Deputy Regional Judge Nigel GravellsMr Robert Chumley-Roberts MCIEH, JPDate 6 December 2024Hearing 2024-11-19Type of application: Application under section 41(1) of the Housing and Planning Act 2016 for a rent repayment order
DECISION
[1]22 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 95(1) of the 2004 Act in that at the relevant time the Respondent was a person in control of or managing a house that was required to be licensed under Part 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 Prima facie offence 23 In accordance with section 43(1) of the 2016 Act, the Tribunal was satisfied beyond reasonable doubt that, subject to the establishment of a reasonable excuse defence (see paragraphs 29-40 below), 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, which provides – A person commits an offence if he is a person having control of or managing a house which is required to be licensed under [Part 3] … but is not so licensed. 24 The Tribunal was satisfied that from 5 June 2023 the subject property was a house subject to selective licensing under Part 3 of the 2004 Act and that the property was not licensed. 25 The Tribunal was satisfied that at all material times the Respondent was the landlord of the subject property (and that Keith Williams was her agent). 26 The Tribunal was satisfied that at all material times the Respondent was the person managing the subject property within the meaning of section 263(3) of the 2004 Act: she was the owner of the property and received (whether directly or through an agent) rent from persons in occupation of the property. 27 While it was not disputed that the offence commenced on 5 June 2023, when the selective licensing scheme came into effect, the parties adopted different positions on when the offence ceased. The Applicant argued that the offence only ceased when the licence was granted on 9 May 2024. The Respondent argued that the offence ceased when she applied for a temporary exemption notice on 1 February 2024, although she extended the date to the end of the current rental period (13 February 2024). 28 Neither party is correct. On the one hand, an application for a temporary extension notice does not suspend the offence of managing an unlicensed house. The requirement of a licence is only removed when the temporary exemption notice is actually served and during the period for which the notice is in force: see section 86(3) of the 2004 Act. On the other hand, an application for a licence ‘duly made’ and ‘still effective’ does suspend the offence (or provide a defence): see section 95(3)(b) of the 2004 Act. Since it is not disputed that the Respondent’s application was ‘duly made’ and ‘still effective’, it follows that the offence commenced on 5 June 2023 and ceased on the day before the Respondent applied for a licence (4 March 2024). Reasonable excuse defence 29 Although the Respondent did not expressly raise a defence of reasonable excuse under section 95(4), the substance of her representations require the Tribunal to consider whether the Respondent might have such a defence: see IR Management Services Limited v Salford City Council [2020] UKUT 81 at paragraph 40. 30 Section 95(4) provides – In proceedings against a person for an offence under subsection (1) … it is a defence that he had a reasonable excuse - (a) for having control of or managing the house in the circumstances mentioned in subsection (1) …. 31 Although the Tribunal must be satisfied beyond reasonable doubt as to the element of the offence listed in section 95(1), the standard of proof in relation to the defence in section 95(4) is the balance of probabilities. 32 The Respondent referred to representations made to her by Allied and by Birmingham City Council. While the representations made by Allied potentially give rise to a reasonable excuse covering the entire period 5 June 2023 to 3 March 2024, the representations made by Birmingham City Council can only potentially give rise to a reasonable excuse covering the period 1 February 2024 to 3 March 2024. 33 The Respondent stated that she and her husband were not professional landlords but were letting the subject property in order to keep what had been Mr Williams’ family home within his family. They instructed Property Link to manage the property. In December 2022 Property Link informed Mr and Mrs Williams that the management of a portfolio of rental properties, including the subject property, would be merged with Allied (although, as noted above, the Applicant’s second assured shorthold tenancy was dated 13 November 2022). According to the Respondent, Allied did not advise her that the subject property would be subject to the selective licensing scheme that Birmingham City Council proposed to introduce. However, the Respondent also said that she was verbally advised by Allied that the issue of the section 21 notice removed the need to license the subject property. 34 In a series of decisions the Upper Tribunal has indicated that a landlord’s reliance upon an agent will rarely give rise to a defence of reasonable excuse: see D’Costa v D’Andrea [2021] UKUT 144 (LC), Aytan v Moore [2022] UKUT 027 (LC), Marigold v Wells [2023] UKUT 33 (LC). 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 himself/herself of the licensing requirements without relying upon an agent (for example, because the landlord lived abroad). 35 In the view of the Tribunal the Respondent has failed to bring herself within the scope of the reasonable excuse defence based on the verbal advice given by Allied. 