For some reason, a whole tranche of First tier Tribunal decisions on rent repayment order applications have just shown up on Bailii. Collectively, they confirm that should you wish to take a journey through the 9 circles of the hell of the private rented sector, rent repayment order decisions are a good way to find displayed what Dante tells us are the three conditions of sin – incontinence, vice, and brute bestiality.
Let us start with incontinence (encompassing, greed, gluttony and avarice).
The applicant, Ms McDermott sought a rent repayment order for 1 April 2019 to 31 August 2019. The respondent, Arshad Ali, did not attend the hearing and played no part. Mr Ali owned the property. Neither did the letting agent, City Move Estate Limited (but not named as a respondent). The property was a four bedroomed flat, occupied by five people during the relevant period and, from 1 April 2019, subject to LB Tower Hamlets additional licensing scheme. No licence was obtained or applied for. Ms McDermott had been given a ‘licence agreement’ for a ‘house share licence’ by City Move Estates, which described CME as ‘an investment company in possession of the property’ and which did not identify the landlord.
No defence of reasonable excuse was advanced by the respondent. The Tribunal found that he was the person entitled to receive the rack rent, and:
Further under the provisions of s263(3)(b) he is the person managing the Flat as he would have received the rent but for having entered into some form of agreement with CME by virtue of which that company received the rent. We cannot envisage an arrangement whereby the respondent would have allowed CME to rent out the Flat without some financial recompense.
Rakusen v Jepson borne in mind.
So, Arhsad Ali had control or management of an unlicensed HMO. No deduction in award from the full rent was made. RRO of £3280 plus £300 application fee made.
This will not be the last dodgy rent to rent/agent setup in this post, nor the last sham ‘licence agreement’.
The applicant, Joseph Cutts, represented by an officer of LB Tower Hamlets, sought an RRO against the landlord, Mohammed Jalal Ahmed, in respect of an unlicensed HMO – a four bedroom flat with four tenants, which was subject to LBTH’s additional licensing scheme from 1 April 2019. No licence application was made until 3 October 2019.
The landlord did not attend the hearing, but had made submissions that he had:
entered into an agreement with Signature Properties to “let and manage on my behalf”. He says that they were advised that the letting should be to one family. The respondent goes on to say “I was generally aware that on occasions they did use other agencies to assist them in letting properties if they were unable to let the property within 14 days.” The respondent says that this is what happened and agents called Flintons were engaged. (In the documentation Flintons appears to be (or to have been) a trading name of a company called Flat Sharing of Bow Common Lane E3).
The Tribunal was not taken by this mitigation:
Signature was contractually bound to pay the respondent rent of £2000. Flintons entered into an agreement with Signature on much the same terms but could let for a greater sum and to “tenants”. In fact, the rent paid by the applicant was £715 per month. If four tenants paid that amount then the monthly rent was £2860. The Tribunal was not persuaded by the written evidence from the respondent. It seemed to the Tribunal that the respondent should have known what was occurring at his property and was aware that other agents might be involved.
Following the Upper Tribunal decision in Goldsbrough and Swart v CA Property Management Ltd and Gardner (2019) UKUT 311(LC), the respondent was in control of an unlicensed property. RRO made, in view of Vadamalayan v Stewart and Others (2020) UKUT 183 (LC) on the full rent starting point, for £4163.50 – after a £150 deduction for utility costs.
On the landlord’s conduct, the Tribunal said:
The landlord should have licenced this property but did not. This is a significant factor when assessing the amount of the rent repayment order. The claimed ignorance of the actual conduct of the ‘rent to rent’ arrangement that evolved here speaks to a lack of oversight and curiosity by the landlord which in our view also amounts to poor conduct. The applicant also described a number of disrepair and management shortcomings which compounded such an unsatisfactory situation.
Furthermore, there was a distinct lack of engagement with the Tribunal on the part of the respondent exemplified by his failure to attend the hearing or provide an explanation for his failure to attend or to send a representative on his behalf. The failure to assist the Tribunal In this way is aggravating conduct.
