Flat 2 Speakerman House, Gibralter Walk, London E2 7EW LON/00BG/HMG/2024/0032

FIRST-TIER TRIBUNAL

PROPERTY CHAMBER (RESIDENTIAL PROPERTY)

Case No LON/00BG/HMG/2024/0032

Between

Mr Louis NesbittApplicant

Mr Mohammed Imran Hussein Kenneth Lloyds Limited Oliver Brooks LimitedRespondent

Before

Judge N O’Brien

Ms R Kershaw BSc

Mr Muhammed William of London Borough of Tower Hamlets for the Applicant

Mr Mohammed Imran Hussein Application for a rent repayment order by tenant for the Respondent

Date 6 March 2025

Hearing 2025-03-05

Property: Walk, London E2 7EW

Type of application: Sections 40, 41, 43, & 44 of the Housing and Planning Act 2016. Judge N O’Brien,

DECISION

Decision of the Tribunal(1) The tribunal makes a rent repayment order against the First Respondent Mr Hussein in favour of the Applicant.

(2) The First Respondent must pay the Applicant the sum of £4124

(3) The above sum must be paid within 28 days of this order.

(4) The Respondent must also reimburse the applicant for the fees paid in these proceedings of £330 to be paid within 28 days of this order. The Proceedings

[1]On 6 March 2024 the tribunal received an application under section 41 of the Housing and Planning Act 2016 (HPA 2016) from the Applicant for a rent repayment order (RRO). The Applicant asserts that the First Respondent, alternatively the Second and Third Respondents was/were his former landlord(s) and that they committed an offence of managing or controlling a house required to be licensed pursuant to s.85 of the Housing Act 2004 (HA 2004) but which was not so licensed. The Second and Third Respondents are limited companies and the First Respondent is the sole director of both and is the leasehold owner of the premises. The Applicants’ case is that he rented in a room in the premises from August 2021 to October 2023. He seeks a Rent Repayment Order (RRO) in the sum of £8616.

[2]The tribunal issued standard directions on 18 June 2024. The Applicant complied with the direction to file a bundle but the Respondents did not. The matter was listed for a final hearing on 13 November 2024 however no one attended the hearing. The case officer telephoned Mr Hussain on the morning of the hearing who said he had forgotten about the hearing date. Mr Williams could not be contacted however in light of the fact that up until that point the Applicant’s representative had engaged fully with and actively pursued the proceedings the tribunal adjourned the hearing. It transpired that Mr Williams was having treatment for a serious health condition and this had prevented his attendance. The matter was relisted on 5 March 2025. Again no bundle was filed by any of the Respondents. The Hearing

[3]The Applicant attended the hearing with his representative Mr Williams. Additionally Mr Hussain attended to represent both himself and the Second and Third Respondents. We were provided with a bundle prepared for the hearing by the Applicant. Mr Hussain confirmed that he had received that bundle on 13 August 2024.

[4]We heard oral evidence from Mr Nesbitt. Additionally Mr Hussain cross examined Mr Nesbitt, gave oral evidence and answered questions put to him by the panel. Background

[5]The property which is the subject of the application is a 3-bedroom first floor flat in a 4-storey block in the Weavers ward in the London Borough of Tower Hamlets. (LBTH). Weavers ward has been subject of a selective licencing scheme introduced by LBTH in October 2016 pursuant to Part 3 of the Housing Act 2004. This scheme required all privately rented properties in the Weaver ward to be licenced irrespective of the number of occupants. It is not in dispute that the premises required a licence pursuant to that scheme if it were let as a dwelling to any number of persons, and it is not in dispute that the premises were not licenced throughout the period of Mr Nesbitt’s occupancy.

[6]Mr Nesbitt had three written tenancy agreements during his occupancy of the premises. All three named the Second Respondent as the landlord. All three were signed by the First Respondent. It is not clear from the signature box if he signed as landlord or on behalf of the landlord. All payments were made to the Second Respondent until May 2023 when the Applicant was instructed by the First Respondent to make payments to the Third Respondent company. He told us in his evidence that he had always considered Mr Hussain to be his landlord and had only dealt with him throughout his occupancy of the premises. On questioning by Mr Hussain he accepted that the tenancy agreements that he had signed named the Second Respondent as landlord.

