Flat 8, 29-31 Dingley Place London, EC1V 8BR LON/00AU/HMF/2022/0257

FIRST-TIER TRIBUNAL

PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case No LON/00AU/HMF/2022/0257

Between

Vy Tran Casper Farchy Luka SharpeApplicant

QRL Properties LimitedRespondent

Before

Judge Shepherd

Louise Crane MCIEH

Date 22 May 2023

Hearing 2023-04-12

Property: EC1V 8BR Vy Tran Casper Farchy

Type of application: 43 & 44 of the Housing and Planning Act 2016

DECISION

Covid-19 pandemic: description of hearing This has been a remote video hearing which has not been objected to by the parties. The form of remote hearing was V: CPVEREMOTE. A face-to-face hearing was not held because it was not practicable and all issues could be determined in a remote hearing

[1]In this case the Applicants, Luka Sharpe, Vy Tran and Casper Farchy (The Applicants) are seeking a Rent Repayment Order against the Respondents, QRL Properties (The Respondents). They chose to take no active role in these proceedings and were debarred.

[2]The Applicants were in occupation of premises at Flat 8, 29-31 Dingley Place, Islington, London EC1V 8BR (The premises) at various times. Vy Tran occupied between 3rd July 2020- 30th April 2022. She claims a Rent Repayment Order for the period 1st May 2021 to 30th April 2022 (“the relevant period”) in the sum of £12000. Casper Farchy lived at the property between 3rd October 2019 and 30th April 2022. He claims a Rent Repayment Order for the period 1st May 2021 – 30th April 2022 (“The relevant period”) in the sum of £14400. Luka Sharpe was in occupation between 1st September 2020 and 3rd June 2022. He claims a Rent Repayment Order for the period 1st August 2021 - 30th June 2022 (“The relevant period”) in the sum of £9604.80

[3]It was the Applicants’ case that the Respondents had failed to license the premises which fell under the mandatory licensing scheme throughout the relevant periods. The premises consist of a five bedroomed self contained flat, and the tenants shared a kitchen and 2 bathrooms The Applicants said that the premises were caught by both the mandatory licensing scheme under the Housing Act 2004 (see below) and an additional licensing scheme administered by the Local Authority which was London Borough of Islington. They said that the Respondents were in receipt of the rack rent and had control of the premises and therefore were the liable party.

[4]The Rent Repayment Order application was made pursuant to section 41 of the Housing and Planning Act 2016.

[5]At the hearing Mr Neilson of Justice for Tenants represented the Applicants. The Respondents did not attend. Mr Neilson said the failure to license was a serious offence. In addition the Respondents had failed to comply with other essential landlord requirements, including the duty to protect deposits, the provision of prescribed information and failure to provide certificates . He said the Respondents were a professional landlord. There was an absence of fire safety precautions in the premises. In addition, there had been a breach of the covenant of quiet enjoyment during the tenancy with the landlord entering the premises without prior notice. There was no evidence as to the Respondents’ financial circumstances or previous convictions. The law on Rent Repayment Orders The Housing Act 2004 (“the 2004 Act”)

[6]The 2004 Act introduced a new system of assessing housing conditions and enforcing housing standards. Part 2 of the Act relates to the licencing of Houses in Multiple Occupation ("HMOs") whilst Part 3 relates to the selective licensing of other residential accommodation. The Act creates offences under section 72(1) of having control and management of an unlicenced HMO and under section 95(1) of having control or management of an unlicenced house. On summary conviction, a person who commits an offence is liable to a fine. An additional provision was that either a local housing authority ("LHA") or an occupier could apply to a FTT for a RRO.

