30 Granard Road, London SW12 8UL LON/00BJ/HMF/2024/0074
FIRST-TIER TRIBUNAL
PROPERTY CHAMBER (RESIDENTIAL PROPERTY)
Case No LON/00BJ/HMF/2024/0074
Between
Deborah Stapleford, Charity Muchunga, Patricia Price, Benjamin Heys, Brandon Evanoff and Cameron MoryApplicantAcquire Estate Agents Limited (First Respondent) and Kswailem Limited (Second Respondent)Respondent
Before
Judge P KornMs F Macleod MCIEHPeter Eliot, Solicitor, of Justice for Tenants for the ApplicantFirst Respondent. Second Respondent unrepresented. for the RespondentDate 21 November 2024Hearing 2024-10-09Property: 8UL Deborah Stapleford, CharityType of application: Application for Rent Repayment Order under the Housing and Planning Act 2016
DECISION
2 Description of hearing This was a face-to-face hearing. Decisions of the tribunal(1) The tribunal makes no rent repayment order against the First Respondent.(2) The tribunal orders the Second Respondent to repay to the Applicants the following sums by way of rent repayment:• to Deborah Stapleford the sum of £5,673.60;• to Charity Muchunga the sum of £7,593.60;• to Patricia Price the sum of £6,633.60;• to Benjamin Heys the sum of £7,977.60;• to Brandon Evanoff the sum of £8,313.60; and• to Cameron Mory the sum of £8,169.60.(3) The tribunal also orders the Second Respondent to reimburse to the Applicants the application and hearing fees of £820.00.(4) The above sums must be paid by the Second Respondent to the Applicants within 28 days after the date of this determination. Introduction[1]The Applicants have each applied for a rent repayment order against the First Respondent and the Second Respondent under sections 40-44 of the Housing and Planning Act 2016 (“the 2016 Act”).[2]The basis for the application is that the First Respondent and/or the Second Respondent committed an offence of having control of and/or managing a house in multiple occupation which was required to be licensed but was not licensed, contrary to section 72(1) of the Housing Act 2004 (“the 2004 Act”).[3]The Applicants seek rent repayment orders in the following sums in respect of the following periods (the exact amounts having been clarified at the hearing):• Deborah Stapleford – the sum of £7,800.00 for the period 13 January 2022 to 12 January 2023;• Charity Muchunga – the sum of £10,200.00 for the period 1 July 2022 to 30 June 2023;• Patricia Price – the sum of £9,000.00 for the period 1 October 2022 to 30 September 2023; 3• Benjamin Heys – the sum of £10,680.00 for the period 24 July 2022 to 23 July 2023;• Brandon Evanoff – the sum of £11,100.00 for the period 8 August 2022 to 7 August 2023; and• Cameron Mory – the sum of £10,920.00 for the period 31 August 2022 to 1 July 2023. As clarified at the hearing, the rent repayment orders are sought against the First Respondent or, failing that, against the Second Respondent. Applicants’ case[4]In written submissions the Applicants state that the Property was a 3-storey detached house containing nine bedrooms with a shared kitchen located on the ground floor and shared bathrooms on the ground floor, first floor and second floor. The Applicants were all tenants at the Property, and during the periods of claim the Property was occupied by at least five persons living in two or more separate households and occupying the Property as their main residence. Their occupation of the Property constituted the only use of the accommodation, and rent was paid by the persons in occupation. They submit that the Property was therefore an HMO requiring an HMO licence.[5]The Applicants have set out details of who occupied which room and between which dates and have provided copy bank statements by way of proof of payment of rent by each occupier. They state that no HMO licence was held during the relevant period and that no licence application was made at any point during the relevant period.[6]The Applicants submit that the First Respondent was the Applicants’ immediate landlord, being the party named as “owner” in the Applicants’ tenancy agreement. They go on to assert that if the tribunal makes a finding of fact that the First Respondent was acting as an agent for the Second Respondent in entering into a tenancy agreement with the Applicants (i.e., that the Second Respondent was an undisclosed principal) then, as per the decision of the Upper Tribunal in Cabo v Dezotti [2022] UKUT 240 (LC) (at paragraphs 62 – 83), both the agent (the First Respondent) and the undisclosed principal (the Second Respondent) could be the Applicants’ immediate landlord.[7]The Applicants go on to argue that the First Respondent has asserted its status as principal and owner/landlord by virtue of the express terms of the contract. Furthermore, according to the Applicants’ reading of the decision in Siu Yin Kwan v Eastern Insurance Co Ltd [1994] A.C. 199 [207], it was expressly stated in that case that the agent of an 4 undisclosed principal may also be sued on the contract and that the circumstances around the contract can show an agent to be the true and only principal.[8]The Applicants then state, possibly arguing in the alternative, that the circumstances around these tenancy agreements illustrate that the First Respondent was the principal as it was responsible for the Property and for the tenants and for the maintenance of the Property as well as being the receivers of the rack-rent. Following Lord Diplock’s dictum in Teheran-Europe Co. Limited v S T Belton (Tractors) Limited, they submit that it should have been made clear to the Applicants that they were contracting with another party via the agent before they signed the agreement in order to avoid the First Respondent being treated as principal. They also assert that the First Respondent has not demonstrated that at the point of entering into the agreement the Applicants were willing to engage with anyone other than the First Respondent as the principal.[9]As for the Second Respondent, the Applicants state that it is the company registered by the owner, Bandar Khaled A Aslwailem, for whom rack-rent was received. This makes it a person “having control” of the Property within the meaning of section 263 of the 2004 Act.[10]On the issue of the respective parties’ conduct, the Applicants state that they have conducted themselves well and have complied with the terms of their tenancy and paid rent. The Respondents, by contrast, have in the Applicants’ submission broken a number of laws causing serious risk to the occupants and their quality of life. In particular, the fire alarm located in the kitchen was not working at a certain point, there was no fire-fighting equipment, there was no fire safety information or signage at the Property, Ms Muchunga’s room was dirty at the start of her tenancy, the First Respondent informed some of the Applicants that a default fee of £50 would be payable if the Applicants obstructed communal arears of the Property, and the Respondents did not ensure that a gas safety certificate or an electrical safety certificate was in place throughout the tenancy and provided to the occupants. The Applicants also reported mould and damp issues throughout the Property but particularly in the downstairs bathroom and Room 4, and there were concerns about a broken back step and a kitchen leak and the absence of a central fire alarm system.