[7]Mr Nesbitt told us that there were three or four people living in the flat at any one time. They all shared a bathroom and kitchen and there was no communal living room. He told us that there were some issues with localised mould in the property and that the landlord had refused to replace a tumble dryer when it broke. Other than that he had little to say about the premises, save that there was a CCTV camera installed in the hallway and that Mr Hussain had access to the footage, which Mr Nesbitt found disturbing.

[8]For his part Mr Hussain insisted that he was not the Applicant’s landlord and that he had leased the premises to the Second Respondent and latterly to the Third Respondent under a guaranteed rent agreement. He pointed repeatedly to the fact that all Mr Nesbitt’s rental payments were made to the Second and Third Respondents and the fact that the Second Respondent was named as the landlord on the tenancy agreements as proof that he was not the landlord. He agreed he was the sole director of the Second and Third Respondents. He accepted that he applied for a probationary licence in his own name in respect of the premises in 2018. He accepted that he also applied for a selective licence for the premises, again in his own name as landlord and licence holder, on 6th March 2024, coincidently the same day that this application was sent to the tribunal. The application for a licence referred to the Third Respondent as the manager of the premises. Mr Hussain accepted that he had not produced any documentary evidence to show that he had leased the premises to either the Second or Third Respondents at any point during Mr Nesbitt’s occupation, although he insisted that such a written agreement existed. At times in the hearing he referred to the Second and Third Respondents as the managing agents and we noted that in an email dated 19 February 2025 sent to the Applicant’s representative he referred to himself as the landlord and the Second and Third Respondents as the ‘agency’. The Relevant Law

[9]The power of local authorities to designate particular areas as being subject to a selective licencing regime is contained in Part 3 of the 2004 Act. By virtue of s.95(1) of the 2004 Act a person commits an offence if they are in control of or manage a house which is required to be licenced by virtue of that part but is not so licenced.

[10]In proceedings against a person for an offence under s.95(1)of the 2004 Act it is a defence that he had a reasonable excuse for having control of managing the house without the required licence.

[11]Section 263(1) of the 2004 Act provides 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.

[12]Section 263(3) of the 2004 act defines ‘person managing’ as follows; 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.

[12]Section 40 of the HPA 2016 provides;(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…

(3) A reference to “an offence to which this Chapter applies” is to an offence, of a description specified in the table, that is committed by a landlord in relation to housing in England let by that landlord. The table which follows s.40(3) includes an offence under s95(1) of the 2004 Act.

[13]Section 41 of the HPA 2016 provides;(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.

[14]Section 43 of the HPA 2016 provides;(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).

(2) A rent repayment order under this section may be made only on an application under section 41.

(3) The amount of a rent repayment order under this section is to be determined in accordance with— (a)section 44 (where the application is made by a tenant);

[15]In Kaswoska v White [2022] UTUT11(LC) the Upper Tribunal concluded that a RRO cannot be made against the director of a company landlord. Further in Rakusen v Jepsen

[2023] UKSC 9

;

[2023] 1 WLR 1028

the Supreme Court confirmed that a RRO can only be made against the tenant’s immediate landlord.

[16]In Marigold v Wells

[2023] UKUT 33 (LC)

, the Upper Tribunal considered that the guidance on the defence of reasonable excuse provided by the Tax and Chancery Tribunal in the case of Perrin v HMRC was relevant to the issue of reasonable defence in the context of licencing offences: “48. The Tribunal in Perrin concluded its decision with some helpful guidance to the FTT, much of which is equally applicable in the sphere of property management and licensing. At paragraph 81 it said this: "81. When considering a "reasonable excuse" defence, therefore, in our view the FTT can usefully approach matters in the following way Third, decide whether, viewed objectively, those proven facts do indeed amount to an objectively reasonable excuse for the default and the time when that objectively reasonable excuse ceased. In doing so, it should take into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times. It might assist the FTT, in this context, to ask itself the question "was what the taxpayer did (or omitted to do or believed) objectively reasonable for this taxpayer in those circumstances?"

