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
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).