16/08/2020

Rent arrears and RROs.

Awad v Hooley CHI/21UD/HMG/2020/0003 5 August 2020 (link to PDF)

This is a First Tier Tribunal (Property Chamber) decision on an application for a Rent Repayment Order (RRO), which unusually deals with the issue of the tenant’s rent arrears.

Ms Awad was the tenant of a property in Hastings from 12 June 2017. Ms Hooley was the landlord. Hastings BC had adopted a selective licensing scheme in October 2015 for an area that included the property, requiring all private landlords to be licensed. Ms H did not obtain a licence, and did not apply for one until 12 February 2020.

Ms A applied for an RRO on 14 February 2020. Prior to that, in October 2019, Ms H had brought a possession claim for rent arrears. A possession order was made in January 2020 and judgment for £8,118.08 arrears,, but this was set aside by consent in February 2020 on Ms H acknowledging the section 8 notice had not been served properly.

Ms H sought a repayment of rent for the specific period 4 December 2018 to 11 July 2019, for what turned out to be some £7184. This is a little over 7 months. An RRO can be sought for a period of 12 months. It is relevant for what follows that the period sought for the RRO was a period when Ms H did make the most payments towards rent (not including housing benefit). At the start of the period sought, Ms H was in arrears of £3,132.95 (as found by the Tribunal, after much analysis of various payments), and after the period sought, arrears had risen to some £10,000 by the time of the RRO application, and increased again since.

The Tribunal’s starting point, as per Vadamalayan v Stewart and others (2020) UKUT 0183 (LC) (our note), was that section 43 Housing and Planning Act 2016 meant the full rent for the claimed period (less any housing benefit/UC)

However, the Tribunal assumed standard accounting practice would apply, such that any payments by Ms A would first have been applied by Ms H to the outstanding arrears, before being allocated to the current rent. On this basis, the payments by Ms A during the period claimed would first have been applied to the arrears of £3,132.95.

Section 44(3) confirms that the maximum the Tribunal can order a landlord to repay is the rent paid in respect of that period (emphasis added). As rent arrears had accrued prior to the Relevant Period, the Tribunal is satisfied that it would be standard accounting practice for any landlady/landlord or council/housing association to apply any payments made during the Relevant Period firstly to any arrears that had accrued prior to the date of payment. Therefore because of the accrued rent arrears, the Tribunal found that any payments actually made by Ms Awad in the Relevant Period should be treated as being made in respect of earlier periods when rent had not been paid, before being applied to the rent due during the Relevant Period. This required the Tribunal to make a determination of any rent arrears as they stood at 3rd December 2018.

The amount for an order was reduced initially to £4,201.09 accordingly.

Then the Tribunal turned to the conduct of the parties. With regard to the landlord, Ms H, the Tribunal found:

the Respondent a well-meaning and naïve landlady who foolishly failed to obtain advice about her legal obligations, in consequence of which she failed to comply with the Council’s selective licencing requirements. She had tried to befriend and assist her tenant (and others living with the Applicant), has tried to provide a decent home and to comply with her repairing obligations but was ineffectual in her management of the tenancy. The Tribunal finds there to be no adverse conduct on the part of the Respondent over and above her failure to obtain a licence and EPC prior to letting the property in June 2017.

On the other hand, with regard to the tenant:

The landlord’s representative had raised a number of accusations against the tenant, but most of these were unevidenced, not relevant or raised at the last minute when they could have been raised by the representative before the hearing, so were not made out or of limited weight. However, the evidence on the tenant’s failure to pay any rent since July 2019 was a “deliberate, persistent and very substantial breach of the terms of the tenancy agreement”. Ms A had failed to provide requested evidence on her assertions of housing benefit and benefit cap difficulties, despite being represented. At th date of hearing, the arrears were £15,538.32 and there was no evidence that Ms A had taken any steps to reduce them.

In view of the conduct of the parties, the RRO award was reduced by 75%, to £849.19.

Comment

Section 44 Housing and Planning Act 2016 provides that:

(1) Where the First-tier Tribunal decides to make a rent repayment order under section 43 in favour of a tenant, the amount is to be determined in accordance with this section.

(…)

(4) In determining the amount the tribunal must, in particular, take into account

(a) the conduct of the landlord and the tenant, (…)

So it is clear that tenant conduct can be taken into account. We have previously seen the FTT go completely off piste, (and breach natural justice) when considering tenant conduct, but this decision – and it is just an FTT decision, so not even binding on another FTT – raises two specific questions.

  1. Can the ‘accounting set off’ of rent paid against past arrears be taken into account in determining rent paid during a set period? My view, for what it is worth, without express hypothecation of the use of the payments by the tenant, this can be done. Assigning payments to arrears initially is indeed a standard practice.
  2. Can the tenant’s conduct after the period claimed for be taken into account? This I will say I am less convinced by. This may well the need the Upper Tribunal to decide. After all this could impact on both landlords and tenants. My sense is that the wording of s.44(4) is by implication restricted to the period of the offence and of the RRO claim. If it isn’t, then FTTs could happily consider the landlord’s subsequent failings and behaviour in determining the amount of an RRO, as well as the tenant’s.
Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.

1 Comment

  1. Ben Reeve-Lewis

    Whilst I get Fallon v. Wilson arguments about the behaviour of tenants I’m always surprised that the law considers this in response to actions of rogue landlords. It is quite normal, for instance where a deposit is unprotected or is simply a tenancy type not requiring protection, for a tenant to take the practical route and withold rent to make sure they get their money back, which law aside, any sensible person would do

    Yes a tenant isnt allowed to withold rent but in real terms how are they really going to get their money back outside of a self generated court case against someone who isnt going to pay them anyway?

    Same with PFEA prosecutions where the courts take into account the behaviour of the tenant. It seems that a landlord can keep punching a tenant in the face but in order to get justice, their response must show the forbearance of Gautama Buddha. As a working TRO I have regularly been talked out of a PFEA prosecution by the council’s legal team if the tenant had the temerity to shout back at the landlord in response to a beating.

    Reply

Leave a Reply (We can't offer advice on individual issues)

This site uses Akismet to reduce spam. Learn how your comment data is processed.