Chan v Bilkhu & Anor (HOUSING – RENT REPAYMENT ORDER – amount awarded) (2020) UKUT 289 (LC)

This was an appeal from an FTT rent repayment order decision. The FTT decision was made before the Upper Tribunal decision in Vadamalayan v Stewart and others (2020) UKUT 0183 (LC) (our report) and this appeal succeeded pretty much on that basis alone – the FTT decision was wrong in law in the way the Tribunal had approached the award – but it also involves the UT putting down another firm marker to FTTs on the correct approach to awards in rent repayment orders.

The original application was for rent repayment order due to an unlicensed HMO. The applicant was there for 12 months from 1 July 2018, living there with four others. His rent for the 12 months was £4,482.50. The FTT found that the property was unlicensed for this period.

The FTT award, however, was £1,494.17, said to be a third of the rental profit.

As to the landlord’s financial circumstances, the FTT looked at these in the light of the decision in Parker v Waller, which required it to consider the extent of the landlord’s profit. It recorded the landlord’s evidence that she made mortgage payments of £873 per month, but noted that no documentation had been provided to demonstrate this. It found that the two respondents between them owned approximately 10 properties, two of which were licensed HMOs.

In considering the conduct of the landlord the FTT noted that she had no criminal convictions under the housing legislation; it recorded the tenant’s evidence that she had failed to respond to some minor disrepair issues. It took the view that she is a professional landlord, but that the failure to obtain a licence in this case was an oversight because the local housing authority had not itself imposed any penalties upon her.

The appeal was, as mentioned, on the basis that this decision was wrong in law, given Vadamalayan. The Upper Tribunal agreed.

The appellant appeals on the basis that the order made was inappropriate in light of the authority of Vadamalayan v Stewart. That is manifestly correct.

The order made by the FTT would have been troubling even absent that authority. It is not possible to understand the basis of the FTT’s calculation (the order made was for repayment of one third of the rent, and does not seem to be calculated by reference to the landlord’s profit); and it is not known why the FTT thought that the landlord should retain two-thirds of her profit, on the FTT’s own account of how the rationale for the sum ordered, in view of the fact that the second was found to be a professional landlord.

However, in any event the order made was determined on a basis that had been customary under the 2004 Act on the authority of Parker v Waller, but is unsustainable under the 2016 Act. The respondents, being unrepresented, did not put forward any legal argument to challenge that conclusion, but it is difficult to see how that recent authority could have been challenged.  The Tribunal sets aside the FTT’s order and substitutes its own.

The award had to be assessed on the starting point of section 43(4) Housing and Planning Act 2016

(4) In determining the amount the tribunal must, in particular, 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.

This meant the landlord’s expenses/net profit was not the starting point. The Upper Tribunal went on to consider the s.43(4) factors

Mr Bilkhu then addressed me about the landlord’s financial circumstances. He confirmed that the respondents own nine properties, in addition to their home, which they let out. They have of course suffered financial difficulties in the course of 2020; students went home in March, rent has not been paid, they have had to give discounts to all their tenants and their properties are not fully occupied. The mortgagees of the properties have not been similarly accommodating to them. He stressed that they are conscientious landlords who put in a great deal of time and work in looking after their tenants, often going out to fix faults that turn out not to have been a real problem. They have paid the amount awarded by the FTT to Mr Chan.

Mr Bilkhu did not suggest that the respondents had suffered any hardship in the course of the year of Mr Chan’s tenancy and I am not persuaded that events that have happened later can have a great deal of impact on a financial order made in relation to a period when they were letting out properties and receiving rent without any special circumstances affecting their income stream. The respondents are landlords with what Mr Bilkhu described as a “portfolio” of properties; the repayment of the rent claimed by this appellant is not, in the face of property ownership on that scale and in light of the profit likely to have been made from that portfolio, going to cause particular hardship.

Turning to the conduct of the landlord, there is a dispute as to whether there was a failure to respond to requests for repairs and maintenance, and I make this decision without regard to any allegations about that. However, I do take into consideration that a landlord with a portfolio of properties is to be expected to keep abreast of their professional and legal responsibilities. I do not regard inadvertence as a mitigation in such a case.

However, raised by the landlord on appeal and apparently unremarked by the FTT below or indeed the applicant/appellant, the property was only two storeys, so did not become a licensable HMO until 1 October 2018. That point was unanswerable, so the RRO was for rent in full for 9 months of the 12 month tenancy – £3,361.87

Comment

The UT’s approach is clear, and should be heeded by the First Tier Tribunals.  While noting that while

the statutory provisions do not limit the matters that the FTT may take into consideration; its attention is directed in particular to the matters listed in section 43(4), set out above.

the UT’s own approach is very clearly focussed on the s.43(4) criteria and there would have to be something significant to be taken into account, not a general unevidenced handwaving at ‘hardship’. The FTT has discretion, but the exercise of that discretion has to be clearly reasoned, on the evidence.