36 As noted above, on 31 January 2024, following the adjournment of the possession proceedings, the Respondent sought guidance from Birmingham City Council in relation to the proposed sale of the property, the section 21 notice and licensing requirements. The Respondent produced a copy of an email dated 1 February 2024 from Tracey Ball, Private Rented Sector Licensing Officer with Birmingham City Council. The email stated - If your property falls within one of the selected licensing wards, a licence will be required. … I can confirm that landlords are legally obligated to apply for a licence, and failing to do so constitutes a criminal offence. … However, as you are in the process of selling the property, I would recommend applying for a Temporary Exemption Notice (providing a valid reason and as much detail as possible). This way you are given 3 months after the date of issue where you are exempt from this scheme. If after 3 months your tenants are still present, you would need to apply for another extension of 3 months (before the initial 3 months period is over), this will give you a total of 6 months. After this period (6 months) a licence will be required if you still have tenants. … You can submit a request for a temporary exemption notice …. Please provide a valid reason and as much information to support your request as possible, the temporary exemption notice will give you a 3-month period where you will not require a licence, however you will need to apply/apply [sic] for an extension before this notice expires. … Once the application is made, the legal duty on the landlord has been fulfilled. You can also serve a section 21 notice (a section 21 notice is not valid until an application has been made). You will need some documents and other information before you apply for a licence .... Importantly, you won't face penalties as long as you've submitted an application, even if it hasn't been issued yet. 37 While Ms Ball doubtless wanted to assist the Respondent, the email is not well written and could have been expressed more clearly (and accurately). Someone conversant with the licensing regime would understand the separate issues of licensing and temporary exemption notices and the different consequences for the requirement to license the subject property. By contrast, it is far from clear that the email would have provided a layperson such as the Respondent with that same understanding. 38 Presumably in response to the email, the Respondent immediately applied for a temporary exemption notice but, for reasons not disclosed to the Tribunal, on 28 February 2024 Birmingham City Council issued a Refusal Notice. On 4 March 2024 the Respondent applied for a licence under the selective licensing scheme and on 9 May 2024 a licence was granted. 39 The question for the Tribunal is whether the Respondent had a reasonable excuse for managing an unlicensed house between 1 February 2024 and 3 March 2024. If she had applied for a licence (rather than a temporary exemption notice) on 1 February 2024, she would have had a defence under section 95(3)(b) of the 2004 Act from that date. However, it is far from clear that the Respondent would have been willing to pay the not-insignificant application fee for a licence if she assumed that a temporary exemption notice (for which no fee is payable) would be served. 40 The Tribunal is not satisfied on a balance of probabilities that, based on the email exchange between the Respondent and Birmingham City Council, the Respondent had a reasonable excuse for managing an unlicensed house during the period 1 February 2024 to 3 March 2024. 41 In the absence of the defence of reasonable excuse, the Tribunal was satisfied beyond reasonable doubt that the Respondent had committed an offence under section 95(1) of the 2004 Act during the period 5 June 2023 to 3 March 2024 (inclusive). 42 However, in the view of the Tribunal, the matters referred to above do constitute mitigation and therefore a reason for reducing the amount of any rent repayment order. Entitlement of the Applicant to apply for a rent repayment order 43 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 subject property was let to the Applicant throughout the period that the Respondent was committing the relevant offence; and the offence was committed in the period of 12 months ending with the day on which the application was made (24 July 2024). Discretion to make rent repayment orders 44 Since the Tribunal is satisfied beyond reasonable doubt that the Respondent committed an offence under section 95(1) of the 2004 Act, a ground for making a rent repayment order has been made out. 45 Even if the Tribunal finds that a relevant offence has been committed, it has a discretion not to make a rent repayment order (see section 43(1) of the 2016 Act). However, in the decision of the Upper Tribunal in the London Borough of Newham v John Francis Harris [2017] UKUT 264 (LC) Judge McGrath stated – I should add that it will be a rare case where a Tribunal does exercise its discretion not to make an order. If a person has committed a criminal offence and the consequences of doing so are prescribed by legislation to include an obligation to repay rent … then the Tribunal should be reluctant to refuse an application for rent repayment order. 46 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. Amount of rent repayment order 47 In accordance with section 44(2) of the 2016 Act, 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 relevant period’). 48 In accordance with section 44(3) of the 2016 Act, the amount that the landlord is required to repay in respect of the relevant period must not exceed the rent paid by the tenant in respect of that period less any relevant award of universal credit paid (to any person) in respect of rent under the tenancy during that period. 