest that clarification will be needed (see para 53).
We are currently appealing a case involving a very similar problem. The appeal was made on a decision of a preliminary hearing of the First-tier Tribunal Property Chamber (Residential Property) (FtT) regarding who the landlord should be: the registered owners or a ltd liability company. Case is being reviewed by the Upper Tribunal with a decision, we expect,in October or earlier. Flat Justice CIC. More details here: https://getrentback.org/blog/2019/07/17/another-week-another-appeal/
It will be interesting to see the result. My initial view ( without knowing the facts) is that the rent to rent landlord would be the one liable.
I don’t understand this in the above posting: “However, as there was no evidence of any interest being granted to the company at all, even to the extent of a licence agreement, the Tribunal’s decision is probably sound.” How so? If the company has no interest why should the Tribunal hold it to be the landlord? as in “They also said that WHC was the landlord, not Mr M.”
The Tribunal didn’t hold WHC to be the landlord. It said that Mr M was. The bit you cite of the post was the argument of Mr M and WHC, not the Tribunal’s finding.
Sorry to be picky, but in Bruton the House of Lords did not decide that a person could “grant” a tenancy going beyond their own interest. They decided that as between the two parties, there was a tenancy (or some might say the same obligations/rights as a tenancy). Kay v Lambeth makes it clear that this “tenancy” does not have any effect beyond the parties. So, whether a company which has no interest in the land is the “landlord” for an RPO depends on what “landlord” means under the statute. It could mean someone who behaves as a landlord or someone who has an interest in the land as is a “landlord” in the conventional sense.
I didn’t suggest (or mean to suggest) that it created anything that had effect other than between the parties. However Bruton concerned precisely whether the Trust were the landlord, as it concerned the landlord’s obligations under s.11 LTA 1985.
The H&PA 2016 is singularly unhelpful on the definition of landlord. It defines ‘residential landlord’ as ‘a landlord of housing’ (s.56). And RROs can be made in respect of an offence “that is committed by a landlord in relation to housing in England let by that landlord” – s.40. So, at least for RROs, it is the ‘letting’ that is key.
I think we agree, at least to the extent that much legislation refers to “landlord” and the legislature seems to think it is blindingly obvious what it means. Or they have taken no care, or don’t care!
In the HA 2004, RROs are against ‘the appropriate person’ defined at s.73(10) as: “in relation to any payment of universal credit or housing benefit or periodical payment payable in connection with occupation of a part of an HMO, means the person who at the time of the payment was entitled to receive on his own account periodical payments payable in connection with such occupation;”
The 2016 Act use of ‘landlord’ instead must have been deliberate, but as you say, it is not necessarily obvious who that is…
Just read an article in Lexology by Robin Stewart of Anthony Gold including discussion of this case which points out “The tribunal’s decision does not address the principle that a tenant is prevented or ‘estopped’ from denying the right of their landlord to grant a lease (see Hill and Redmond’s Law of Landlord and Tenant, Chapter 1 A 4).” which confirms my impression not a case to rely on.
Loathe though I am to disagree with Robin, (colleague, friend and very good lawyer), I’m not sure that flies in this case. The tenants weren’t denying the right of their landlord to grant a lease, indeed the RRO application was predicated on there being a valid tenancy. The claim was also brought against the person who had signed the tenancy agreement. A dispute as to who has actually granted the lease is not a denial of the landlord’s right to grant one.
That said, I’d agree that this is not a decision without issues.
On a landlord not having an interest in a property this was one of the issues in Mann & Anor v Shelfside Holdings Ltd & Anor [2015] EWHC 2583 (QB) (15 September 2015) (on BAILII) which in paragraph 49 summarised the law as
“If the immediate landlord does not in fact own or have any interest in the property which he purports to let then the situation is as follows:
a. The purported tenancy is effective to create the relationship of landlord and tenant between the parties to the tenancy;
b. The contracting parties are estopped from denying the tenancy’s efficacy in creating an estate in land. This estoppel may be “fed” if the purported landlord subsequently acquires the freehold or a superior interest in the land;
c. So far as concerns anyone who actually owns a proprietary interest in the land, the purported tenancy is of no effect.”
citing Bruton
I think the Tribunal went a bit off piste on the issue – it was not so much about whether the company could be the landlord in law, more of a question of the actual identity of the landlord. The applicants were not denying the tenancy per se.
Mann v Shelfside is here – https://www.bailii.org/ew/cases/EWHC/QB/2015/2583.html
It also concerns a tenancy agreement signed by the freeholder, but as director of a company which was allegedly the landlord. I note at 73
WPL would be the landlord and would be the party with whom the First Claimant would enter into the FBT as landlord. This is no more than would usually be the case when a party enters into a lease or tenancy agreement. There is no representation as to WPL’s title beyond that it had sufficient interest to enter into the FBT on the day that it did to grant a valid FBT or any other type of tenancy. This would be so provided WPL had some sort of interest in the property, such as a weekly tenancy or a licence. If and when the licence or tenancy comes to an end then, as a matter of law, the FBT would not be binding on the freeholder.