[11]Each of the Applicants has given a witness statement. Respondents’ case[12]The Second Respondent has not made any written or oral submissions in these proceedings. 5[13]In written submissions the First Respondent states that an application for an HMO licence was made in or around October 2023.[14]The First Respondent states that the Second Respondent is a company incorporated and registered in Saudi Arabia. It is assumed by the First Respondent that Mr Aslwailem is the controlling mind of the company, and pursuant to standard terms of business the Second Respondent appointed the First Respondent to carry out management services in respect of the Property from 21 September 2018. The First Respondent itself is a company incorporated in England & Wales on 17 February 2005 of which Quoc Hien Nguyen Lu (Mr Lu) is the sole director and shareholder. The statement of the financial position of the First Respondent ending on 28 February 2023 shows a deficit of £62,169.[15]At various times, the rooms were let to the Applicants through licence agreements. Whilst the First Respondent was appointed by the Second Respondent as the managing agent, the landlord’s name and address for service of notices given in the tenancy agreements were those of the First Respondent.[16]The First Respondent notes that a rent repayment order can only be made against a "landlord" and that in Rakusen v Jepson [2023] UKSC 9 the Supreme Court confirmed that this means only the tenant's immediate landlord.[17]The circumstances in which a tenant is entitled to seek a rent repayment order against both an agent and the undisclosed principal was considered by the Upper Tribunal in Cabo v Dezotti [2022] UKUT 240 (LC). The Upper Tribunal explained the relationship between agent and principal in Cabo as follows: “An agent is a person engaged to do any act for another or to represent another in dealings with third parties. The person for whom such acts are done is known as the principal. The essence of the relationship is that the agent is given power, within prescribed limits, to affect the principal’s legal relations with third parties. The relationship of agent and principal is usually created by a written contract and the responsibilities of the agent are defined by the contract. But the relationship may be defined partly in writing and partly by oral agreement or by conduct”.[18]The Upper Tribunal in Cabo v Dezotti then went on to say the following: “When the true relationship between the company and Ms Cabo was revealed, Ms Dezotti was therefore entitled to make her claim for a rent repayment order against Ms Cabo, as her landlord. I think it likely that she could additionally have made a claim against the company itself, because the contractual relationship of landlord and tenant also existed between them, but in this case she chose not to do so and it is not necessary to decide that point”. 6[19]In the recent decision of the First-tier Tribunal in Brugmans v Trojan Developments (Bournemouth) Limited, Judge Dobson analysed the Upper Tribunal’s comments in Cabo v Dezotti and determined that the meaning of the word “landlord” should be construed to include an agent of an undisclosed principal. The First Respondent submits that this analysis is incorrect. Whilst it accepts that an agent without a proprietary interest could become a “landlord” by dint of entering into a contractual agreement with someone else, in its submission it does not naturally follow that a rent repayment order can be made against such an agent under the 2016 Act.[20]The First Respondent goes on to state that an agent when disclosing the fact of an agency may do so without disclosing the name of the principal. Such a principal is not undisclosed but might be called “unidentified”, and in its submission there is a distinction between an undisclosed and unidentified principal. It adds that it is obvious from the construction of the agreement itself that the reference to the First Respondent as the owner was simply a mistake. Any reasonable person would have noted that “Acquire Estate Agent” was not the landlord but a mere agent. The fact that the Applicants did not know the identity of the landlord does not mean the principal was undisclosed, only that it was unidentified. Furthermore, Benjamin Heys’ evidence confirms that he believed that Mr Lu, not the First Respondent, was the landlord.[21]The First Respondent asserts that the contemporaneous correspondence unequivocally demonstrates that the Applicants, both individually and collectively, knew that the First Respondent was nothing more than an agent acting on behalf of somebody else. For example, on 6 November 2023, Patricia Price sent an email to the Council stating that “we received the attached email form our estate agent …”.[22]The First Respondent further submits that even if the contractual material dictates that the First Respondent is the landlord, the Applicants are estopped from relying on its being one. In the decision of the House of Lords (as it then was) in Republic of India v India Steamship Company Limited [1998] AC 878 Lord Steyn said: “It is settled that an estoppel may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared by both of them or made by one and acquiescing by the other. The effect of the estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on an assumption…. it is not enough that each of the two parties acts on an assumption not communicated to the other. But it was rightly accepted by counsel for both parties that a concluded agreement is not required for an estoppel by convention”. This decision was referred to by the Upper Tribunal in Admiralty Park Management Company Ltd v Ojo [2016] UKUT 0421 (LC), where it concluded (in the context of a service charge dispute) that the leaseholder had had a number of opportunities to raise objections to 7 the method of demanding and apportioning the service charges. By failing to raise any objections for many years, he had effectively acquiesced to those methods and was estopped by convention from challenging the service charges on those grounds.[23]In the present case, argues the First Respondent, the parties operated on the understanding that the First Respondent was the agent. At various times the Applicants sought the permission of the ‘landlord’ to keep pets and for the ‘landlord’ to carry out works, and the First Respondent in turn relied upon that assumption by chasing up the matter with the landlord rather than carry out the works itself and at its own expense.