(1) Holly Percival (2) Francesca Turner (3) Ryan Plant (4) Zachary Herrod (5) Andrew Jason Haines (6) Elliott Andrew Jackson (7) Molly BurkeApplicantMrs Annabel LewisRespondent
Before
Graham Freckelton FRICS (Chairman)Robert Chumley-Roberts MCIEH, J.PMrs S Percival for the ApplicantMr Daniel Hoare for the RespondentDate 15 August 2019Hearing 2019-08-06Type of application: Application under section 41(1) of the Housing and Planning Act 2016 for rent repayment orders
DECISION
[32]The Tribunal considered the application in four stages –(i) Whether the Tribunal was satisfied beyond reasonable doubt that the Respondent had committed an offence under section 72(1) of the 2004 Act in that at the relevant time she was a person who controlled or managed an HMO that was required to be licensed under Part 2 of the 2004 Act but was not so licensed.(ii) Whether the Applicants were entitled to apply to the Tribunal for rent repayment orders.(iii) Whether the Tribunal should exercise its discretion to make rent repayment orders.(iv) Determination of the amounts of any orders. Offence under section 72(1) of the 2004 Act[33]In accordance with sections 43(1) of the 2016 Act, the Tribunal was satisfied beyond reasonable doubt that the Respondent, as landlord of the subject property, had committed an offence listed in section 40 of the 2016 Act, namely an offence under section 72(1) of the 2004 Act. At the hearing she readily accepted that she had committed the offence.(i) Throughout the period from 1st October 2018 to 30th June 2019 the subject property was a house in multiple occupation subject to mandatory licensing.(ii) The subject property was not licensed.(iii) The Respondent was the person having control and/or managing the subject property. Entitlement of the Applicants to apply for rent repayment orders[34]The Tribunal determined that the Applicants were entitled to apply for rent repayment orders pursuant to section 41(1) of the 2016 Act. In accordance with section 41(2), the Respondent was committing the relevant offence throughout the period when the subject property was let to the Applicants; and the offence was committed in the period of 12 months ending with the day on which the application was made (29th April 2019). Discretion to make rent repayment orders[35]The Tribunal was satisfied that there was no ground on which it could be argued that it was not appropriate to make rent repayment orders in the circumstances of the present case. Amounts of Rent Repayment Orders[36]In accordance with section 44 of the 2016 Act, first, the amount of an order must relate to rent paid in a period, not exceeding 12 months during which the landlord was committing an offence under section 72(1) of the 2004 Act. The Applicants’ claims satisfy that condition. Second, the amount that the landlord is required to pay in respect of a period must not exceed the rent paid in respect of that period. All the Applicants claim rent repayment of £4,050.00 being 9 months’ rent paid. Third, in determining the amount of any rent repayment order, the Tribunal must, in particular, take into account the conduct of the parties, the financial circumstances of the landlord and (not applicable in the present case) whether the landlord has been convicted of any of the offences listed in section 40 of the 2o16 Act.[37]The discretion afforded to the Tribunal at the final stage of the determination of the amount of any rent repayment order was considered by the Upper Tribunal (Lands Chamber) in Parker v Waller [2012] UKUT 301 (LC); and the observations of the President in that case have received express approval in subsequent decisions of the Upper Tribunal. Although those observations were made in the context of the rent repayment order regime contained in the 2004 Act, in the view of the Tribunal many of them remain relevant in the context of the 2016 Act regime.[38]The following observations, contained in paragraph 26 of the decision in Parker v Waller, would appear to be relevant in the present case – (iii) There is no presumption that the Rent Repayment Order (RRO) should be for the total amount received by the landlord during the relevant period unless there are good reasons why it should not be. The Residential Property Tribunal (RPT) [now the First-tier Tribunal (Property Chamber)] must take an overall view of the circumstances in determining what amount would be reasonable. (iv) [The 2004 Act] requires the RPT to take into account the total amount of rent received during any period during which it appears to it that the offence was being committed. It needs to do that because the RRO can only be made in respect of rent received during that period. It is limited to the period of 12 months ending with the date of the occupier’s application. But the RPT ought also to have regard to the total length of time during which the offence was being committed, because this bears upon the seriousness of the offence. (v) The fact that the tenant will have had the benefit of occupying the premises during the relevant period is not, in my judgment a material consideration or, if it is material, one to which any significant weight should be attached. This is because it is of the essence of an occupier’s RRO that the rent should be repaid in respect of a period of his occupation. While the tenant might be viewed as the fortunate beneficiary of the sanction that is imposed on the landlord, it is only misconduct on his part that would in my view justify the reduction of a repayment amount that was otherwise reasonable. (vi) Payments made as part of the rent for utility services count as part of the periodical payments in respect of which an RRO may be made. But since the landlord will not himself have benefited from these, it would only be in the most serious case that they should be included in the RRO. (vii) [The Act] requires the RPT to take account of the conduct and financial circumstances of the landlord. The circumstances in which the offence was committed are always likely to be material. A deliberate flouting of the requirement to register will obviously merit a larger RRO than instances of inadvertence – although all HMO landlords ought to know the law. A landlord who is engaged professionally in letting is likely to be more harshly dealt with than the non-professional.