The applicant, Ms Nocula-Giza, sought an RRO for a failure to licence an HMO. Arun District Council had attended the property and found it to be operating as an unlicensed HMO. The landlord, Magdelena Holubowska, had not given any written tenancy agreements. She claimed that
a Romanian friend had rented the flat from 10 January 2020 for six months. She had agreed to be a guarantor under the tenancy agreement. The friend lived at the property with three others from Romania, all working as builders, but when they lost their jobs as a result of the Covid lockdown all four left the UK. This left the Respondent liable for the rent, which she said was £1050.00 per month. When the Tribunal asked to see a copy of the tenancy agreement, the Respondent said she didn’t have one. She did not know who owned the property.
The Respondent said she panicked and decided to rent the flat out herself. She advertised on Facebook. She accepted what the Applicant had told the Tribunal about the occupiers and that she did not have, or apply for, a HMO licence. She said that she paid the rent for the flat from March 2020 onwards until she gave up the flat on 8 October 2020, and that she also paid the Council Tax and water bills.
She claimed to have made no profit.
The Tribunal was not impressed:
As regards the landlord’s conduct, in the view of the Tribunal the Respondent’s actions have been, at best, highly irresponsible. She decided to rent out rooms at the flat without having any apparent authority to do so. No written tenancy agreements were provided. She had prior experience of renting properties but produced no evidence that she did anything at all in terms of complying with the legal requirements placed on all landlords e.g. in respect of gas safety. She provided the Tribunal with a narrative, seeking sympathy, but chose not to provide a single item of written evidence to support anything that she said. The Tribunal does not believe that the Respondent let out rooms in a panic and only wanted to cover the outgoings. A reasonable person who found themselves liable for four months’ rent as a guarantor would have mitigated their loss by asking the head landlord/ agent to re-let, and, if that didn’t work, by ending the tenancy at the first opportunity at the end of the initial 6- month term. Instead she saw the property as an opportunity to make money, and only gave it up shortly after the Council discovered it was an unlicensed HMO.
RRO of £1448 – the full rent – and payment of £300 application fee ordered.
The applicants, Athina Ofosu and Samuel Amoako, sought an RRO for a failure to licence an HMO against the landlord Kwaku Bawuah Asare-Konadu.
The applicants were tenants of one room and shared kitchen and bathroom with three other households in the flat. The respondent was joint owner, but was the only name on the tenancy agreement. LB Lewisham stated that a) there had been an additional licensing scheme since 11 Feb 2017 and b) a notice of HMO Declaration under s.255 Housing Act 2004 had been issued on 10 August 2018. No HMO licence had been applied for as of 30 April 2020. Lewisham had issued a civil penalty notice.
The landlord asserted that on 6 January 2020 he had made a licence application with the help of a Lewisham officer at their offices and tried to pay the fee on 31 January 2020. He thought the application had been accepted as Lewisham had taken no further enforcement action. Lewisham said the fee payment had bounced so the application was not valid and they had told the landlord this on 30 April 2020.
The Respondent stated emphatically that he had been expecting a reply within about two weeks. Despite the fact that he is potentially subject to criminal sanctions and has not seen any return on his payment of £2,000, his only action in the 13 months since has been to make one phone call in which an officer, whose name the Respondent does not know, simply promised to write. This is not credible.
In the Tribunal’s opinion, it is far more likely that Lewisham did communicate to the Respondent that his payment had failed and the absence of communication since that time is because Lewisham have left it to the Respondent to remedy this and he has chosen not to do so.
The landlord’s conduct in failing to carry out repairs, failing to protect deposits, and failing to pay ‘inclusive’ utility bills merited an RRO at the full rent, with a deduction of £40 per month for utilities.
RRO of £7360 and application fee of £300 made.
The applicants, Emmanuel Lamson and Ken Uzuegbuna sought an RRO against the landlords Lucy Nana Yaa Barnes and Kayode Clement Ayotunde for an unlicensed property. The respondents (by Ms Barnes) admitted the property should have been licensed and that a licence had been applied for on 22 June 2020, the end of the period for which the tenants claimed.