[24]The First Respondent further argues that it would be grossly unfair to punish an agent and require them to repay significant sums in circumstances where no monies were retained by them. Witness evidence Ms Stapleford’s evidence[25]In her witness statement as one of the Applicants, Ms Stapleford states that there was no carbon monoxide detector in the Property until she requested this in April 2021. There were no fire or smoke alarms in the bedrooms, nor was there a fire blanket in the kitchen. As she had some concerns, she organised a fire safety check with the London Fire Brigade who found the alarm in the kitchen not to be working and the location of the carbon monoxide detector to be incorrect. She adds that the kitchen backdoor was very old and required a key to open and two further bolts to close securely, and there was also no centralised alarm system. There was damp in her bedroom which she first complained about in August 2021, and she has previously identified this as the reason why she moved out. Ms Muchunga’s evidence[26]In her witness statement as one of the Applicants, Ms Muchunga states that the back doorstep was damaged, there was a leak in the kitchen and a large hole next to the boiler, and she echoes complaints articulated by Ms Stapleford. She also complains that the Applicants were not always given 24 hours’ notice of the First Respondent coming to the Property. Ms Price’s evidence[27]In her witness statement as one of the Applicants, Ms Price echoes concerns raised by Ms Stapleford and Ms Muchunga and raises some 8 other concerns such as windows being single pane and liable to smash into large shards. Mr Heys’ evidence[28]In his witness statement as one of the Applicants, Mr Heys echoes concerns raised by other Applicants and also complains about Mr Lu’s own behaviour when visiting the Property.[29]At the hearing, Mr Heys said that he did not recall seeing any landlord other than Mr Lu who he believed to be the landlord in his personal capacity. In answer to a differently worded question, he then said that when he entered into his tenancy agreement he believed that the agreement was just with the First Respondent. He then added that he had understood the First Respondent to be the ‘initial port of call’ in its capacity as agent but that in some way the First Respondent was also the landlord or possibly a group company was the landlord. He accepted, though, that estate agents do not ordinarily own property, and he speculated that maybe he believed Mr Lu to be the owner of the First Respondent.[30]It was put to Mr Heys that there were various references in the correspondence to the First Respondent being the estate agent as well as various references by the First Respondent to there being a “landlord” (i.e. there being some other entity which was the landlord). In response, Mr Heys effectively said that he was unable to add to what he had already said. Mr Evanoff’s evidence[31]In his witness statement as one of the Applicants, Mr Evanoff echoes concerns raised by the other Applicants but with some extra detail. Mr Mory’s evidence[32]In his witness statement as one of the Applicants, Mr Mory also echoes concerns raised by the other Applicants, again with some extra detail. Mr Lu’s evidence[33]Mr Lu is sole director of the First Respondent. In his witness statement he states that the Second Respondent was formed to collect rent on behalf of the Aslwailem family and that he was told that it would be the First Respondent’s client. The First Respondent was later instructed to remit the rental income, less its fees and expenses, to Khaled Aslwailem’s personal bank account on behalf of the Second Respondent. The intention was not to create assured shorthold 9 tenancies, and the occupiers (including the Applicants) were granted licences to occupy. Each licence provided the First Respondent’s full name and address as the main contact where occupiers could serve notice, if so required, since the Second Respondent is not registered in the United Kingdom. However, the Applicants were informed and were fully aware that the First Respondent was not the landlord or owner of the Property and that decisions had to be authorised by the landlord first.[34]Mr Lu goes on to state that the First Respondent collected the rent received from occupiers of the Property and then paid it over to Khaled Aslwailem each month less its management fee and any expenses incurred in dealing with matters such as repairs and maintenance, cleaning, utilities, council tax, Wi-fi and the TV licence. He has provided copy bank statements showing the payments made to Mr Aslwailem.[35]Mr Lu also states that as a result of the Covid-19 restrictions, the First Respondent agreed that the Applicants could assist with finding occupants for rooms that became vacant, but the Applicants were specifically informed that the owner (landlord) would have to approve each proposed new occupant. All applications were made via the First Respondent’s online portal AcquireLiving.co. The portal informed users that the First Respondent was not the landlord, and all of the Applicants applied to live at the Property via this portal. When major decisions were required, the First Respondent always informed occupiers that it would need to speak with the landlord first.[36]At the hearing, Mr Lu accepted that there was no evidenced in the hearing bundle as to what is stated on the First Respondent’s portal nor any evidence that the First Respondent had made it clear to the Applicants that there was a separate landlord. When asked why the First Respondent could not have ensured that the tenancy agreements were clearer in this regard, Mr Lu said that it was an automated system.[37]Mr Lu was also asked about utilities. He accepted that the First Respondent’s information on what had been spent on utilities was sufficiently unclear that it was difficult to work out what (if anything) should be deducted for utilities if the tribunal was minded to make a rent repayment order. Mr Ta’s evidence[38]Mr Ta is the property manager at the First Respondent. In relation to the roof leak complained about by the Applicants, in or around November 2022 the tenant who occupied the top rear bedroom reported damp and leak on her bedroom wall. The First Respondent arranged for GHD Roofing to investigate, and they recommended that the whole roof should be replaced at an approximate cost of £48,000. 10 This being a large sum, it took the landlord a long time to decide. In the end this solution was not approved, and the First Respondent found a different roofing contractor who could carry out repairs for £5,000. This was approved by the landlord and work commenced on 29 March 2023.[39]In relation to the ground floor bathroom, he states that Benjamin Heys reported two issues in or around December 2022. The first was that the light pull cord was not working, and the First Respondent sent a contractor to fix it immediately. The second was that the bathroom window’s wooden frames were rotten. The First Respondent boarded up the window and then arranged for several window contractors to attend and quote for a replacement window, but the landlord did not approve the cost. Finally the First Respondent found a contractor who quoted approximately £500 to replace the window and this was approved by the landlord. That contractor let them down and therefore the First Respondent had to find an alternative contractor. The window was finally replaced in or around January 2024. Oral submissions at hearing Applicants’ oral submissions[40]Mr Eliot for the Applicants said that the First Respondent was acting as agent for an undisclosed principal and therefore made itself a contracting party, thereby taking on the responsibilities of a landlord. Also, at the point of entering into the tenancy agreements the Applicants were not told that the First Applicant was merely an agent and there was no evidence that they knew that the First Respondent was merely an agent.