Mishcon acts on pro bono case clarifying rent repayment orders

Law firm Mishcon de Reya has acted pro bono on a Court of Appeal case that clarifies the application of rent repayment orders. The orders allow tenants to reclaim rent paid to rogue landlords and property agents in England. They were introduced in 2004 to penalise landlords who breach the houses in multiple occupation licensing regime. In 2016, the regulations were broadened to target unlawful and illegal behaviour by all types of landlords and property agents. The orders force landlords to refund up to 12 months of rent and are most commonly used when landlords rent properties without a license, don’t comply with a council notices, harass tenants or evict them without the proper paperwork. In the case in question, Mishcon represented tenants Marek and Kahori Kowalek against landlord Hassanein Limited. The tenants agreed to rent a flat in Kilburn, north London, for 24 months from February 2019 for £3,500 per month. The flat was in an area that required the landlord to have a license, which it didn’t. The tenants stopped regularly paying rent in August 2019. Four months later the landlord gave notice that it intended to seek possession. In January 2020, the tenants applied for a rent repayment order of almost £24,000 and vacated the flat in March. At the end of January 2020, the landlord was granted a licence for the property, meaning an offence was no longer being committed. In September 2020, the First-tier Tribunal, which heard the tenants’ case, stated the maximum they were due was £23,819. The tribunal found the landlord should have licensed the property and was in breach. Even so “the payment of rent is the paramount duty of a tenant and in this case the applicant is in clear breach of that duty”. The tribunal discounted the maximum award by 50%, awarding the tenants £11,910. The tenants appealed to the Upper Tribunal, where their claim was dismissed. They then appealed to the Court of Appeal. In a ruling handed down today, the tenants lost. Even so, the ruling has clarified the basis on which rent repayment orders are to be calculated, according to the Mishcon lawyers who advised on the case. Tania Whiteford, an associate at the firm, said: “The Court of Appeal confirmed that a tenant’s failure to pay rent is ‘conduct’ which can be taken into account when assessing the value of such an order. “It also clarified that the maximum amount of a rent repayment order must be determined without regard to rent which, while it may discharge indebtedness which arose during a period that a landlord was committing a breach, was not paid in that period.” Mishcon partner Mark Reading said: “The Court of Appeal also provided useful practical guidance to parties dealing with such an order.” The judges suggested that “in future similar cases, it might be right for the application for a rent repayment order to be heard only after a claim for rent in the County Court had been determined. “Alternatively, it might be suitable for the proceedings in the FTT and the County Court to be heard together. Whether these options are appropriate is likely to depend on whether the outcome of the County Court proceedings would have a material impact on the size of the rent repayment order made,” the judges said. (1) Marek Kowalek and (2) Kahori Kowalek v Hassanein Ltd Court of Appeal (Newey LJ, Coulson LJ, Warby LJ) 25 July 2022