Graham Freckelton FRICS (Chairman)Tribunal Judge Peter EllisRobert Chumley-Roberts MCIEH, J.PPudsey Legal for the ApplicantNone for the RespondentDate 11 June 2020Hearing 2020-06-03Type of application: Application under sections 40, 41, 43 and 44 of the Housing and Planning Act 2016 for a rent repayment order
DECISION
[30]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 a property that was required to be licensed under Parts 2 and 3 of the 2004 Act but was not so licensed.(ii) Whether the Applicant was entitled to apply to the Tribunal for a rent repayment order.(iii) Whether the Tribunal should exercise its discretion to make a rent repayment order.(iv) Determination of the amount of any order. Offence under section 95(1) of the 2004 Act[31]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 95(1) of the 2004 Act. Throughout the period from 24th January 2019 until 24th January 2020 (when the tenancy agreement ended) the subject property was a property subject to Selective Licensing.(i) The subject property was not licensed.(ii) The Respondent was the person having control and/or managing the subject property. Entitlement of the Applicants to apply for rent repayment orders[32]The Tribunal determined that the Applicant was entitled to apply for a rent repayment order pursuant to section 41(1) of the 2016 Act. In accordance with section 41(2), the Respondent was committing the relevant offence from 24th January 2019 to 24th January 2020. Discretion to make rent repayment orders[33]The Tribunal was satisfied that there was no ground on which it could be argued that it was not appropriate to make a rent repayment order in the circumstances of the present case. Amounts of Rent Repayment Orders[34]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 95(1) of the 2004 Act. The Applicants’ claim satisfies 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. The Applicant claims for the period 24th January 2019 – 24th January 2020. 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 whether the landlord has been convicted of any of the offences listed in section 40 of the 2o16 Act.[35]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.[36]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 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.[37]Distilling the substance of those observations and applying them to the facts of the present case, the Tribunal determines that various deductions should be made from the maximum amount as set out in paragraph 10.[38]In accordance with section 44(4)(a) of the 2016 Act, the Tribunal considered the conduct of both parties. The Tribunal finds that there is no evidence of conduct on the part of the Respondent which would affect its decision. The Respondent has fully accepted that she should have had a licence but did not do so. She is not a professional landlord and was not residing in the area so it is not surprising that she was unaware of the requirement by the local authority for the property to be licensed. Upon discovering that she should have had a selective licence she approached the local authority but was informed that she could not obtain a licence retrospectively. There is no evidence of any intention to profit from not obtaining a licence and she has not been convicted of any offence.[39]With regard to the conduct of the Applicant the Tribunal notes that there is no conduct during the application process which would affect its decision. However, although not relevant to this decision the Tribunal is disappointed in noting some of the behaviour of the Applicant. In particular the Tribunal noted the Applicant’s comments on social media which could be described as aggressive and is of the opinion that, notwithstanding the contents of the Applicant’s Representative’s email dated 12th May 2020 the condition of the property, based on the evidence submitted had deteriorated during the tenancy.[40]Although not strictly relevant to this decision the Tribunal is not surprised that the Respondent submits that she was not aware that the area was to be included in the City Council’s Selective Licensing Scheme. Indeed, from the Tribunal’s experience many landlords actually living in Nottingham were unaware that a Selective Licensing scheme was to be introduced.[41]In order to make a designation that an area is subject to selective licensing a local authority has to consider that at least one of six conditions exist as described in paragraph 2. The property is modern (Valuation Office Agency records indicate it was completed in 2001) and from the Tribunal’s experience there is little evidence of the conditions required for designation as a selective licensing area or typically associated with such areas.[42]The Tribunal also considered the agreement between the Respondent and Purple Bricks. The Tribunal notes that in ‘Section 17 Landlord Duties’ it is the landlord’s (and not the agents) responsibility to obtain and renew a licence if the property falls under a selective licensing scheme.[43]In this case at the commencement of the tenancy the property did not require a selective licence but such a licence was required part way through the tenancy. The Respondent was obviously unaware of this as she was not living in the area and although not strictly relevant to this decision the Tribunal is disappointed that Purple Bricks did not think it was appropriate to inform her accordingly. The Tribunal would have expected a reputable agent to take its obligations on behalf of its clients more seriously and professionally than has been apparent in this case.[44]Following the Tribunal’s determination in paragraph 10 that the maximum amount of any rent repayment order should be limited to 11 months, based on the evidence provided by the Applicant the Tribunal determines that some deductions are appropriate as referred to in paragraphs 27 and 28 above.[45]With regard to the mortgage payment the Tribunal determined to allow 75% of the gross payment of £670.62 per month as no evidence has been provided to suggest it is anything other than a repayment mortgage. The Tribunal therefore calculates the allowable amount at £502.97 per month.[46]The Tribunal therefore calculates the amount of the Rent Repayment Order as follows: Maximum Amount 8800.00 Less: Mortgage - 11 months @ 502.97 = 5532.67 Insurance – 11 months @ 27.36 = 300.96 Management – 11 months @ 66.00 = 726.00 Total deductions 6559.63 Balance £2,240.37[47]The Tribunal then considered the Respondent’s personal financial circumstances referred to and summarised in paragraph 29. There is clearly a shortfall each month which the Respondent calculates as being in the region of £652.22. Indeed, the true figure is likely to be in excess of this as several ongoing expenses in respect of the subject property are not yet known.[48]To reflect the Respondent’s personal financial circumstances the Tribunal reduces the amount shown in paragraph 46 above by 50%.[49]The Tribunal therefore confirms the Rent Repayment Order in the sum of £1120.19 (One Thousand One Hundred and Twenty Pounds Nineteen Pence).[50]Payment should be made within 28 days of the date of this decision. APPEAL[51]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: 11th June 2020 Graham Freckelton FRICS Chairman First-tier Tribunal (Property Chamber)