[41]In the tenancy agreements the First Respondent described itself as owner and landlord, and this in Mr Eliot’s submission can be relied on pursuant to the decision of the Upper Tribunal in Cabo v Dezotti and pursuant to the First-tier Tribunal decision in Brugmans v Trojan Developments (Bournemouth) Limited (both already referred to above). It was true that the First Respondent’s name included the words “Estate Agents”, but in Mr Eliot’s submission ordinary tenants would not think that this meant they it was not the landlord.[42]Mr Eliot also said that there had been many failings on the part of the Respondents. The Property had remained unlicensed for 3 years without an application being made, there were no fire blankets, the fire alarm was broken, and the fire system was not interconnected. There had been mould damage, problems with windows and visits to the Property by the First Respondent without notice. 11 First Respondent’s oral submissions[43]Mr Hardman for the First Respondent accepted that the Property required an HMO licence for the whole of the period of claim and that(a) it was not licensed during that period and(b) no application for a licence was made during that period. However, in his submission the First Respondent was not a “landlord” for the purposes of the rent repayment provisions of the 2016 Act. He also submitted that the purpose of the 2016 Act was not to go after agents.[44]Mr Hardman added that the First Respondent is called an “estate agent”, which should have indicated to the Applicants what its role was. In addition, Mr Heys’ evidence suggests that he understood the First Respondent to be merely the ‘middle-man’. Mr Hardman also referred the tribunal to extracts from the textbook ‘Chitty’ regarding undisclosed principals. In addition, he re-emphasised the ‘estoppel’ argument made in written submissions. In relation to the Supreme Court decision in Rakusen v Jepson, Mr Hardman referred the tribunal specifically to paragraphs 31 and 38 of that decision, as well as to section 40(2) of the 2016 Act and submitted that one needed ultimately to look at who has received the rent. Relevant statutory provisions[45]Housing and Planning Act 2016 Section 40(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 ...(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. Act section general description of offence 1 Criminal Law Act 1977 section 6(1) violence for 12 securing entry 2 Protection from Eviction Act 1977 section 1(2), (3) or (3A) eviction or harassment of occupiers 3 Housing Act 2004 section 30(1) failure to comply with improvement notice 4 section 32(1) failure to comply with prohibition order etc 5 section 72(1) control or management of unlicensed HMO 6 section 95(1) control or management of unlicensed house 7 This Act section 21 breach of banning order Section 41 (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. Section 43 (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). 13 (2) A rent repayment order under this section may be made only on an application under 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) ... Section 44 (1) Where the First-tier Tribunal decides to make a rent repayment order under section 43 in favour of a tenant, the amount is to be determined in accordance with this section. (2) The amount must relate to rent paid during the period mentioned in the table. If the order is made on the ground that the landlord has committed the amount must relate to rent paid by the tenant in respect of an offence mentioned in row 1 or 2 of the table in section 40(3) the period of 12 months ending with the date of the offence an offence mentioned in row 3, 4, 5, 6 or 7 of the table in section 40(3) a period, not exceeding 12 months, during which the landlord was committing the offence (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.(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 (c) whether the landlord has at any time been convicted of an offence to which this Chapter applies. 14 Housing Act 2004 Section 72 (1) A person commits an offence if he is a person having control of or managing a house in multiple occupation which is required to be licensed under this Part … but is not so licensed.(5) In proceedings against a person for an offence under subsection (1) … it is a defence that he had a reasonable excuse … for having control of or managing the house in the circumstances mentioned in subsection (1) … . Section 263 (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 … rents or other payments from … 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 … 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 ... Tribunal’s analysis[46]The First Respondent accepts that the Property required an HMO licence for the whole of the period of claim and that(a) it was not licensed during that period and(b) no application for a licence was made during that period. On the basis of the evidence before us, we agree with that assessment. The uncontested evidence (in this regard) shows that the Property was occupied by at least five persons living in two or more separate households and occupying the Property as their main residence. Their occupation of the Property constituted the only use of the accommodation, and rent was paid by the persons in occupation. No submissions have been made by or on behalf of the Second Respondent. 15[47]We are therefore satisfied beyond reasonable doubt that the Property required a licence and was not licensed for the whole period of claim. Did the First Respondent commit an offence?[48]Under section 72(1) of the 2004 Act, “a person commits an offence if he is a person having control of or managing a house in multiple occupation which is required to be licensed under this Part … but is not so licensed”. The phrases “person having control” and “person managing” are both defined in section 263 of the 2004 Act which is already quoted above.[49]The definition of a “person having control” includes a person “who receives the rack-rent of the premises (whether on his own account or as agent or trustee of another person)”. The First Respondent is a legal person and it is common ground between the parties that it received the rent, whether on its own account or as agent for the Second Respondent. It is also common ground that the rent received was large enough to fall within the definition of “rack rent” in section 263(2), or at least the First Respondent has not sought to argue otherwise. The First Respondent is therefore clearly a “person having control” and it follows that the First Respondent has committed an offence under section 72(1) of the 2004 Act being “a person having control of … a house in multiple occupation which is required to be licensed under this Part … but is not so licensed”. Whether the First Respondent is also a “person managing” is less clear, but this point has not been properly argued and does not need to be decided. Was the First Respondent a “landlord” for the purposes of the RRO legislation?