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17/07/2022

Rent Repayment Orders in the Upper Tribunal

A few Upper Tribunal appeals on rent repayment orders, in particular on the level of award, conduct and mitigating factors.

Aytan & Ors v Moore & Ors (HOUSING – RENT REPAYMENT ORDER) (2022) UKUT 27 (LC)

We’re late to this one from January 2022, but it is an important initial decision on benchmarking the proportion of rent that a rent repayment order should be made for. There were two joined appeals by the landlords of FTT decisions awarding RROs of 100% of rent.

(There was also a failed appeal ground that not being told by the letting agent that a licence was required amounted to a reasonable excuse defence. This got short shrift:

We would add that a landlord’s reliance upon an agent will rarely give rise to a defence of reasonable excuse. At the very least the landlord would need to show that there was a contractual obligation on the part of the agent to keep the landlord informed of licensing requirements; there would need to be evidence that the landlord had good reason to rely on the competence and experience of the agent; and in addition there would  generally be a need to show that there was a reason why the landlord could not inform themself of the licensing requirements without relying upon an agent, for example because the landlord lived abroad. )

On the RRO amounts, the UT followed Williams v Parmar (2021) UKUT 244 (LC) – the full 100% rent award was for the most serious cases.

On Aytan, there were no serious factors in conduct to be held against either the landlord or the tenants. Such conduct would have to be significant and with evidenced harm. However, the landlord was a property company which owned 9 residential flats in this building. The Tribunal took a serious view of the failure to licence. 85% of relevant rent awarded.

On Wilson, the second case, there was not only a failure to licence, but a failure to comply with fire safety improvement notices. The landlord was a member of the RLA so had no excuse not to be aware of the need to licence. 90% of rent awarded.

Simpson House 3 Ltd v Osserman & Ors (HOUSING – RENT REPAYMENT ORDER – conduct issues relied on by tenants not dealt with by FTT) (2022) UKUT 164 (LC)

This was a large landlord, and where the letting agent was contractually obliged to “ensure that the Landlord complied with all relevant statutory provisions relating to the management and occupation of the property”. The agent admitted it had not done so in respect of the obligation to licence the flat, but the FTT dismissed the landlord’s argument that this was a reasonable excuse. The tenants had complained of elements of the landlord’s conduct, including retaliatory eviction attempts after the tenants formed a union and made complaints.

The FTT had found that there were no conduct issues on either side and made an award of 65% of rent. The landlord appealed (though not on the ‘reasonable excuse’ point and the tenants cross appealed.

 The sole ground of the Tenants’ cross-appeal and the focus of Mr Sprack’s submissions was that the FTT had failed to take relevant matters into consideration when determining the amount of the rent repayment order.  Specifically, it had failed to have regard to the uncontested evidence of Mr MFum concerning non-compliance with relevant fire safety regulations; nor had it dealt with the Tenants’ allegation that the Landlord had mounted a campaign of harassment against them including instructing security guards to conduct surveillance and serving notices terminating their tenancy accompanied by statements misrepresenting what would happen if they did not vacate the flat on the required date.  It was apparent from paragraph 31 of the decision that the FTT had only taken account of ‘good conduct’ issues, which it considered justified a deduction of 35% from the total amount of rent claimed.  No account had been taken of ‘bad conduct’ in the weighing of factors relevant to the amount of the order.

I accept Mr Sprack’s submission.  The absence of any reference in the decision to the alleged acts of harassment suggests either that the FTT did not consider that these were relevant to the amount of the rent repayment order, or (in relation to the suggested surveillance) it did not accept that it had occurred.  But Mr Hadjiioannou’s evidence did not dispute that security guards might well have been observing and filming tenants at the property, including Dr Osserman, because of some suggested concern about access to the roof of the building.  The FTT did not say whether it accepted Dr Osserman’s evidence about what had happened to him or what he had been told by security guard who had been filming him, nor did it say what it made of Mr Hadjiioannou’s explanation or whether what there might have been some innocent explanation for the suggested surveillance. 

The FTT did not mention the section 21 notices or the Landlord’s motive for serving them.  There was no doubt that the notices had been served in response to the Tenants’ complaints.  Although Mr Hadjiioannou said the suggestion that there was an element of “revenge” was “speculation”, his own explanation explicitly linked the decision to terminate the tenancy with the Tenants’ dissatisfaction with the condition of the building: “It was clear that the applicants were not happy with the position at Simpson House, so it was not in anybody’s interest to continue the relationship.”

