Rent Repayment Orders: why a landlord’s excuse must remain reasonable for the duration of the offence

Thursday, April 6th, 2023 - By Rooshan Saeed, Paralegal, Anthony Gold Solicitors

The Upper Tribunal has imposed a rent repayment order on a landlord despite accepting that he was told by the council that he did not need a licence and that he would later be invited to apply for a licence.

The case of Marigold and Ors v Wells [2023] UKUT 33 (LC) concerned a 5-bedroom self-contained flat at Number 4 Weddell House in Tower Hamlets. The property was occupied by five occupiers from 23 November 2018 until 22 November 2020. The occupiers applied for a rent repayment order (or ‘RRO’) seeking £34,490 for the period of 12 months between 13 November 2019 to 12 December 2020.

The occupiers argued that they were entitled to an RRO because their landlord had committed a criminal offence of controlling or managing an unlicensed HMO.

The landlord accepted that the flat ought to have been licensed from 1 April 2019 when Tower Hamlet’s additional licensing scheme came into force. However, he submitted that he did not commit the offence as under Section 72(5) of the Act, he had a reasonable excuse. The respondent alleged that before letting the flat to the occupiers in 2018, he applied for a licence. However, a council employee, Mr Shah, informed him on a telephone conversation that no licence was needed and that Tower Hamlets would be in touch with him at a later date to invite him to apply for the licence once the scheme was in effect. Mr Shah then emailed the respondent an hour later stating that the application fee was refunded “as requested.“

The First-tier Tribunal quoting D’Costa v D’Andrea & Ors [2021] UKUT 144 (LC) found that it was reasonable for the respondent, where he had been told by a local authority employee that his property did not require a licence and as there was no sufficient evidence contradicting his evidence, the defence of reasonable excuse was proved on the balance of probabilities.

The applicants appealed the FTT’s decision on the ground that despite the respondent’s evidence of his conversation with a council employee, it was nevertheless wrong to find that the defence was made out on the balance of probabilities for two reasons:

1. The FTT’s reliance on D’Costa meant it treated D’Costa as establishing a rule which it did not and further, D’Costa could be distinguished on the facts as it involved a landlord renting her property, being advised by Tower Hamlets they will inform her when a licence was needed on multiple occasions, and multiple visits by council employees to the property. Whereas, in the current case, the respondent was a portfolio landlord, he was aware that a scheme was going to come into effect, and there was no additional engagement by council officers.

2. The FTT failed to consider the period for which the defence of reasonable excuse applied for.

On the first appeal ground, the Upper Tribunal found that the FTT had noted the difference between the facts of D’Costa and the current case at paragraph 34 of its decision. However, the FTT simply stated the decision rather than explain how despite the differences it came to the same conclusion as D’Costa.

On the second appeal ground, the UT accepted that the respondent did not take any steps to inform himself whether the additional licencing scheme had commenced, despite being aware that it would be commenced at a point in future. The UT stated:

“40. The offence of having control of or managing an unlicensed HMO contrary to section 72(1) of the 2004 Act is a continuing offence which is committed by the person having control or managing on each day the relevant HMO remains unlicensed. To avoid liability for the offence the person concerned must therefore establish the defence of reasonable excuse for the whole of the period during which it is alleged to have been committed.“

The UT very helpfully sought to provide guidance on how to assess the period for which the defence of reasonable excuse could be applied. The UT at paragraph 47 of its decision referred to Perrin v HMRC [2018] UKUT 156 (TCC), concerning a taxpayer’s appeal against penalties for late filing of her self-assessment tax return, which was brought to its attention by the applicants’ representative. The UT quoting paragraph 81 of Perrin stated that the following 3-stage approach can provide a helpful framework:

1. First, establish the relevant facts that give rise to a reasonable excuse. This may include the beliefs, acts or omissions of the person asserting reasonable excuse or any other person, the person’s own experience or relevant attributes, the situation of the person at any relevant time and any other relevant external facts;

2. Second, decide which of those facts are proven; and

3. Third, decide whether, when viewed objectively, the proven facts would amount to an objectively reasonable excuse for the belief, fact or omission and the time when that reasonable excuse ceased to exist. This may include taking into account the experience and other relevant attributes of the person and the situation is which they found themselves at the relevant time.

Simply, the First-tier Tribunal should ask itself whether the belief, act or omission by the landlord was objectively reasonable for that landlord in those circumstances? Applying that to the facts of the case, the First-tier Tribunal should have considered whether it was objectively reasonable for the landlord to have been ignorant of the licensing requirements at the time and whether it was objectively reasonable for him to be continue to be ignorant under the particular circumstances of the case.

The more time elapsed the less reasonable it became for the respondent to rely on what he had been told. The UT said this was an identifiable flaw in the FTT reasoning which meant that the respondent’s appeal ought to be allowed on the second point.

For landlords, this means that they have to actively ensure that they keep themselves informed of the licensing requirement if they own a property which is let out to multiple occupants. Where landlords have been informed by the local authority or other relevant authorities that the licensing requirements did not apply at a certain time, they should take initiative and continue to follow up with the relevant authorities to ensure compliance with any requirements and/or developments that come in force later.

Rooshan Saeed is a Paralegal at Anthony Gold Solicitors. She can be contacted at rsa@anthonygold.co.uk.

Please note that the views and opinions expressed in these blogs are those of the author and do not necessarily represent the views of London Property Licensing. These blogs are designed to stimulate discussion and debate within the property industry. This article does not represent legal advice and should not be treated as such.

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