The rent under the tenancy agreement was £1200 per month. Ms Barnes then immediately demanded that a new tenancy agreement at £1450 was entered into. Two months at £1450 were paid, then the tenants paid £1200 thereafter. At one point Ms Barnes had unlawfully excluded the tenants from the property.
Ms Barnes defence was that she hadn’t know the property had to be licenced and she had applied as soon as she had been made aware.
The Tribunal rightly found that this was not a defence. Further, her behaviour was unacceptable at times and verging on harassment. No plea of financial hardship had been made. RRO ordered at the full rent, less a county court judgment sum in respect of the deposit, for £6,400.
Then we turn to vice, which includes fraud….
The applicant tenant, Jacob Jewitt-Jalland sought an RRO against the immediate landlord, Nest Estates Limited, in respect of an unlicensed HMO. Mr Jewitt-Jalland had signed a ‘licence agreement’ for a room in a terraced house with 5 bedrooms (one converted from the living room). Rent was £625 per month, with a deposit of £721 and an ‘administration fee’ of £150. The superior landlord, Jan Ahmad, was perhaps fortunate that Mr Jewitt-Jalland did not seek an RRO against him as well, as an RRO had been made against both Nest and Mr Ahmad in respect of another of the tenants in 2020.
The respondent, in the person of Mr Rizwan Alam, director of Nest Estates, made a last minute application to adjourn the hearing on the basis that the company could not pay for legal advice. This was refused. The respondent did not attend the hearing.
The Tribunal found:
a) the ‘licence’ was a sham and this was a tenancy.
b) The respondent had control of the property (as would the superior landlord, Mr Ahmad) and managed the property
c) the offence had been committed
d) as the licence was an artificial transaction to conceal the tenancy, there was no justification for the administration charge, the deposit should have been protected and returned to the tenant, and complaints of disrepair had been ignored, the landlord’s conduct merited an RRO of the full rent paid. There should be no deduction for the £4000 financial penalty imposed by LB Wandsworth.
RRO of £3,125 and £300 application fee made.
The applicants, Matthew Anderson, Clara Labaste, Victoria Valderrey and Elodie Gaillard, sought an RRO against the landlord, Gemma Jane Constance Aldridge, for a failure to licence an HMO. The property was a two bed flat, with the living room converted to a third bedroom, with a shared kitchen, bathroom and toilet. It was subject to additional licensing by LB Hammersmith & Fulham.
Ms Aldridge had leased the property to Estate Student Ltd to sub-let the property.. At some point, Estate Student Ltd entered an agreement with DMCK Rooms. The status of DMCK was unclear. It appears to have been managing the property for Estate Student, and had the same registered address.
The tenants had entered ‘licence agreements’ for their rooms, which were counter signed by DMCK, said to be ‘personal agreements’. During the course of the agreement with Ms Aldridge, Estate Student changed its name to Dammack Properties Ltd. It then purported to terminate the agreement, stopped paying rent and stopped responding. It is now in voluntary liquidation.
Ms Aldridge defended on the basis that she as not in control of or managing the property. She was not receiving the ‘rack rent’ for the property as she was receiving less from Estate Student than they were getting in rent from the sub tenants and she had no knowledge of DMCK.
The Tribunal held:
The tribunal accepts the evidence of the respondent that she was unaware of the existence of DMCK Rooms.
The tribunal accepts the arguments of the applicants that the respondent was in receipt of a rack rent for the premises and is in control of the property.
Whilst the respondent does not receive 2/3 of the rent paid by the applicants, the tribunal accepts that more than one rack rent may be paid in connection with a property.
The respondent is the long leaseholder of the property and received rent She is therefore also a person who manages the property.
On the landlord’s ‘reasonable excuse argument:
Although the tribunal accepts that the respondent was not aware of the details of the letting arrangements it has two concerns. First, property owners cannot avoid legal responsibility by failing to engage with the realities of letting arrangements even when they have put intermediaries into place. Second, the evidence demonstrates that the respondent knew that licences would be used in the property and was prepared to allow their use. Clause 7 of the contract with Estates Student Ltd makes this clear. Whilst licences may be appropriate in some circumstances, they are often shams disguising that the reality of the arrangement is a tenancy. They can be indicative of exploitation of people’s ignorance of the law. The use of licences should have alerted the respondent to the need to be vigilant in the legal arrangements for the property. This did not happen.