Nor did the FTT refer to the Landlord’s failure to provide gas safety or energy performance certificates until they became necessary to terminate the tenancy.

In addition, the FTT had misdirected itself as to the relevant legislation, applying the pre Housing and Planning Act 2016 position on factors to consider.

The UT decided to remake the decision itself. The alleged videoing of the tenants could not be decided – the evidence was contested and the FTT had made no finding. However, the landlord had certainly served notice because of the tenants’ complaints

The Landlord had the right to terminate the tenancy under the general law and cannot be criticised simply for having done so; nor can the Tenants be criticised for insisting on repairs being carried out.  Nevertheless, the purpose of the rent repayment order regime is to secure compliance with the law on housing standards, one object of which is to ensure that HMOs are safe and free from serious defects.  For a landlord to respond to legitimate requests by its tenants concerning repairs and the condition of the building by vindictively terminating the tenants’ right of occupation can only deter the making of such requests thereby putting the achievement of satisfactory housing standards at risk.  If such behaviour goes unmarked it may discourage these or other tenants from requesting that repairs be carried out and encourage this or other landlords to avoid their obligations.  For that reason I take it into account.

The Landlord can also be criticised for misrepresenting the consequences for the Tenants of non-compliance with the original section 21 notice; both the Landlord and its agent would have known that a tenant who has not vacated by the date stated in a section 21 notice does not risk forfeiting their deposit or adverse credit scores (provided they continue to pay what is due from them).

The rent repayment order was increased to 80% of rent.

Hallett v Parker & Ors (HOUSING – RENT REPAYMENT ORDER – proper approach – factors relevant to determination of sum to be repaid) (2022) UKUT 165 (LC) (24 June 2022)

The landlord lived abroad and used a letting agent to find tenants (though not manage the flat). There was an additional licensing scheme in Brent from 2015, but this did not apply to the flat until it was let to three unrelated tenants in 2019. No licence was obtained until after a local authority inspection based on tenants’ complaints about repairs. Once the local authority had told the landlord a lcence was required, a licence was obtained. The tenants applied for an RRO.

The FTT rejected the landlord’s defence of reasonable excuse by reliance on an agent – the landlord undertook management himself – and made an award of 100% of rent, stating thatthere were no aggravating or mitigating factors.

The landlord appealed (not on the reasonable excuse point) on the basis that “by failing to give any weight to the matters he had relied on in mitigation of the rent repayment order, the FTT had failed in its obligation under section 44(4)(a), 2016 Act, to take into account the conduct of the landlord.”

The Upper Tribunal upheld the appeal. While it had been difficult for the UT to provide guidance on awards, it was clear that “the purpose of the repayment regime is not compensatory (an unlicensed HMO may be a perfectly satisfactory place to live)” (as per Rakusen v Jepsen (2020) UKUT 298 (LC) ).

As per Williams v Parmar, an award of 100% should be reserved for the most serious cases (at least when section 46 Housing and Planning Act 2016 did not apply).

The FTT had apparently elided ‘reasonable excuse defence’ and mitigation in addressing the isue of the use of an agent. While it was not a reasonable excuse, use of an agent should be encouraged for smaller landlords as the tenants would be likely to benefit. In addition, the agents failure to warn the landlord of the need for a licence when sourcing the three tenants should be considered in mitigation.

It might also have been thought relevant to the issue of mitigation that Mr Hallett is a small landlord, letting out a single property, and that the FTT accepted that he was unaware of the need to obtain a licence.  It was rightly critical of his failure properly to inform himself, especially when he was out of the country for prolonged periods and had “little time for the finer details of management”, but a small landlord who fails, through ignorance, to comply with a regulatory requirement might be thought to deserve some leeway.  In that regard, the fact that the FTT found that property to be “in fairly good condition” is also capable of providing mitigation.  The object of HMO licensing is to contribute to the achievement of satisfactory housing standards.  If a landlord has provided accommodation of a decent standard, despite failing to obtain a necessary licence, the punishment appropriate to the offence ought to be moderated.    

In short, this was clearly not a case justifying the most stringent penalty available to the FTT.  It arrived at that sanction because it assumed that the default order should be for the repayment of the full amount of the rent unless some particularly meritorious conduct justified a reduction.  As I have explained that approach was wrong in principle and for that reason I set aside the FTT’ decision.

The UT redetermined the decision, and awarded 25%.

