Tenants are increasingly aware that a rent repayment order is a powerful tool in sanctioning landlords who commit certain housing-related offences. As more applications are coming before the tribunals, clearer guidance is being given in relation to the factors the First-tier Tribunal must take into consideration when assessing the amount a landlord must repay.
In Kowalek and another v Hassanein Ltd [2021] UKUT 143 (LC) the landlord’s property was situated in a selective licensing area. In February 2019, the landlord rented the property to tenants without obtaining an HMO licence. This was a housing-related offence under section 95(1) of the Housing Act 2004.
Pursuant to section 40(1) of the Housing and Planning Act 2016, the tenants initially applied for a RRO in the sum of £23,819. The tenants subsequently amended their application to seek repayment of two further sums. Firstly, the sum of £2,000 for rent paid after the landlord had applied for a licence. Secondly, a rent deposit in the sum of £4,920.
The tenants argued that the rent paid after the landlord had applied for its licence should be treated as having been paid to discharge rent which fell due during the period the offence was being committed. The FTT found that the ordinary language of section 44(2) of the 2016 Act meant that a rent repayment order could only be made in respect of a sum paid at the time the relevant offence was being committed.
Further, the FTT found that the tenancy deposit had to be ignored when assessing the amount to be repaid. Section 40(2) only related to money paid “as rent”. Although the deposit was security for the performance of the tenants’ obligations, and the payment of rent was an obligation, the tenants’ breach of the same did not give their landlord an immediate right to the tenancy deposit.
At the material time the tenants vacated the property they were in substantial arrears. The FTT took the tenants’ failure to pay rent for long periods into consideration under section 44(4)(a). In so doing, the FTT reduced the amount that landlord was required to repay by 50%; ordering repayment of £11,909.99.
In dismissing the tenants’ appeal the Upper Tribunal (Lands Chamber) underscored that both limbs of section 44(2) needed to be satisfied before a sum paid as rent could be subject to a rent repayment order. Firstly, the amount had to relate to rent during the relevant period, in the present case “a period, not exceeding 12 months, during which the landlord was committing the offence”. Secondly, “the amount must relate to rent paid by the tenant in respect of” the appropriate period. In short, regard must be had to what the payment was for. The sum of £2,000 was paid after the period the landlord had ceased committing the offence and therefore had to be disregarded.
The UT further highlighted that on normal contractual principles, it was up to the tenant, as the paying party, to decide how rent paid for a particular period would be appropriated. Only when the tenant failed to do so, was the receiving party, namely the landlord, entitled to do so.
In considering section 44(4)(a), the UT noted that the FTT had a broad discretion in determining the type of conduct that was relevant on the part of the landlord or tenant. A failure to pay rent was a serious breach of a tenant’s obligation and therefore a material consideration when determining the amount of a rent repayment order.
Elizabeth Dwomoh is a barrister at Lamb Chambers