[7]Part 2 of the 2004 Act relates to the licensing of HMOs. Section 61 provides for every prescribed HMO to be licensed. HMOs are defined by section 254 which includes a number of “tests” including s.257. 254 Meaning of “house in multiple occupation” (1) For the purposes of this Act a building or a part of a building is a “house in multiple occupation” if– (a) it meets the conditions in subsection (2) (“the standard test”); (b) it meets the conditions in subsection (3) (“the self-contained flat test”); (c) it meets the conditions in subsection (4) (“the converted building test”); (d) an HMO declaration is in force in respect of it under section 255; or (e) it is a converted block of flats to which section 257 applies.

[8]Section 257 states the following: 257 HMOs: certain converted blocks of flats(1) For the purposes of this section a “converted block of flats” means a building or part of a building which– (a) has been converted into, and (b) consists of, self-contained flats.

(2) This section applies to a converted block of flats if– (a) building work undertaken in connection with the conversion did not comply with the appropriate building standards and still does not comply with them; and (b) less than two-thirds of the self-contained flats are owner-occupied.

(3) In subsection (2) “appropriate building standards” means– (a) in the case of a converted block of flats– (i) on which building work was completed before 1st June 1992 or which is dealt with by regulation 20 of the Building Regulations 1991 (S.I. 1991/2768), and (ii) which would not have been exempt under those Regulations, building standards equivalent to those imposed, in relation to a building or part of a building to which those Regulations applied, by those Regulations as they had effect on 1st June 1992; and (b) in the case of any other converted block of flats, the requirements imposed at the time in relation to it by regulations under section 1 of the Building Act 1984 (c. 55).

(4) For the purposes of subsection (2) a flat is “owner-occupied” if it is occupied– (a) by a person who has a lease of the flat which has been granted for a term of more than 21 years, (b) by a person who has the freehold estate in the converted block of flats, or (c) by a member of the household of a person within paragraph (a) or (b).

(5) The fact that this section applies to a converted block of flats (with the result that it is a house in multiple occupation under section 254(1)(e)), does not affect the status of any flat in the block as a house in multiple occupation.

(6) In this section “self-contained flat” has the same meaning as in section 254.

[9]The Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018 prescribes those HMOs that require a licence: An HMO is of a prescribed description for the purpose of section 55(2)(a) of the Act if it—(a) is occupied by five or more persons;

(b) is occupied by persons living in two or more separate households; and

(c) meets— (i) the standard test under section 254(2) of the Act; (ii) the self-contained flat test under section 254(3) of the Act but is not a purpose-built flat situated in a block comprising three or more self-contained flats; or (iii) the converted building test under section 254(4) of the Act.

[10]Section 263 provides: “(1) In this Act “person having control”, in relation to premises, means (unless the context otherwise requires) the person who receives the rack-rent of the premises (whether on his own account or as agent or trustee of another person), or who would so receive it if the premises were let at a rack-rent. (2) In subsection (1) “rack-rent” means a rent which is not less than two-thirds of the full net annual value of the premises. (3) In this Act “person managing” means, in relation to premises, the person who, being an owner or lessee of the premises–(a) receives (whether directly or through an agent or trustee) rents or other payments from– (i) in the case of a house in multiple occupation, persons who are in occupation as tenants or licensees of parts of the premises; and (ii) in the case of a house to which Part 3 applies (see section 79(2)), persons who are in occupation as tenants or licensees of parts of the premises, or of the whole of the premises; or

(b) would so receive those rents or other payments but for having entered into an arrangement (whether in pursuance of a court order or otherwise) with another person who is not an owner or lessee of the premises by virtue of which that other person receives the rents or other payments; and includes, where those rents or other payments are received through another person as agent or trustee, that other person.” The Housing and Planning Act 2016 (“the 2016 Act”)

[11]Part 2 of the 2016 Act introduced a raft of new measures to deal with "rogue landlords and property agents in England". Chapter 2 allows a banning order to be made against a landlord who has been convicted of a banning order offence and Chapter 3 for a data base of rogue landlords and property agents to be established. Section 126 amended the 2004 Act by adding new provisions permitting LHAs to impose Financial Penalties of up to £30,000 for a number of offences as an alternative to prosecution.

