What factors are considered when determining the amount of a Rent Repayment Order – Williams v Parmar [ 2021] UKUT 244 (LC)

Thursday, October 28th, 2021 - By Nikki Basin, Solicitor at Anthony Gold

The First-Tier Tribunal Property Chamber (Residential Property) (“the Tribunal”) has a wide discretion when determining whether to make a rent repayment order. A rent repayment order is an order allowing tenants and local authorities to seek repayment of rent paid where the landlord has committed an offence under section 40(3) of the Housing and Planning Act 2016 (“the Act”).

In cases where the Tribunal decides to make a rent repayment order the principles applied in determining the amount payable by the landlord are set out in case law. Up until recently it was held that the starting point in rent repayment order applications is the maximum rent during the relevant period. The relevant period is subject to a limit of 12 months during which the offence was committed. However, in the recent case of Williams v Parmar [ 2021] UKUT 244 (LC) the Upper Tribunal held that when considering the amount of a rent repayment order the Tribunal is not restricted to the maximum amount of rent and is not limited to factors listed at section 44(4) of the Act. The background and implications of this case are discussed in more detail below.

The First-Tier Tribunal Property Chamber (Residential Property) Decision

The initial decision in this case was made by the Tribunal in October 2020 by way of a paper determination. The tenants of 28 Afghan Road, London SW11 2QD (“the Property”) brought an application for a rent repayment order under section 40 of the Act against their landlord, Ms Amanda Williams. The application was made on the basis that their landlord had failed to obtain a licence for a house in multiple occupation and as such committed an offence under section 72(1) of the Housing Act 2004. The Tribunal considered the papers and was satisfied beyond reasonable doubt that the landlord had committed the offence.

The Tribunal then went onto consider what amount the landlord should repay. In determining the amount of the rent repayment order the Tribunal was required to have regard to section 44(4) of the Act.

Section 44(4) requires the Tribunal to consider the following factors when determining the amount of the order:

(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.

The Tribunal considered the above factors but was not convinced that the factors in this case allowed for a deduction. Then, when considering what other justifications there might be for a deduction, it considered Vadamalayan v Stewart and others (2020) UKUT 183 (LC). In Vadamalayan the Upper Tribunal held that only utilities paid by the landlord may be deducted from rent paid in the relevant period, and any other landlord’s expenses should not be deducted. Therefore, the Tribunal considered that it was restricted in only deducting the costs of utilities (namely electricity, gas, council tax, water, TV Licence, telephone line) from the rent that had been paid and apportioned the amount of the utilities between the six tenants. The Tribunal ordered rent repayment orders in favour of all six tenants. The landlord appealed this decision.

The Appeal

The landlord was granted permission to appeal for the following grounds:

“a. the correct rental period was not applied by the FTT in calculating the amount of the RROs, and so the amount should be reduced (Ground A);

b. the amounts of the interest-only mortgage monthly payments paid by the landlord should have been deducted from the amount of the RROs, since an RRO should only reflect the profit made by the landlord from the commission of the relevant offence (Ground B);

c. the FTT had insufficient regard to the landlord’s financial circumstances and state of health in determining the amount of the RRO (Ground C)”

The focus of Ground B significantly changed during the appeal and the landlord abandoned Ground C. Therefore, only Ground A and a revised Ground B were pursued before the Upper Tribunal. The revised Ground B focused on the Tribunal having made a mistake in its approach to quantifying the amount of the rent repayment order by rejecting all other factors apart from those specified in section 44(4) of the Act.

Ground A

The Tribunal dismissed Ground A quickly as the landlord tried to raise this new point in front of the Upper Tribunal which had not been raised at the original hearing before the First-tier Tribunal.

The landlord’s reasoning was that a licensing application had been made during part of the relevant period for which the tenants were seeking a rent repayment order. In cases, where the landlord has made a valid application for a licence, this amounts to a reasonable excuse defence under section 95(3)(b) of the Housing Act 2004 resulting in the relevant period coming to an end on the date a valid application for a licence has been made. However, the landlord had failed to provide this in evidence at the Tribunal. Therefore, the Upper Tribunal did not consider it fair to allow the landlord to rely on this new point and dismissed this ground.

Ground B

In relation to Ground B, the Upper Tribunal considered that the Tribunal had adopted a narrow view of its power under section 44 to determine the amount of a rent repayment order. The Upper Tribunal held that “there is no presumption in favour of the maximum amount of rent paid during the period“. It was noted that when calculating the amount of a rent repayment order the calculation must relate to the maximum in some way. Although, the amount of the rent repayment order can be “a proportion of the rent paid, or the rent paid less certain sums, or a combination of both“. Therefore, there is no presumption that the amount paid during the relevant period is the amount of the order subject to the factors referred to in section 44(4) of the Act.

The Upper Tribunal further went on to highlight that the Tribunal is not limited to those factors referred to in section 44(4) and that circumstances and seriousness of the offending landlord compromise part of the “conduct of the landlord” and ought to be considered. The Upper Tribunal considered that the Tribunal had taken a very narrow approach of section 44(4)(a) by stating that “meritorious conduct of the landlord may justify a deduction from the starting point“. It concluded that the Tribunal may in appropriate cases order a lower than maximum amount if the landlord’s conduct was relatively low in the “scale of seriousness, by reason of mitigating circumstances or otherwise“.

The Upper Tribunal went on to lower the amount of the rent repayment orders made by the Tribunal by applying a reduction of 20% and 10% on the basis that whilst the landlord did not have any relevant previous convictions, she was also a professional landlord who had failed to explain why a licence had not been applied for and the condition of the property had serious deficiencies.

The Upper Tribunal also confirmed that in cases where the landlord is a professional landlord, and the premises has serious deficiencies more substantial reductions would be inappropriate even if the landlord did not have any previous convictions.

The Implications of the Decision

This decision highlights that there is no presumption that rent repayment orders will be for maximum rent, and that while the full rent was in some sense still the “starting point” that did not mean that the maximum rent was the default. The amount of the rent repayment order needs to be considered in conjunction with section 44(4) factors and the Tribunal is not limited to the factors mentioned within section 44(4).

Crucially, the Upper Tribunal held that “the circumstances and seriousness of the offending conduct of the landlord are comprised in the “conduct of the landlord”, 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 is relatively low in the scale of seriousness, by reason of mitigating circumstances or otherwise“. This means that even if a landlord is guilty of an offence, if their offence is not a particularly serious one, they will expect to be ordered to repay less than the full rent paid during the relevant period.

The Tribunal has always had discretion on the amount of rent repayment order it makes and may not make significant reductions in cases where the landlord is a professional landlord. However, the Upper Tribunal did not define ‚Äòprofessional landlord’ and it remains to be seen how the Tribunal categorises landlords and decides who is or is not a professional landlord.

The decision in this case will be welcomed by many landlords as it reinforces the Tribunal’s discretion about the size of rent repayment orders.

The author of this blog, Nikki Basin, is a Solicitor in the Housing team at Anthony Gold. Her email is nba@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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