[49]The Tribunal then dealt with a particular point which is regularly encountered in HMO licensing cases and which therefore merits attention: "82. One situation that can sometimes cause difficulties is when the taxpayer's asserted reasonable excuse is purely that he/she did not know of the particular requirement that has been shown to have been breached. It is a much-cited aphorism that "ignorance of the law is no excuse", and on occasion this has been given as a reason why the defence of reasonable excuse cannot be available in such circumstances. We see no basis for this argument. Some requirements of the law are well-known, simple and straightforward but others are much less so. It will be a matter of judgment for the FTT in each case whether it was objectively reasonable for the particular taxpayer, in the circumstances of the case, to have been ignorant of the requirement in question, and for how long."

[51]… When considering for how long any reasonable excuse persisted, it may find the systematic approach described in Perrin provides a helpful framework”.

[17]The tribunal must consider whether the Respondent has a reasonable excuse whether or not he raises it as a defence If it is raised by the Respondent the burden is on him or her to prove it to the civil standard (i.e. on the balance of probabilities) and not the criminal standard (beyond all reasonable doubt); see Thurrock Council v Palm View Estates [2020] UKUT (LC) 355. Has the First Respondent Committed the Offence

[18]We are satisfied to the criminal standard that the First Respondent was the landlord and committed an offence of controlling and/or managing unlicenced premises. For the avoidance of doubt we consider that he both controlled and managed the premises. We do not accept that the First Respondent ever entered into a lease agreement with either the Second or Third Respondents. Had he done so he would have disclosed a copy of that lease in these proceedings. We asked the First Respondent why he had not disclosed the lease agreements between him and the other Respondents and he was unable to answer. Further it is telling that when Mr Hussain applied for a licence for the premises in 2024 he applied as landlord and ticked a box indicating that responsibility for repairing the premises lay with him. He indicated that the Third Respondent was the manager of the premises. The form indicates that the Third Respondent does not have responsibility for repairs but collects the rent. When the panel asked him why the application was not in the names of either Second and Third Respondent Mr Hussain explained that it would not be usual for managing agents to apply for a licence in their own names and that the practice in the lettings industry is for the licence to be applied for in the name of the actual landlord. We did not consider that the First Respondent was a reliable or credible witness and we are satisfied that he was not telling us the truth when he told us that he had let the premises to the limited companies pursuant to a guaranteed rent agreement.

[19]As we have concluded that the First Respondent did not lease the premises to either the Second or Third Respondents, they can only have entered into the tenancy and received rent as the First Respondent’s agent. Does the Respondent have a Reasonable Excuse

[20]We do not accept that the first Respondent had a reasonable excuse for not having a licence. Mr Hussain explained that he had not understood that when he was granted a probationary licence it was for a 12-month period only. A copy of that licence is included in the bundle at page 64 and it clearly states that it was for a period of 1 year from 23 January 2018.

[21]We are therefore satisfied to the criminal standard that the Respondent has committed an offence pursuant to s.95(1) of the Housing Act 2004. We are not satisfied that he had a reasonable excuse. Amount of RRO

[22]Section 44(2) of the 2016 Act provides that where the First-tier Tribunal decides to make a RRO under s.41(1) in favour of a tenant, the order may be made in relation to rent paid over the period not exceeding 12 months during which the landlord was committing the offence. In the case of Acheampong v Roman

[2022] UKUT 239 (LC)

the Upper Tribunal set out a 4-stage test which the tribunal must apply when considering how much to order a landlord to pay by way of an RRO. In summary the tribunal must;

[1]Ascertain the whole of the rent for the relevant period.

[2]Subtract any element of that sum that represents payment for utilities that only benefit the tenant. It is for the Landlord to supply evidence of these, but an experienced Tribunal will be able to make an informed estimate.

[3]Consider seriousness both compared to other types of offences for which an RRO can be made and examples of the same type of offence. What proportion of the rent (after deductions as above) is a fair reflection of the seriousness of the offence? This is the starting point. It is also the default penalty in the absence of any other factors but maybe higher or lower in light of the final step.