49 Both the Applicant and her husband were in receipt of universal credit. 50 The Applicant provided a schedule showing for each month from June 2023 to March 2024 (i) the housing element of universal credit for the subject property, (ii) the nominal universal credit entitlement, (iii) the actual amount of universal credit paid after deductions, (iv) the percentage of the nominal universal credit paid,(v) the amount of the housing element paid and(vi) the net rent paid by the Applicant. For the full ten-month period of the Applicant’s claim, the scheduled showed a gross rental figure of £675.00 x 10 = £6,750.00 and payments of £2075.00 for the amount of the housing element of universal credit, resulting in the figure of £4,675.00 for the net rent paid by the Applicant. 51 The Respondent did not challenge – and (subject to paragraph 52 below) the Tribunal accepted - the Applicant’s schedule and its methodology. 52 The Tribunal has determined the relevant period during which the Respondent was committing the offence under section 95(1) of the 2004 Act to be 5 June 2023 to 3 March 2024, a period of nine months less one day (see paragraphs 28 and 41 above). The rent payable during that period was £675.00 x 9 less, say, £25.00 = £6,050.00. The amount of the housing element of universal credit paid in the months June 2023 to February 2024 inclusive was £1,786.73. The total net rent paid in the relevant period was £6050.00 less £1786.73 = £4263.27, which is therefore the maximum amount of a rent repayment order. 53 In accordance with section 44(4) of the 2016 Act, 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. 54 The proper approach that the Tribunal is required to take at the final stage of the determination of the amount of any rent repayment order has been considered by the Upper Tribunal (Lands Chamber) in a series of recent decisions: see Vadamalayan v Stewart [2020] UKUT 183 (LC), Ficcara v James [2021] UKUT 38 (LC), Awad v Hooley [2021] UKUT 55 (LC), Williams v Parmar [2021] UKUT 244 (LC), Aytan v Moore [2022] UKUT 27 (LC), Acheampong v Roman [2022] UKUT 239 (LC), Dowd v Martins and others [2022] UKUT 249 (LC). 55 In Dowd v Martins and others, the Upper Tribunal endorsed the approach summarised in paragraph 21 of the decision in Acheampong v Roman. The FTT should: (a) Ascertain the whole of the rent for the relevant period. (b) Subtract any element of that sum that represents payment for utilities that only benefited the tenant, for example gas, electricity and internet access. It is for the landlord to supply evidence of these, but if precise figures are not available an experienced tribunal will be able to make an informed estimate. (c) Consider how serious this offence was, both compared to other types of offence in respect of which a rent repayment order may be made (and whose relative seriousness can be seen from the relevant maximum sentences on conviction) and compared to other examples of the same type of offence. What proportion of the rent (after deduction as above) is a fair reflection of the seriousness of this offence? That figure is then the starting point (in the sense that that term is used in criminal sentencing); it is the default penalty in the absence of any other factors but it may be higher or lower in light of the final step. (d) Consider whether any deduction from, or addition to, that figure should be made in the light of the other factors set out in section 44(4). 56 Applying steps (a) to (d) above to the present case, the Tribunal has already determined step (a): see paragraphs 47-52 above. 57 Step (b) is not relevant in the circumstances of the present case. 58 Turning to step (c), the Upper Tribunal has made it clear that in applying section 44(4)(a) of the 2016 Act, the conduct of the Respondent landlord also embraces the seriousness of the offence committed by the Respondent landlord that is the pre-condition for the making of a rent repayment order. The offence of managing an unlicensed house is a serious offence, although it is clear from the scheme and detailed provisions of the 2016 Act that it is not normally regarded as the most serious of the offences listed in section 40(3): see Daff v Gyalui [2023] UKUT 134 (LC) at paragraphs 48-49 and Irvine v Metcalfe [2023] UKUT 283 (LC) at paragraph 72. The Tribunal determines that the relatively less serious offence committed by the Respondent should be reflected in a deduction from the maximum amount of the rent repayment order identified in paragraph 52 above. 59 Turning to step (d), the Applicant raised a number of issues in relation to the conduct of the Respondent. She asserted (i) that the Respondent and Allied had conducted themselves poorly throughout the tenancy, (ii) that the property had been rented in poor condition, (iii) that the Respondent had failed to meet her statutory repairing obligations, (iv) that the property suffered from mould in the kitchen and bathroom, (v) that the garden and garden fence were in need of maintenance and repair and (vi) that Allied had displayed threatening and aggressive behaviour towards the Applicant. 60 In relation to the condition of the subject property, the Respondent asserted that the property had been let in good condition and that no issues with the condition of the property had been raised, either directly with the Respondent or indirectly through Allied, until the service of the section 21 notice in May 2023. Specifically in relation to the mould, Allied had visited the property and had found wet clothes on every radiator but no open windows to provide ventilation. 