[50]Having established that the First Respondent has committed an offence under section 72(1) of the 2004 Act the next question is whether it is a “landlord” for the purposes of the rent repayment provisions of the 2016 Act.[51]First of all, just on a point of detail, the agreements with the Applicants are called (and are referred to by the First Respondent as) licences to occupy, but there is no suggestion by the First Respondent that anything turns on this distinction for the purposes of these proceedings, and the First Respondent accepts that an RRO can be made in favour of a licensee. For ease of reference, therefore, we will just refer to the agreements as tenancy agreements.[52]Amongst the arguments raised by the First Respondent is an estoppel argument. The First Respondent argues that even if the contractual material dictates that it is the landlord, the Applicants are estopped from relying on its being one because the parties operated on the 16 understanding that the First Respondent was the agent . We do not accept this argument. First of all, the key moment was the point at which the tenancy agreements were signed, and therefore any subsequent dealings during which it may have become apparent (if in fact it did) that the First Respondent was merely the agent are not relevant for these purposes. Secondly, we are not persuaded that the Applicants gave much thought to this question when signing the tenancy agreements or, even if they did, that they concluded that the First Respondent was merely the agent. Thirdly, we do not accept that there is any evidence of a meeting of minds or an understanding between the parties at the time as to the First Respondent’s status.[53]Turning now to the case of Cabo v Dezotti referred to earlier, the issue before the Upper Tribunal in that case was effectively the reverse of the issue in the present case. In Cabo v Dezotti the question was whether a tenant who had dealt solely with an agent could make a rent repayment claim against the undisclosed principal. It was held that the tenant could do so. The Upper Tribunal also speculated on the question of whether the tenant could also have made a claim against the agent itself. That question was acknowledged by Martin Rodger KC to be ‘obiter’ but he commented as follows: “I think it likely that she could additionally have made a claim against the company itself, because the contractual relationship of landlord and tenant also existed between them”.[54]We also note that in Siu Yin Kwan v Eastern Insurance Co Ltd [1994] A.C. 199 [207] it was stated by the Privy Council that the agent of an undisclosed principal may be sued on contract and that the circumstances around the contract can show an agent to be the true and only principal.[55]The First-tier Tribunal in Brugmans v Trojan Developments (Bournemouth) Limited determined on the facts of that case in paragraph 118 that “where there is a tenancy created and where the only contracting party is the agent because the principal is undisclosed, the landlord for the purpose of the 2016 Act is the agent of the undisclosed principal”.[56]The Supreme Court decision in Rakusen v Jepson focused specifically on the question of who is a landlord for the purposes of the rent repayment provisions of the 2016 Act. The context was an attempt by the tenant to bring a rent repayment claim against the superior landlord (as distinct from his immediate landlord).[57]At paragraph 24 of the decision in Rakusen v Jepson their lordships noted that the opening words of section 40(2) of the 2016 Act state that a rent repayment order can be made against “the landlord under a tenancy of housing” and they commented that a tenancy of housing consists of the grant by one or more persons to one or more other 17 persons of the right to occupy residential accommodation in return for the payment of rent. Then at paragraph 28 they stated that section 40(2) links the landlord with the tenancy that generates the rent and renders it artificial and unnatural to construe section 40(2) as referring to any landlord other than the landlord under that tenancy.[58]At paragraphs 37 to 39 the Supreme Court in Rakusen v Jepson then went on to explain the purpose of, or policy behind, rent repayment orders, and at paragraphs 38 and 39 they stated as follows: “… Most of the relevant offences can also be committed by persons who are not landlords, in particular property agents. In many situations, they too may be regarded as directly benefiting from the payment of rent (e.g. through commission payments). Yet there is no suggestion that RROs can be made against property agents. RROs can only be made against landlords. The obvious policy reason for that is that landlords are those who directly benefit from the payment of the rent, or from the associated universal credit. For the implementation of that policy it is entirely rational to confine RROs to those to whom rent is directly paid, and those who benefit from the associated universal credit. In both cases that means the immediate landlord. It should also be borne in mind, in considering the purpose or policy, that an RRO is only one sanction available to those seeking to attach rogue landlords …”.[59]Taking the case law as a whole, there is some basis for arguing that in principle it is possible for an agent to be liable in relation to a contract entered into by that agent on behalf of an undisclosed (or unidentified) principal. However, it does not automatically follow that this is the case in the context of rent repayment applications under the 2016 Act.[60]In the present case, there is disagreement between the parties as to the capacity in which the Applicants believed they were dealing with the First Respondent. Mr Heys was somewhat unclear in cross-examination as to what he had understood the position to be when he signed his tenancy agreement, but our assessment is that neither he nor any of the other Applicants really put their mind to that question. There is no evidence before us that it particularly mattered to them, and there are factors pointing both ways that could either lead a reasonable tenant to conclude that the First Respondent was merely the agent or that it was the principal.[61]Furthermore, whatever the Applicants may or may not have believed, the evidence before us indicates that the First Respondent was in fact merely the agent. The Applicants have not questioned the proposition that the First Respondent passed the rent on to the Second Respondent (after deducting fees and expenses), and indeed the hearing bundle contains some documentary evidence of this arrangement. The First Respondent also did not have any property interest in the Property. 