[4]Consider deductions or additions in light of section 44(4) factors (conduct of landlord and tenant, financial circumstances of landlord and any previous convictions of the landlord in relation to offences set out in section 40)

[23]In Kowalek v Hassanien Ltd

[2022] EWCA Civ 1041

; [2022] 1 W.L.R. 4558 the Court of Appeal held that when calculating the maximum recoverable under a rent repayment order, the rent in question had both to have been paid to discharge indebtedness which had arisen during the relevant period of offending by the landlord and in fact paid during that period. The effect of this decision is that rent paid by the tenant at a time when no offence was being committed cannot be included in the calculation of the maximum amount of a rent repayment order even if it had been paid in order to satisfy a liability which accrued during the period when an offence was committed.

[24]In the case of Simpson House 3 Ltd v Osserman

[2022] UKUT 164 (LC)

the Upper Tribunal considered that in deciding the level of any RRO, the tribunal should distinguish between the rogue landlord against whom a RRO should be made at the higher end of the scale and the landlord whose failure was to take sufficient steps to inform themselves of the regulatory requirements.

[25]In Newell v Abbot

[2024] UKUT 181 (LC)

the Upper Tribunal, having reviewed a number of recent authorities on the correct approach to quantification, observed at para 57; “This brief review of recent decisions of this Tribunal in appeals involving licencing offences illustrates that the level of rent repayment orders varies widely depending on the circumstances of the case. Awards of up to 85% or 90% of the rent paid (net of services) are not unknown but are not the norm. Factors which have tended to result in higher penalties include that the offence was committed deliberately or by a commercial landlord or an individual with a larger property portfolio or whether the tenants have been exposed to poor or dangerous conditions which have been prolonged by the failure to licence. Factors which tend to justify lower penalties include inadvertence on the part of the smaller landlord, property in good condition such that a licence would have been granted without one being required and mitigating factors which go some way to explaining the offence without excusing it such as the failure of a letting agent to warn of the need for a licence or personal incapacity due to poor health”

[26]In that case the Upper Tribunal noted that the landlord was not a professional landlord and that he had had committed the offence of controlling an unlicenced HMO through inadvertence rather than deliberately. The property was in reasonably good condition during the tenants’ occupation. It made a RRO equating to 60% of the net rent paid.

[27]The Applicant has compiled a schedule of payments however it differs from the payments shown on the bank statements. Mr William asked us to calculate the maximum RRO by reference to the payments shown on Mr Nesbitt’s bank statements. These show that Mr Nesbitt paid £7169.97 between 3 July 2022 and 30 May 2023, roughly an 11-month period. Of that £1443.33 was paid to the Third Respondent and the remainder was paid to the Second Respondent. Mr Nesbitt confirmed that he had paid rent up until he vacated the premises and was not in any arears as at the date he vacated. He told us that utilities were included in the rent. Mr Hussain confirmed that he had paid the utility bills including water, power and broadband. At first he told us that the utility contracts were in his name but then said he was not sure who was named on the contracts.

[28]We have no information as to the amount paid in respect of utilities used by the tenants and so we have had to estimate it as best we can making use of our experience as an expert tribunal. We consider that the average monthly utility bills (power/heat, water and broadband) for a three-bedroom flat would be in the region of £300, assuming it was occupied by 4 people. Over an 11-month period this would be £3,300 or £825 per occupant. This results in a maximum award of £6345.

[29]While we bear in mind the important public policy reasons underpinning the HMO licencing regime, we consider that this is a less serious offence when compared to the other offences in respect of which a RRO can be made. These include unlawful eviction and harassment. We bear in mind that the purpose of the legislation is deterrence; it is not relevant that the applicants have not suffered any personal loss as a result of the failure to obtain a licence. In our view the starting point in this case would be 60% of the maximum.

[30]In our view the conduct of the First Respondent as an experienced property professional merits a higher award. Mr Hussain raised no issue with the Applicant’s conduct.

[31]Looking at matters in the round we make a RRO at 65% of the maximum. This will result in an award of £4124. Name : Judge N O’Brien Date of Decision 6 March 2025 Rights of appeal By rule 36(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, the tribunal is required to notify the parties about any right of appeal they may have. 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. 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. 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. 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. If the tribunal refuses to grant permission to appeal, a further application for permission may be made to the Upper Tribunal (Lands Chamber).