Which again seems to return to the grantor of the tenancy having at least some interest…
Hi Giles
I have a few general queries regarding Rent Repayment Orders for cases where a property requires HMO licencing and was wondering if you might clarify.
1. I understand since 2016 that a tenant bring claims, can they bring these by themselves or must they jointly do it with a local council.
2. Do all claims need to be brought in the First Tier Tribunal or can they be heard in Part7 or Part8 tracks
3. Is there any defence that a Landlord can rely upon (Novice, Foreign or anything at all really)
4. Is the late registration in itself evidence of the failure (Councils inform tenants when this is done).
Hi Marie. Well you are asking a lot, and you are not going to get it all. Plus I rather suspect you are defending an RRO application.
1. Tenant can make an application without the council
2. It is an application to the First Tier Tribunal. That is the statutory route.
3. There are statutory defences. Novice or foreign are not amongst them.
4. Well yes.
Thanks Giles for taking the time to reply, to be honest I do not know how you find the time, but this whole blog is a credit to you and your firm.
I can assure you my enquiry was for legal academic purposes, I am trying to put together a flowchart similar to your excellent S21 flowchart for both Landlords and Tenants. There is a leaning towards Landlords because I often run and produced courseware for Landlord Training in Local Authorities.
I must confess that I have a daughter planning to start a law degree at university and I have used housing law as a way to introduce her to the subject, albeit that her leanings are more towards international human rights.
I do refer both Landlords and Tenants to your firm as a thank you for what you do. I saw your RRO page “Rent Repayment Orders: I am a tenant; can I get my rent back?” (in link) which seems to be aimed at Tenants and does give some helpful advice, but there does not seem to be an equivalent page for Landlords.
My questions came from your page in the link and a few others, plus from feedback I have had in Q&A sessions.
Mostly they are about mitigation options, in some statutory penalties for failure to comply there can be mitigation and a scale, did they apply in RRO’s to penalty, amount of rent repaid etc.
So far the only defence I have seen is something being beyond their control, clearly ignorance is not as any landlord needs to make sure that they are compliant with the law. Hard to see what could be beyond their control, except maybe an Agent providing a full service but Landlord would still have the obligation.
Most of the people I deal with are on a Council Course, they may be novices or new to licensing either because they do not have it in areas where they own another property, or because they thought they had avoided HMO regulation by keeping it to family members (I remember one had cousins and asked if they counted as a single household).
So any novice Landlord can buy a property for rental, they may have avoided buying a typical HMO property but not realise they need licensing because of the street it is in, or that the number “households” exceeds two, so student lets are a real risk.
When they do find out they often go on the Landlord Course at the local authority (well the good ones anyway), but this does not undo the failure nor does getting the license as soon as they are made aware.
I asked about the First Tier Tribunal because although I know that is the statutory route, I was asked whether one could get a case brought on Part7 thrown out because they did not bring it to FTT. I did not know so I said they should try because chances are the FTT will have more experience in these matters. However, I was not sure if CPR was enough to stop a Court hearing it (on application by LL), especially if they brought it with another (non RRO) claim.
I read that the burden of proof is treated as a criminal offence, but as you have confirmed the paperwork chain provided by the Local Authority to tenants seems to provide that proof.
The timing issue did hurt my brain a bit; I got that the offence must have been committed after 6 April 2017, the question I struggle with is when was the offence committed. Was it upon the creation of the tenancy, or as it is an on-going requirement is it constantly being committed until the license is obtained? Thus being in anytime in the preceding 12 months.
Other queries I have had are
“What happens with an RRO when a tenant does not pay rent for six months but did pay rent to begin with?”
or
“What happens if they abandoned the property after 3 months without giving notice and without break clause but I did not dare rent it because of other eviction legislation, now in month 13 they are coming after me for an RRO”
or
“If a tenant were in substantial arrears but got an RRO can I still go after their guarantors for the arrears”
Of course I refer them to your good selves but I like to be able to give them an idea?
Mitigation is going to be heavily fact specific – FTT is to take into account:
(a)the conduct of the landlord and the tenant,
(b)the financial circumstances of the landlord, and
(c)whether the landlord has at any time been convicted of an offence to which this Chapter applies.
A failure to licence is an ongoing offence. Illegal eviction, say, isn’t.
An RRO must take into account the actual rent paid – Housing Act 2004 s.97(2A)(6)
I don’t think it matters whether the tenant was actually in occupation as far as the making of an RRO goes, but it may well impact on the amount, particularly if tenant not paying rent.
On the guarantor point, an RRO is on rent paid, not rent due, so a judgement call on whether pursuing arrears would increase amount of RRO.