18[62]Returning to the decision of the Supreme Court in Rakusen v Jepson, it seems clear that the correct interpretation of the word “landlord” for the purposes of the rent repayment provisions of the 2016 Act is a straightforward one. As their lordships state, there is no suggestion that rent repayment orders can be made against property agents, and their lordships go on to explain that the purpose of the specific tool of rent repayment is to require those who actually benefit from the rent (i.e. landlords) to repay an appropriate proportion of that rent where they have committed a relevant criminal offence whilst in receipt of that benefit.[63]We accept that there is a possible concern that by effectively sheltering an undisclosed principal a property agent could potentially protect that principal against a rent repayment order without being required to account for the rent itself. In the present case, there is no evidence before us to indicate that this was the First Respondent’s intention, but nevertheless the concern is an understandable one. The answer to this concern, though, is again to be found in Rakusen v Jepson. First of all, if – as in the present case – it is established that a property agent has committed one of the offences listed in section 40(3) of the 2016 Act there are various sanctions that can be imposed on that property agent, and these sanctions can act as a deterrent against committing such an offence, or as a deterrent against failing to keep up to date with legislation protecting vulnerable occupiers, or as a punishment for having committed such an offence.[64]Secondly, the language of the 2016 Act does not in our view admit of a wide enough interpretation to enable tenants to make rent repayment claims against property agents. Parliament could for example have drafted the 2016 Act so as to enable tenants to make rent repayment claims against any “person managing” and/or against any “person having control” of premises, using the same wording as is to be found in for example section 72(1) of the 2004 Act. That Parliament did not do so is likely to reflect the fact that it did not consider it fair to require ‘repayment’ of rent by those not actually benefiting from that rent.[65]In conclusion, therefore, the First Respondent is not a “landlord” for the purposes of the rent repayment provisions of the 2016 Act and therefore a rent repayment order cannot be made against it. This differs from the conclusion reached in the First-tier Tribunal decision in Brugmans v Trojan Developments (Bournemouth) Limited, but that decision is not binding on this tribunal. It also differs from the ‘obiter’ comments of the Upper Tribunal in Cabo v Dezotti, but importantly that case was decided prior to the decision of the Supreme Court in Rakusen v Jepson.[66]For the sake of completeness we would just add that subsequent to the final hearing in the present case the Court of Appeal handed down its own decision in Cabo v Dezotti (on appeal from the Upper Tribunal) 19 but that the Court of Appeal did not address the issue of whether – and if so in what circumstances – an agent can be a ‘landlord’ for the purposes of the rent repayment provisions of the 2016 Act. Did the Second Respondent commit an offence?[67]As previously stated, we are satisfied that the Property required a licence and was not licensed. Under section 72(1) of the 2004 Act, “a person commits an offence if he is a person having control of or managing a house in multiple occupation which is required to be licensed under this Part … but is not so licensed”.[68]The definition of a “person having control” includes a person “who receives the rack-rent of the premises (whether on his own account or as agent or trustee of another person)”. Whilst the Applicants’ main focus has been on the First Respondent, they state that the Second Respondent is the company registered by the owner, Bandar Khaled A Aslwailem, for whom rack-rent was received. This in their submission makes it a person “having control” of the Property within the meaning of section 263 of the 2004 Act.[69]The Second Respondent has not engaged with these proceedings and has not made any written or oral submissions. The Applicants’ assessment has therefore not been challenged. On the basis of the information before us we accept that the Second Respondent was a person “having control” of the Property on the basis of the Applicants’ uncontested evidence that it received the rack rent. It follows that the Second Respondent has committed an offence under section 72(1) of the 2004 Act being “a person having control of … a house in multiple occupation which is required to be licensed under this Part … but is not so licensed”. Was the Second Respondent a “landlord” for the purposes of the RRO legislation?[70]The Applicants have not specifically addressed the question of whether the Second Respondent was also a “landlord” for the purposes of the 2016 Act. However, in our view, based on the evidence before us, the Second Respondent was a “landlord”, because it was the undisclosed or unidentified principal under the tenancy agreements. In any event, to find otherwise would enable the receiver of rent to escape liability by virtue of a sham arrangement. Parliament cannot have intended an individual property owner to be able to let out a property and then set up a company to receive the rent on the basis that the individual would not be liable to ‘repay’ the rent because it had not received the rent and the company would not be liable to repay the rent because it had not itself granted the tenancy. In our view, therefore, the Second Respondent was a “landlord” for the purposes of the 2016 Act. 20 The defence of “reasonable excuse”[71]Under section 72(5) of the 2004 Act, it is a defence that a person who would otherwise be guilty of the offence of controlling or managing a house which is licensable under Part 2 of the 2004 Act had a reasonable excuse for the failure to obtain a licence. The burden of proof is on the person relying on the defence.[72]In this case, the Second Respondent has made no submissions, and in our view there is no credible basis for concluding that the Second Respondent had a reasonable excuse. The offence[73]Section 40 of the 2016 Act confers power on the First-tier Tribunal to make a rent repayment order where a landlord has committed an offence listed in the table in sub-section 40(3), subject to certain conditions being satisfied. An offence under section 72(1) of the 2004 Act is one of the offences listed in that table, and for the reasons given above we are satisfied to the necessary standard of proof(a) that the Second Respondent was a “person having control” of the Property for the purposes of section 263 of the 2004 Act,(b) that the Property was required to be licensed throughout the periods of claim and(c) that it was not licensed at any point during the periods of claim.[74]Under section 41(2), a tenant may apply for a rent repayment order only if the offence relates to housing that, at the time of the offence, was let to the tenant and the offence was committed in the period of 12 months ending with the day on which the application is made. Based on the end date for each Applicant’s claim, we are satisfied in respect of all of the Applicants that the offence was committed in the period of 12 months ending with the day on which their application was made. Process for ascertaining the amount of rent to be ordered to be repaid[75]Based on the above findings, we have the power to make a rent repayment order against the Second Respondent.