[39]Distilling the substance of those observations and applying them to the facts of the present case, the Tribunal determines that various deductions should made from the maximum amounts set out in paragraph 31.[40]The rent paid by the Applicants included gas and electricity charges, water and sewerage charges, boiler service agreement, internet charges and the fire alarm service/maintenance agreement. The Tribunal finds that the benefit of those items accrued to the tenants (and not to the Respondent) and that the costs should not be included in the rent repayment orders. The Tribunal determines that, since there were seven tenants occupying the subject property during the relevant period, a deduction of one seventh of the costs should be applied to each of the seven Applicants.[41]On the same principle, as applied by the Upper Tribunal in Fallon v Wilson [2014] UKUT 0300 (LC), the Tribunal determines that there should be further deductions to reflect part of other outgoings paid by the Respondent out of the gross rents received from the Applicants. Specifically, the Tribunal determines that mortgage interest payments of approximately £1254.00 per month should be taken into account together with a further sum of £283.50 per month in respect of management fees and VAT. This is calculated at £3150.00 x 7.5% = £236.25 + VAT at 20% (£47.25) = £283.50.[42]With regard to the fire alarm service maintenance agreement the Tribunal determined that the sum of £64.22 per month was the appropriate cost for the property. This was calculated as follows: - Total cost £,1156.00 for three properties for six months. Total cost for each property £385.33. Total cost per month £64.22.[43]The quantification of the deductions referred to in paragraphs 39, 40, 41 and 42 is set out in the table below – Expenditure Cost to Respondent per month Gas and electricity £345.00 Water and sewerage £40.00 Internet £40.00 Boiler Service £14.70 Fire Alarm £64.22 Mortgage payments £1254.00 Management fees £283.50 Total £2041.42[44]In accordance with section 44(4)(a) of the 2016 Act, the Tribunal considered the conduct of the landlord and tenant. The Tribunal finds that there is no evidence of conduct on either side which would affect its decision. Although the Tribunal notes that the Respondent is a professional landlord it finds that she did not deliberately flout the requirement to obtain a HMO licence for the subject property and endeavoured to obtain a licence, although not as quickly as she might. There were however extenuating circumstances which the Tribunal is prepared to accept.[45]Therefore, the Tribunal is satisfied that there is nothing in the conduct of the parties to justify any adjustment to the amount of the rent repayment orders.[46]In accordance with section 44(4)(b) of the 2016 Act, the Tribunal considered the financial circumstances of the landlord. Mrs Lewis did not provide details of her income and expenditure but the Tribunal was informed that she owns five residential letting properties (including 26 Queensway) and is employed as an Auctioneer. The Tribunal therefore determined not to make any further allowance to reflect financial circumstances.[47]The Tribunal therefore determines that the appropriate amount of the rent repayment order would be the gross rent paid of £3150.00 less £2041.42 per month.[48]The quantification of the rent repayment orders is therefore: - Gross Rent: £3,150.00 per calendar month Less Deductions: £2,041.42 per calendar month Total £1,108.58 per calendar month[49]With regard to the length of time the Tribunal can consider making the Rent Repayment Order this commences on 1st October 2018 (the date mandatory licensing became due) and expires on 29th April 2019 (being the date the application was made to the Tribunal (S41(2)(b) of the Act)). This is six months and 29 days. The Tribunal therefore rejects the Applicant’s submission that the order should be made for a period of nine months expiring on the date the tenancy terminated.[50]The monthly amount is detailed above in paragraph 48. The daily rate is calculated as follows: Annual repayment amount (£1,108.58 x 12) £13,302.96. £13,302.96 ÷365 = £36.45 per day x 29 days (1st – 29th April) = £1,057.05.[51]The Tribunal therefore confirms the total amount of the Rent Repayment Order as follows: £1,108.58 per month for six months £6,651.48 Rate for 29 days £1,057.05 Total £7,708.53[52]The Tribunal therefore confirms the total amount of the Rent Repayment Order of £7,708.53.[53]The Tribunal therefore determines that the Rent Repayment due to each of the Applicants is the sum of £1,101.22 (£7,708.53 ÷ 7). Payment should be made in full within 28 days of the date of this decision. APPEAL[54]Any appeal against this decision must be made to the Upper Tribunal (Lands Chamber). Prior to making such an appeal an aggrieved party must apply in writing to the First-tier Tribunal for permission to appeal within 28 days of the date specified below stating the grounds on which that party intends to rely in the appeal. Date: 15th August 2019 Graham Freckelton FRICS Chairman First-tier Tribunal (Property Chamber)