61 There also appeared to be some dispute as to the garden. The Respondent produced photographs showing that the garden was in good condition when the Applicant moved in. Although it appears that under the tenancy agreement the Applicant was responsible for the maintenance of the garden, the Applicant asserted that garden was largely used by the Respondent’s uncle, who occupied the neighbouring property, to store construction materials and other belongings. However, according to the Respondent, the Applicant had given the Respondent’s uncle permission to use the garden. 62 The Applicant asserted that the cellar of the property was in very bad condition. However, the Respondent states that the cellar had been locked but that the Applicant had removed the padlock. The Respondent also asserted that the Applicant had removed smoke alarms installed in the property. 63 In seeking to resolve the conflicting evidence presented by the parties, the Tribunal notes that, when the Applicant referred the proposed increase in rent to the Tribunal in 2024 (see paragraph 7 above), the Tribunal, in determining the rent, deducted £125.00 from the ‘starting figure’ of £900.00 per month to reflect the Respondent’s responsibility for the poor condition of the property both internally and externally. 64 The Tribunal determines that it would be appropriate to make an upward adjustment of the amount of the rent repayment order. 65 Section 44(4)(b) of the 2016 Act requires the Tribunal to take into account the financial circumstances of the landlord. The Respondent asserted that she and Mr Williams did not have surplus cash to make a repayment of the amount claimed; and that she would have to obtain a loan. However, in response to questions from the Tribunal, the Respondent stated that both she and her husband were in full-time employment of a type that, in the view of the Tribunal, would be reasonably well paid. The Tribunal determines that it would not be appropriate to make any further adjustment of the amount of the rent repayment order to reflect the financial circumstances of the Respondent. 66 Section 44(4)(c) of the 2016 Act requires the Tribunal to take into account whether the landlord has at any time been convicted of any of the offences listed in section 40(3). The Respondent has no such convictions. 67 As Sir Timothy Fancourt stated in Williams v Parmar (at paragraph 24), the wording of section 44(4) leaves open the possibility of there being factors other than those expressly referred to in paragraphs (a) to (c) that, in a particular case, may be taken into account and affect the amount of the rent repayment order. 68 As noted above, the Tribunal determines that, although the Respondent has failed to establish the defence of reasonable excuse, the matters relied upon do constitute mitigation and therefore a reason for reducing the amount of the rent repayment order. 69 Finally, the Tribunal notes (i) the reminder from Sir Timothy Fancourt in Williams v Parmar (at paragraph 43) that Rent Repayment Orders under the Housing and Planning Act 2016: Guidance for Local Authorities identifies the factors that a local authority should take into account in deciding whether to seek a rent repayment order as being the need to: punish offending landlords; deter the particular landlord from further offences; dissuade other landlords from breaching the law; and remove from landlords the financial benefit of offending; and (ii) the clear indication (at paragraph 51) that the factors identified in the Guidance will generally justify an order for repayment of at least a substantial part of the rent. 70 The Tribunal determines that, in order to reflect the factors discussed in paragraphs 53-69 above, the maximum repayment amount identified in the paragraph 52 above (£4263.27) should be discounted by 55 per cent. 71 The Tribunal therefore orders under section 43(1) of the 2016 Act that the Respondent repay to the Applicant the sum of £1,918.47, say £1,900.00. Reimbursement of fees 72 The Applicants applied under rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 for the Tribunal to make an order requiring the Respondent to reimburse to the Applicant her application fee (£110.00) and the Tribunal hearing fee (£220.00). 73 Since the Tribunal has made a rent repayment order in favour of the Applicant, albeit in a lesser amount than that applied for, it is appropriate that she should have her fees reimbursed. Summary 74 The Tribunal orders under section 43(1) of the 2016 Act that the Respondent repay to the Applicant the sum of £1,900.00 not later than 10 January 2025. 75 The Tribunal orders under rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 that the Respondent reimburse to the Applicant £110.00 in respect of the application fee and £220.00 in respect of the hearing fee not later than 10 January 2025. Appeal 76 If a party wishes to appeal this Decision, that appeal is to the Upper Tribunal (Lands Chamber). However, a party wishing to appeal must first make written application for permission to the First-tier Tribunal at the Regional office which has been dealing with the case. 77 The application for permission to appeal must be received by the Regional office within 28 days after the Tribunal sends written reasons for the decision to the person making the application. 78 If the application is not made within the 28-day time limit, such application must include a request for an extension of time and the reason(s) for not complying with the 28-day time limit. The Tribunal will then consider the reason(s) and decide whether to allow the application for permission to appeal to proceed despite not being within the time limit. 79 The application for permission to appeal must state the grounds of appeal and state the result the party making the application is seeking.