Why compliance is the best defence to a Rent Repayment Order claim

Thursday, October 22nd, 2020 - By Richard Tacagni, Managing Director at London Property Licensing

In late 2019, I was instructed to assist a West Midlands landlord who had received a Rent Repayment Order (RRO) claim from one former and one current tenant. The case was being heard by the First-tier Tribunal, RRO applications had been lodged and Directions issued.

The property was a two storey six bedroom House in Multiple Occupation (HMO). The tenants were alleging it was a licensable but unlicensed HMO. Their claim, addressed to the Company Directors, was for approximately £13,500.

RRO applications: who is the landlord

One of the preliminary issues we explored was correct identification of the landlord for the purposes of a RRO under the Housing and Planning Act 2016.

After investigating the circumstances, I discovered the property was owned by a limited company, there were no separate leaseholders and the rent was paid, via the managing agent, directly into the company’s bank account. This was all evidenced. On this basis, we explained why the landlord should be the limited company rather than the Company Directors.

In doing so, reference was made to the Upper Tribunal decision of Keith Goldsbrough & Robert Swart and CA Property Management Ltd & Mr & Mrs Gardener [2019] UKUT 311 (LC). The case explores the correct identification of the landlord for the purposes of a RRO.

Was there an HMO licensing offence

The substantive issue in this case involved determining whether a licensing offence had been committed during the relevant period.

The tenants had examined the council’s public register of licensed HMOs and exhibited a extract showing the property was not listed. The tenants were unrepresented and assumed this was evidence the property was an illegal unlicensed HMO.

Prior to putting in their claim, the tenants had approached the managing agent and asked for a copy of the licence. The agent was unable to provide a copy as the licence had not yet been granted.

So, had any licensing offence been committed? The simple answer, after investigating the circumstances, was no, there had been no offence. Yet, defending the claim and explaining the reasons involved mapping out the timeline.

It was acknowledged that the two storey six bedroom HMO first became licensable on 1 October 2018 and that the two claimants had been tenants.

A trawl of company records found evidence the landlord has acted responsibly and made a timely application. The application had been submitted on 28 September 2018 and an acknowledgement email was received from the council on 1 October 2018.

The council issued a notice of intent to grant the licence in August 2019 and the licence was approved the following month.

All this information was collated, exhibits prepared and a bundle of documents submitted to the Tribunal.

The Tribunal’s decision

Two weeks after the bundle was submitted, the Tribunal inspected the property and made their decision via a paper determination.

On the preliminary issue of who should be the landlord for the purposes of a RRO application, the Tribunal considered the Upper Tribunal decision and agreed the landlord should be the limited company rather than the Company Directors.

On the substantive issue, the Tribunal was not satisfied beyond reasonable doubt that any licensing offence had been committed. A licence application had been submitted at the appropriate time. As a result, the tenants were not entitled to a RRO. Importantly, the landlord’s unblemished record of compliance remained intact.

A sting in the tail

Whilst the RRO claim was dismissed, the Tribunal expressed concern that the tenants had not been informed that an HMO licence application was submitted in September 2018. They considered this an omission on the part of the landlord which had contributed to the RRO claim being submitted.

Without inviting further representations, the Tribunal ordered the landlord to refund each tenant their £100 Tribunal application fee under Rule 13(2) of the Tribunal Procedure Rules.

It is unusual for a party that wins their case to be required to pay costs to the other side, particularly as the landlord had incurred costs in defending the claim.

The Housing Act 2004 sets out which interested parties must be notified when a licence application is submitted. The list excludes private tenants on assured shorthold tenancies. Likewise, there is no requirement on a local authority to send tenants a copy of the draft or final licence. This was decided when the legislation was made. The landlord had complied with all statutory requirements.

That said, the landlord was reluctant to incur further costs by challenging this aspect of the decision. It was time to move on and their defence against the claim for £13,500 had been successful. The landlord paid each tenant £100 and the case was closed.

In conclusion, the best line of defence for a RRO claim is the ensure compliance. Licence applications should be promptly submitted when a property becomes licensable and records kept showing when the application was made.

For tenants considering an RRO application, it is important to note that a landlord is compliant wiht the property licensing scheme from the date a valid application is made. This information can be obtained by contacting your local council. Ref: BIR/00CR/HMK/2019/0054 & 0078

The author of this blog, Richard Tacagni MCIEH CEnvH, is Managing Director of London Property Licensing. You can contact him at Richard@londonpropertylicensing.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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