[76]The amount of rent to be ordered to be repaid is governed by section 44 of the 2016 Act. Under sub-section 44(2), the amount must relate to rent paid by the relevant tenant in respect of a period, not exceeding 12 months, during which the landlord was committing the offence. Under sub-section 44(3), the amount that the landlord may be required to repay in respect of a period must not exceed the rent paid in respect of that period less any relevant award of housing benefit or universal credit paid in respect of rent under the tenancy during that period. 21[77]In this case, the Applicants’ respective claims relate to periods not exceeding 12 months. The evidence before us indicates that no part of the rent was covered by the payment of housing benefit, and the Second Respondent has not disputed that the rental amounts claimed were in fact paid by the Applicants. We are also satisfied on the basis of their evidence that the Applicants were in occupation for the whole of the period to which their respective rent repayment applications relate.[78]Under sub-section 44(4), in determining the amount of any rent repayment order 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(c) whether the landlord has at any time been convicted of an offence to which the relevant part of the 2016 Act applies.[79]The Upper Tribunal decision in Vadamalayan v Stewart (2020) UKUT 0183 (LC) is one of the authorities on how a tribunal should approach the question of the amount that it should order to be repaid under a rent repayment order if satisfied that an order should be made. Importantly, it was decided after the coming into force of the 2016 Act and takes into account the different approach envisaged by the 2016 Act.[80]In her analysis in Vadamalayan, Judge Cooke states that the rent (i.e. the maximum amount of rent recoverable) is the obvious starting point, and she effectively states that having established the starting point one should then work out what sums if any should be deducted. She departs from the approach of the Upper Tribunal in Parker v Waller (2012) UKUT 301, in part because of the different approach envisaged by the 2016 Act, Parker v Waller having been decided in the context of the 2004 Act. Judge Cooke notes that the 2016 Act contains no requirement that a payment in favour of a tenant should be reasonable. More specifically, she does not consider it appropriate to deduct everything that the landlord has spent on the property during the relevant period, not least because much of that expenditure will have repaired or enhanced the landlord’s own property and/or been incurred in meeting the landlord’s obligations under the tenancy agreement. There is a case for deducting utilities, but otherwise in her view the practice of deducting all of the landlord’s costs in calculating the amount of the rent repayment should cease.[81]In Judge Cooke’s judgment, the only basis for deduction is section 44 of the 2016 Act itself, and she goes on to state that there will be cases where the landlord’s good conduct or financial hardship will justify an order less than the maximum.[82]Since the decision in Vadamalayan, there have been other Upper Tribunal decisions in this area, notably those in Ficcara and others v James (2021) UKUT 0038 (LC) and Awad v Hooley (2021) UKUT 22 0055 (LC) . In Ficcara v James, in making his decision Martin Rodger QC stressed that whilst the maximum amount of rent was indeed the starting point the First-tier Tribunal (FTT) still had discretion to make deductions to reflect the various factors referred to in section 44(4) of the 2016 Act. In addition, he stated that neither party was represented in Vadamalayan, that the Upper Tribunal’s focus in that case was on the relevance of the amount of the landlord’s profit to the amount of rent repayment and that Vadamalayan should not be treated as the last word on the exercise of discretion required by section 44.[83]In Awad v Hooley, Judge Cooke agreed with the analysis in Ficcara v James and said that it will be unusual for there to be absolutely nothing for the FTT to take into account under section 44(4).[84]In Williams v Parmar & Ors [2021] UKUT 244 (LC), Mr Justice Fancourt stated that the FTT had in that case taken too narrow a view of its powers under section 44 to fix the amount of the rent repayment order. There is no presumption in favour of the maximum amount of rent paid during the relevant period, and the factors that may be taken into account are not limited to those mentioned in section 44(4), although the factors in that subsection are the main factors that may be expected to be relevant in the majority of cases.[85]Mr Justice Fancourt went on to state in Williams that the FTT should not have concluded that only meritorious conduct of the landlord, if proved, could reduce the starting point of the (adjusted) maximum rent. The circumstances and seriousness of the offending conduct of the landlord are comprised in the “conduct of the landlord”, and so the FTT may, in an appropriate case, order a lower than maximum amount of rent repayment if what a landlord did or failed to do in committing the offence was relatively low in the scale of seriousness, by reason of mitigating circumstances or otherwise.[86]In Hallett v Parker and others [2022] UKUT 165 (LC), the Upper Tribunal did not accept a submission that the fact that the local authority has decided not to prosecute the landlord should be treated as a “credit factor” which should reduce the amount to be repaid.[87]In its decision in Acheampong v Roman and others [2022] UKUT 239 (LC), the Upper Tribunal recommended a four-stage approach to determining the amount to be repaid, which is paraphrased below:-(a) ascertain the whole of the rent for the relevant period;(b) subtract any element of that sum that represents payment by the landlord for utilities that only benefited the tenant;(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 compared to other examples of the same type of offence; and 23(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).[88]Adopting the Acheampong approach, the whole of the rent means the whole of the rent paid by each Applicant out of his/her own resources, which is the whole of the rent in this case as no part of the rent was funded by housing benefit.[89]In relation to utilities (see (b) above), the First Respondent has provided some information as to what was spent on utilities. And whilst that information is somewhat unclear, it is the best information that we have available. We have therefore used the figures in the table contained in the First Respondent's bundle for gas, electricity and Wi-fi (but excluding Council Tax and water rates) which seem reasonable if split between 8 rooms. In view of the somewhat broad-brush nature of the exercise in coming to this conclusion and in the absence of more specific evidence, we consider that the simplest approach is to treat each Applicant as having benefited to the same extent (by £708.00, based on the First Respondent’s figures) from the landlord’s expenditure on utilities.