RRO of the full rent made. The Tribunal had particular concerns about the management of the shared property and the ‘licence agreement’. Ms Aldridge had provided no evidence of her financial position. RRO of £22,532.86 (apportioned) and £300 application fee made.
And then there is brute bestiality, including, for our purposes, illegal eviction
The applicant, Johnathan Jones, applied for an RRO on grounds of lack of licence and illegal eviction. The respondent Rachid Lourradi (also going by Fawzi ) did not respond to the application and did not attend the hearing.
There was a lot of evidence that the applicant had exclusive possession of room 2 at the property. He had been given a tenancy by SB Lets Ltd but there was no tenancy agreement and the landlord was not named. Rachid Lourradi had sent a text demanding the second month’s rent and giving details of a bank account, and SB Lets had referred issues about repairs to ‘Fawzi’ at Rachid Lourradi’s email address.
The respondent had demanded all tenants move out with 4 weeks notice by whatsapp message on 11 November 2019 for works to be done. The applicant refused, citing the legal requirements for terminating his tenancy and reported to the council and police. On 18 December 2019, the respondent changed the locks and left some of the applicant’s belongings in the lobby.
The flat had had at least 5 occupiers during the tenancy. The council had emailed the property owner on 18 November 2019 about making a licence application. An E Barakat replied saying the property was not an HMO and it had been let to Rachid Lourradi for the last two years.
The Tribunal found a) there was an illegal eviction, and b) it was an unlicensed HMO. RRO of the maximum amount of £7200 made.
The applicant. Thomas Lascar-Awolesi, sought an RRO against Mr S Ahmed, the respondent, for illegal eviction and failure to licence.
The applicant had a tenancy of a small room at the property, which had been converted into 7 rooms. He admitted that he was in arrears of rent at the end of the tenancy on 28 April 2019. He asserted that he had been illegally evicted. The applicant went on to say that he accepted that the failure to licence was an honest mistake as there was a selective licence, but not an HMO licence.
The respondent argued that the failure to obtain an HMO licence was a genuine mistake and the applicant had said he was moving out.
The Tribunal found, on licensing and eviction:
We can criticise the landlord to not understanding or knowing the correct regulations pertaining to his property, and the apparently non-professional way in which he approaches his management. It might be prudent for the landlord to take some professional advice in relation to the management of residential properties.
An RRO was made. The landlord was naive and, in part, had made an honest mistake. The award was 50% of rent paid – £1,413 and repayment of fees paid.
If there are common themes here – and there are – then it is ‘rent to rent’ set ups. Our rule of thumb here-abouts is that unless the ‘lease to sub-let’ deal is with a substantial body (Council, housing association, well established and well funded agency), then it is likely to mean dealing with incompetents, shysters, or fraudsters (or all three). The RRO cases here do not do anything to change that view. The lessons are:
i) If you are a property owner, do not enter a ‘rent to rent’ agreement, unless you want to be on the hook for thousands of pounds.
ii) Landlords that enter rent to rent agreements are remarkably lazy and blind to their own interests (assuming they aren’t silently complicit with what is then done).
iii) This ‘licence’ nonsense has to stop. These are not licences, these are tenancies. Those peddling licences are – as above – incompetent, shysters or fraudsters.
But there is a serious legal point at issue in this. The Upper Tribunal decision in Rakusen v Jepson (our note here) that allowed RROs against the superior landlord if they were receiving a rack rent for the property underlies most of these decisions. It is under appeal to the Court of Appeal and due to be heard in July 2021. If anything, many of these cases show why the Housing and Planning Act 2016 changes on RROs make sense if it means going against the superior landlord. It means casually handing over the property to shysters without any check or responsibility is to be avoided and deterred…