Comment

The bumpy process of arriving at a quasi tariff in RRO awards continues. The importance of conduct and mitigating factors continues to rise. The baseline for a simple failure to licence by a ‘professional landlord’ (in itself a fairly meaningless phrase, but clearly numbers of properties let, and length of experience are factors) would appear to be c. 80% – 85% without other fault/conduct by the landlord. On the other hand, Hallett shows a very substantial ‘discount’ for a one property landlord on such a simple failure to licence.

It is also increasingly clear that it is not just any ‘conduct’ by landlord or tenant that should be thrown in to the argument. The conduct needs to be significant and to have direct bearing on the occupation of the property.

 

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.

6 Comments

  1. Ben Reeve-Lewis

    These endless see-sawing arguments about reductions in awards are the bane of RRO life. Not only do you have to assess the likelihood of receiving any money whatsoever from a ‘Usual suspect’ respondent with no assets but also what view the FTT will take on matters to count and discount. In many instances the chances of a reduction the size of Hallet there make an RRO not worth the bother, given the difficulty and stress involved just getting to the hearing stage and where the hapless tenant finds themselves going nose to nose with an experienced barrister for a whole day…..and yes I know….my comment oozes with frustration….I know!

    Reply
  2. Alan Armstrong

    I wonder if anyone has done some research on how many FTT RRO awards are actually paid by the landlord in full, how many were only paid after further Court Action and how many tenants had to pay for a lawyer to recover it for them.

    Reply
  3. Guy Morris

    Hallett (one of our cases) was something we suspected was coming after earlier comments from the UT. The discount given seems to be the result of a combination of what the UT considered mitigating circumstances: 1. Only 1 property/non-professional landlord; 2. Use of a competent agent (yes, a bit of an oxymoron) 3. not previously letting the subject property as a HMO 4. property in reasonably good condition 5. Immediate application for a licence when notified of the need 6. Hallett lived abroad a lot so was unaware of the licensing requirement

    The Simpson House case, where the landlord also lived abroad, used an agency and maintained the property reasonably well saw an increase in the award which shows that Hallett was quite a special situation.

    For those making a DIY application for a RRO you may find our template Statement of Case (SoC) here useful:
    https://www.getrentback.org/Guide%20Materials/DIY_SoC.docx

    Don’t despair Ben! Just a bump in the road!

    Reply
  4. Ben Reeve-Lewis

    I have to remind myself of the area of renting we work in, which is exclusively the realm of the fraudster. We dont deal with normal landlords @Alan all I can say is that in a little over 2 years we have won between £150k and £200k for our clients and realised just £5k in actual cash and we had to go the full distance and freeze her bank account just to get that. In 2 other cases we have frozen bank accounts and there wasnt enough in there to cover the award and where the respondent is a rent to rent scammer….forget it.

    Our unique problem is that our services are paid for by local authority partners and as a matter of professional responsibility we have to weigh up the amount of hours we bill them against the likelihood of an award and I’m increasingly coming to the opinion that 90% of them arent worth doing, given the types of landlords and agents we have to deal with

    Reply
  5. Alan Armstrong

    ignoring the company landlord that dissolves before payment can be sought, or claim made, it is a shame the Tribunal doesn’t have the power to make an Order such as those in the Magistrates etc, where the Court chases the money on behalf of the victim.

    Reply
  6. Al Mcclenahan - Justice For Tenants

    @Alan, the collection rate has been very high when there is a property asset involved. Our experience has shown that even if a landlord is non-compliant with paying an RRO award, an Interim Charging Order on a property asset usually leads to payment without the need to progress to a Final Charging Order.

    For Rent-2-Rent companies, it is part of their business model it seems to not pay a debt, have no assets, and simply fold and start up as a new company when the debts get too high. That is why it was so uplifting to see this business model, which subverts the exact stated purposes of the expanded enforcement powers in HPA 2016, get referenced in the Renters Reform Bill white paper.

    We also await the Rakusen v Jepsen UKSC decision on whether a tenant is often forced to take action against a Rent-2-Rent company that is unlikely to pay any award, or if they can name a superior landlord (while still having to prove that superior landlord committed the criminal offence to the criminal standard).

    Whilst it does seem that the decisions flip-flop a bit in terms of quantum awarded, I actually think there is starting to be a clear rational for the decisions and what truly counts as mitigation and how that should affect awards. The framework is being built to scaffold future decisions, which is likely to lead to realistic settlements if parties are represented by experienced representatives who gather the nuance between the recent spate of decisions.

    Conversely, for inexperienced reps or parties, they might just think that the award could be between 25%-90% without understanding the difference between the circumstances in the decisions, which would increase the likelihood of cases proceedings to hearings.

    Al
    JFT

    Reply

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