[90]These charges should be deducted from the rental amount capable of forming the basis of an RRO as they relate to the Applicants’ share of gas, electricity and Wi-fi consumption and are exactly the sorts of utility charge envisaged by the Upper Tribunal in Acheampong. Therefore, the starting point for Ms Stapleford is reduced by £708.00 to £7,092.00, the starting point for Ms Muchunga is reduced by £708.00 to £9,492.00, the starting point for Ms Price is reduced by £708.00 to £8,292.00, the starting point for Mr Heys is reduced by £708.00 to £9,972.00, the starting point for Mr Evanoff is reduced by £708.00 to £10,392.00 and the starting point for Mr Mory is reduced by £708.00 to £10,212.00.[91]As regards the seriousness of the type of offence, whilst it could be argued based on the maximum criminal penalty available that there are offences covered by section 40(3) of the 2016 Act which can give rise to a greater criminal sanction, a failure to license is still a serious offence. Failure to license leads – or can lead – to significant health and safety risks for often vulnerable tenants, and sanctions for failure to license have an important deterrent effect on future offending as well as encouraging law-abiding landlords to continue to take the licensing system seriously and inspiring general public confidence in the licensing system. In addition, there has been much publicity about licensing of privately rented property, and there is an argument that good landlords who apply for and obtain a licence promptly may feel that those who fail to obtain a licence gain an unfair benefit thereby and therefore need to be heavily incentivised not to let out licensable properties without first obtaining a licence. Furthermore, even if it could be argued that the Applicants did not suffer direct loss through the Second Respondent’s failure to obtain a licence, it is clear that a 24 large part of the purpose of the rent repayment legislation is deterrence. If landlords can successfully argue that the commission by them of a criminal offence to which section 43 of the 2016 Act applies should only have consequences if tenants can show that they have suffered actual loss, this will significantly undermine the deterrence value of the legislation.[92]In the light of the above factors, we consider that the starting point for this offence should be 70% of the maximum amount of rent payable.[93]As for the seriousness of the offence in this particular case compared to others of the same type, in our view it was more serious than average as regards the level of culpability of the Second Respondent. The Property remain unlicensed for a considerable period of time, there were some significant problems at the Property that were not dealt with in a timely manner and some of which relate to safety, and the Second Respondent hid its identity by not being a party to the tenancy agreements and then did not engage with these proceedings. This in our view increases the starting point from 70% to 80%.[94]As regards the specific matters listed in section 44, the tribunal is particularly required to take into account(a) the conduct of the parties,(b) the financial circumstances of the landlord, and(c) whether the landlord has at any time been convicted of a relevant offence. We will take these in turn. Conduct of the parties[95]There is no real evidence before us that the Applicants’ conduct has been anything other than satisfactory. As for the Second Respondent’s conduct, this has already been covered above and there should be no double-counting to further increase the penalty. Financial circumstances of the landlord[96]The tribunal is required to take the Second Respondent’s financial circumstances into account when making its decision where there is concrete information available to it. However, the tribunal has no information on the Second Respondent’s financial circumstances and neither has it been able to cross-examine the Second Respondent on its financial circumstances as it was neither present nor represented at the hearing. Therefore, no adjustment can be made to reflect the Second Respondent’s financial circumstances. Whether the landlord has at any time been convicted of a relevant offence[97]There is no evidence before us that the Second Respondent has been convicted of a relevant offence, but it is clear from the Upper Tribunal 25 decision in Hallett v Parker (see above) that this by itself should not be treated as a credit factor. Other factors[98]It is apparent from the wording of sub-section 44(4) itself that the specific matters listed in sub-section 44(4) are not intended to be exhaustive, as sub-section 44(4) states that the tribunal “must, in particular, take into account” the specified factors. However, in this case we are not aware of any other specific factors which should be taken into account in determining the amount of rent to be ordered to be repaid. Amount to be repaid[99]The four-stage approach recommended in Acheampong has already been set out above. The amounts arrived at by going through the first two of those stages for each Applicant are set out in paragraph 90 above. As for the third stage, namely the seriousness of the offence including mitigating circumstances, this reduces the amount to 80% of each of those sums, subject to any adjustment for the section 44(4) factors referred to above.[100]As noted above, there is nothing to add or subtract for any of the other section 44(4) factors.[101]Therefore, taking all of the factors together, the rent repayment order for each Applicant against the Second Respondent is as follows:• Ms Stapleford – the sum of £5,673.60• Ms Muchunga – the sum of £7,593.60• Ms Price – the sum of £6,633.60• Mr Heys – the sum of £7,977.60• Mr Evanoff – the sum of £8,313.60• Mr Mory – the sum of £8,169.60. Cost applications[102]The Applicants have applied under paragraph 13(2) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 for an 26 order that the First Respondent or the Second Respondent reimburse their application and hearing fees of £820.00.[103]As the Applicants’ claim has been successful against the Second Respondent, albeit that there has been a deduction from the maximum payable, we are satisfied that it is appropriate in the circumstances to order the Second Respondent to reimburse these fees. Name: Judge P Korn Date: 21 November 2024 RIGHTS OF APPEALa. A. If a party wishes to appeal this decision to the Upper Tribunal (Lands Chamber) a written application for permission must be made to the First-tier Tribunal at the regional office dealing with the case.b. B. 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.c. C. If the application is not made within the 28 day time limit, such application must include a request for extension of time and the reason for not complying with the 28 day time limit; the Tribunal will then look at such reason and decide whether to allow the application for permission to appeal to proceed despite not being within the time limit.d. D. 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.