Hallett v Parker and others

Housing – House in multiple occupation – Rent repayment order (RRO) – Appellant landlord appealing against First-tier Tribunal (FTT) decision to make RRO in favour of respondent tenants for full amount of rent – Whether FTT adopting correct approach to making RRO – Whether FTT failing to take account of all relevant matters including conduct of appellant – Appeal allowed The appellant owned a lower ground floor flat in a converted house at 29A Christchurch Avenue in the London Borough of Brent which he let to tenants. He had previously let the flat exclusively to families. In 2015, the local housing authority introduced an additional licensing scheme under the Housing Act 2004 requiring all houses in multiple occupation (HMOs) to be licensed. The new scheme did not apply to the appellant’s flat while it was let to families and he was unaware of its introduction. In September 2019, the appellant let the flat to the three respondents who did not form a single household pursuant to section 258 of the 2004 Act. The flat then became an HMO and the person in control of it required a licence. The appellant was not told of the need for a licence by his letting agent and he did not obtain one. Once the flat was let, the appellant assumed responsibility for its management and did not use his letting agents as managing agents. When notified by the local authority that the flat was an HMO, he obtained a licence. The respondents applied to the First-tier Tribunal (FTT) for a rent repayment order (RRO) from 13 September 2019 to 3 April 2020, during which time they had paid rent of £11,712.75. The FTT made an RRO in the full amount claimed. The appellant appealed contending that, by failing to give any weight to the matters he had relied on in mitigation, the FTT had failed in its obligation under section 44(4)(a) of the Housing and Planning Act 2016, to take into account the conduct of the landlord. Held: The appeal was allowed. (1) Section 44(3) of the 2016 Act conferred power on the FTT to make RROs where a landlord had committed an offence, including the offence of being in control of an unlicensed HMO contrary to section 72(1) of the 2004 Act. By section 44(4), in determining the amount to be paid the FTT had, in particular, to take into account: the conduct of the parties; the financial circumstances of the landlord; and whether the landlord had been convicted of a relevant housing offence. That left open the possibility of there being other factors that, in a particular case, might be taken into account and affect the amount of the order. In Williams v Parmar [2021] UKUT 244 (LC); [2021] PLSCS 169 (decided after the FTT’s decision in the present case), the Upper Tribunal emphasised the need for tribunals making RROs to conduct an evaluation of all relevant factors before deciding on the amount of the order, rather than starting from an assumption that the full rent should be repaid unless there was some good reason to order repayment of a lesser sum.  (2)  Generally, the purpose of the repayment regime was not compensatory. It was clearly to deter the commission of housing offences and to discourage the activities of “rogue landlords” in the residential sector by the imposition of stringent penalties: Rakusen v Jepsen [2020] UKUT 298 (LC); [2021] EGLR 39 considered. The power to make RROs had to be exercised with the objective of deterring those who exploited their tenants by renting out substandard, overcrowded or dangerous accommodation. The greater flexibility given to tribunals when ordering rent repayment in licensing cases was a reflection of that objective. Tribunals also had to be aware of the risk of injustice if orders were made which were harsher than necessary to achieve the statutory objectives. (3) It was apparent from the FTT’s decision that it started with a presumption, often applied after the decision in Vadamalayan v Stewart [2020] UKUT 183 (LC); [2020] PLSCS 189, that an RRO should require the full amount of the rent to be repaid unless there was some good reason to discount it. That approach was wrong in principle.  Vadamalayan was authority for the proposition that an RRO was not to be limited to the amount of the landlord’s profit obtained by the unlawful activity during the period in question. It was not authority for the proposition that the maximum amount of rent was to be ordered under an RRO subject only to limited adjustment for the factors specified in section 44(4). (4) The conduct which had to be taken into account by the FTT, in determining the amount to be repaid, included the conduct constituting the relevant housing offence itself and the penalty had to reflect the relative seriousness of that offence: so the FTT might, in an appropriate case, order a lower than maximum amount of rent repayment, if what a landlord did, or failed to do, in committing the offence was relatively low in the scale of seriousness, by reason of mitigating circumstances or otherwise. The object of HMO licensing was to contribute to the achievement of satisfactory housing standards. If a landlord had provided accommodation of a decent standard, despite failing to obtain a necessary licence, the punishment appropriate to the offence ought to be moderated. Accordingly, the FTT’s decision would be set aside. (5) The Upper Tribunal would determination the appropriate order, considering that: the offence was not of the most serious type; proper enforcement of licensing requirements against all landlords was necessary to ensure the general effectiveness of the licensing system and to deter evasion; the appellant had failed to take sufficient steps to inform himself of the regulatory requirements associated with HMOs; this was the first occasion on which a licence was required; he might reasonably have expected to be alerted by his letting agent to the need to obtain a licence; the condition of the property was fairly good; he applied for and was granted a licence as soon as he became aware that one was required; and he let no other property. Taking all those matters into account, the appropriate order was for the repayment of £1,000 to each of the three respondents, the total figure of £3,000 representing approximately 25% of the sum paid by the tenants in rent in the period of about seven months during which the offence was being committed.    Karol Hart (solicitor advocate, of Freemans Solicitors) appeared for the appellant; Francesca Nicholls (of Flat Justice) appeared for the respondents Eileen O’Grady, barrister Click here to read a transcript of Hallett v Parker and others