[12]Chapter 4 introduces a new set of provisions relating to RROs. An additional five offences have been added in respect of which a RRO may now be sought. The maximum award that can be made is the rent paid over a period of 12 months during which the landlord was committing the offence. However, section 46 provides that a tribunal must make the maximum award in specified circumstances. Further, the phrase "such amount as the tribunal considers reasonable in the circumstances" which had appeared in section 74(5) of the 2004 Act, does not appear in the new provisions. It has therefore been accepted that the case law relating to the assessment of a RRO under the 2004 Act is no longer relevant to the 2016 Act.

[13]In the Upper Tribunal (reported at

[2012] UKUT 298 (LC)

), Martin Rodger KC, the Deputy President, had considered the policy of Part 2 of the 2016. He noted (at [64]) that “the policy of the whole of Part 2 of the 2016 Act is 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. Despite its irregular status, an unlicensed HMO may be a perfectly satisfactory place to live. The “main object of the provisions is deterrence rather than compensation.”

[14]Section 40 provides (emphasis added): “(1) This Chapter confers power on the First-Tier Tribunal to make a rent repayment order where a landlord has committed an offence to which this Chapter applies. (2) A rent repayment order is an order requiring the landlord under a tenancy of housing in England to—(a) repay an amount of rent paid by a tenant, or

(b) pay a local housing authority an amount in respect of a relevant award of universal credit paid (to any person) in respect of rent under the tenancy.”

[15]Section 40(3) lists seven offences “committed by a landlord in relation to housing in England let by that landlord”. The five additional offences are:(i) violence for securing entry contrary to section 6(1) of the Criminal Law Act;

(ii) eviction or harassment of occupiers contrary to sections 1(2), (3) or (3A) of the Protection from Eviction Act 1977;

(iii) failure to comply with an improvement notice contrary to section 30(1) of the 2004 Act;

(iv) failure to comply with prohibition order etc contrary to section 32(1) of the Act; and

(v) breach of a banning order contrary to section 21 of the 2004 Act. There is a criminal sanction in respect of some of these offences which may result in imprisonment. In other cases, the local housing authority might be expected to take action in the more serious case. However, recognising that the enforcement action taken by local authorities was been too low, the 2016 Act was enacted to provide additional protection for vulnerable tenants against rogue landlords.

[16]Section 41 deals with applications for RROs. The material parts provide: “(1) A tenant or a local housing authority may apply to the First-Tier Tribunal for a rent repayment order against a person who has committed an offence to which this Chapter applies. (2) A tenant may apply for a rent repayment order only if —(a) the offence relates to housing that, at the time of the offence, was let to the tenant, and

(b) the offence was committed in the period of 12 months ending with the day on which the application is made.

[17]Section 43 provides for the making of RROs: “(1) The First-Tier Tribunal may make a rent repayment order if satisfied, beyond reasonable doubt, that a landlord has committed an offence to which this Chapter applies (whether or not the landlord has been convicted).”

[18]Section 44 is concerned with the amount payable under a RRO made in favour of tenants. By section 44(2) that amount “must relate to rent paid during the period mentioned” in a table which then follows. The table provides for repayment of rent paid by the tenant in respect of a maximum period of 12 months. Section 44(3) provides (emphasis added): “(3) The amount that the landlord may be required to repay in respect of a period must not exceed—(a) the rent paid in respect of that period, less

(b) any relevant award of universal credit paid (to any person) in respect of rent under the tenancy during that period.

[19]Section 44(4) provides: “(4) In determining the amount the tribunal must, in particular, take into account—(a) the conduct of the landlord and the tenant,

(b) the financial circumstances of the landlord, and

[20]Section 46 specifies a number of situations in which a FTT is required, subject to exceptional circumstances, to make a RRO in the maximum sum. These relate to the five additional offences which have been added by the 2016 Act where the landlord has been convicted of the offence or where the LHA has imposed a Financial Penalty.

[20]In Williams v Parmar

[2021] UKUT 244 (LC)

;

[2022] HLR 8

, the Chamber President, Fancourt J, gave guidance on the approach that should be adopted by FTTs in applying section 44:(i) A RRO is not limited to the amount of the profit derived by the unlawful activity during the period in question (at [26]);

(ii) Whilst a FTT may make an award of the maximum amount, there is no presumption that it should do so (at [40]);

(iii) The factors that a FTT may take into account are not limited by those mentioned in section 44(4), though these are the main factors which are likely to be relevant in the majority of cases (at [40]).

(iv) A FTT may in an appropriate case order a sum lower than the maximum sum, if what the landlord did or failed to do in committing the offence is relatively low in the scale of seriousness ([41]).

(v) In determining the reduction that should be made, a FTT should have regard to the “purposes intended to be served by the jurisdiction to make a RRO” (at [41] and [43]).

[21]The Deputy Chamber President, Martin Rodger KC, has subsequently given guidance of the level of award in his decisions Simpson House 3 Ltd v Osserman

;

and Hallett v Parker

;

. Thus, a FTT should distinguish between the professional “rogue” landlord, against whom a RRO should be made at the higher end of the scale (80%) and the landlord whose failure was to take suﬃcient steps to inform himself of the regulatory requirements (the lower end of the scale being 25%).

[22]In Acheampong v Roman

[2022] HLR 44

, Judge Cooke has now stated that FTTs should adopt the following approach: "20. The following approach will ensure consistency with the authorities: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).

[21]I would add that step (c) above is part of what is required under section 44(4)(a). It is an assessment of the conduct of the landlord specifically in the context of the offence itself; how badly has this landlord behaved in committing the offence? I have set it out as a separate step because it is the matter that has most frequently been overlooked." Application to the present case

[23]The Applicant provided evidence of the rent that they had paid and satisfied the Tribunal that for the relevant period the premises should have been licensed but were not.

[24]It is of some concern that the Respondents chose not to take any active part in the proceedings. No evidence was offered of the Respondents’ financial situation. Reasonable excuse

[25]There was no discernible argument of reasonable excuse put forward by the Respondents. Conduct

[26]The Applicants were to all intents and purposes good tenants. The Respondents on the other hand were by all indications bad landlords or “rogue” landlords. They had scant regard for the welfare of the tenants and put them at real risk by allowing them to occupy a property that was not fire safe. Quantum

[27]This was a very serious offence of failure to license. Applying the criteria in Acheampong above:• The total rent paid for the relevant period was : Vy Tran - £12000; Casper Farchy - £14400 and Luka Sharpe £9604.80.

• There is a deduction to be made for utilities although the Respondent provided no evidence of this.

• As already indicated, this was a serious licensing breach with a risk to health and safety of the Applicant.

[28]Applying the other criteria under the Act there was evidence of very poor conduct by the Respondents as detailed above.

[29]The financial circumstances of the Respondents were unknown and she gave no further evidence on that.

[30]In light of all of these matters we consider that an 85% award is appropriate – this reflects a 15% deduction for utilities.

[31]The Respondents are required to pay £10200 to Vy Tran;£12240 to Casper Farchy and £8164 to Luka Sharpe. They are also required to pay the Applicants their application and hearing fee of £300 in total. Judge Shepherd 22nd May 2023 RIGHTS OF APPEAL

[1]If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) then a written application for permission must be made to the First-Tier Tribunal at the Regional office which has been dealing with the case.

[2]The application for permission to appeal must arrive at the Regional office within 28 days after the Tribunal sends written reasons for the decision to the person making the application.

[3]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 for not complying with the 28 day time limit; the Tribunal will then look at such reason(s) and decide whether to allow the application for permission to appeal to proceed despite not being within the time limit.

[4]The application for permission to appeal must identify the decision of the Tribunal to which it relates (i.e. give the date, the property and the case number), state the grounds of appeal and state the result the party making the application is seeking.