Rent Repayment Orders – how much will the Tribunal award?

On 5 September the Upper Tribunal issued its decision in a combined appeal case of Acheampong v Roman & Ors and Choudhury v Razak & Ors [2022] UKUT 239 (LC). This is an important decision as it is the latest in a series of appeals where the Upper Tribunal has sought to provide guidance on how Rent Repayment Orders (“RROs”) should be calculated.

Background

RRO applications are made, in the first instance, to the First-tier Tribunal (Property Chamber) (“the FTT”). Once the tribunal is satisfied that the applicant is entitled to a RRO the
tribunal must determine the amount to be awarded. Most RRO applications are applications made by tenants for offences relating to being in control of or managing an unlicensed house or house in multiple occupation (HMO) under the Housing Act 2004. RRO applications in England are governed by the Housing and Planning Act 2016 (HPA). Section 44(4) of the HPA requires the tribunal to take into account the following factors when determining the RRO amount:

(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 RRO provisions apply.

It is important to note that with tenant applications for licensing failures, the Tribunal retains discretion in setting the level of the RRO. They are not restricted to ordering the maximum amount of rent for the relevant period. However, recent cases, including decisions from the Upper Tribunal, show that the tribunals have struggled to formulate a consistent approach to applying this discretion.

The Upper Tribunal’s Decision

This latest decision concerns two appeals both involving tenant applications for landlord licensing offences. The facts of each case were different but the legal point on appeal was the same: what approach should the tribunal have taken in determining how much a landlord should pay by way of RRO?

After reviewing earlier authorities, Judge Cooke sets out a paragraph on “practical points for decision making.” She starts by stating:

“It is easy to say what the FTT should not do: it should not take the whole rent (less any payment for utilities) and regard that as the starting point subject only to deductions made in light of the factors in section 44(4) of the 2016 Act.”

This was the approach that was commonly applied by the FTT following the 2020 case of Vadamalyan v Stewart and which frequently resulted in tenants being awarded 100% of the rent. This was held to be an incorrect approach in Williams v Parmar. (My colleague Nikki Basin has written about this further here.) As Judge Cooke explains, the problem with that approach is that no consideration is given to the seriousness of the offence meaning that absent evidence of good conduct by the landlord, poor conduct by the tenant or financial difficulties of the landlord, the result is a 100% RRO. This is regardless of the type of offence and where it sits on the seriousness scale. Therefore, a landlord who has inadvertently failed to licence a property but otherwise provided satisfactory accommodation could receive the same RRO as one who has used violence to secure entry to a property. Without being able to adjust the RRO to reflect the seriousness of the offence, the tribunal will have fettered its discretion.

Turning to what the FTT should do, Judge Cooke sets out the four-stage approach:

• a. Ascertain the whole of the rent for the relevant period;
• b. Subtract any element of that sum that represents payment for utilities that only benefited the tenant, for example gas, electricity and internet access. It is for the landlord to supply evidence of these, but if precise figures are not available an experienced tribunal will be able to make an informed estimate.
• 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 whose relative seriousness can be seen from the relevant maximum sentences on conviction) and compared to other examples of the same type of offence. What proportion of the rent (after deduction as above) is a fair reflection of the seriousness of this offence? That figure is then the starting point (in the sense that that term is used in criminal sentencing); it is the default penalty in the absence of any other factors but it may be higher or lower in light of the final step:
• 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).

The first stage should be straightforward. With licensing offences the relevant period only extends to a period during which the landlord was committing the offence but in all cases the relevant period cannot exceed 12 months.

The second stage should also not be problematic. Where utilities are included in the rent the tribunal has long allowed deductions for this as these are sums that benefit the tenant not the landlord.

The third stage is where the Tribunal will need to consider more explicitly the seriousness of the offence. As Judge Cooke comments this is not a new element. It forms part of what is required under the statutory factor at s44(4)(a): the conduct of the landlord. It is an examination of the conduct of the landlord within the context of the actual offence. It therefore involves looking at all the circumstances of the offence: how serious is it, how culpable is the landlord, what harm has been caused? Once that assessment has been carried out the tribunal can arrive at a figure for the RRO which is the starting point.

Finally, the Tribunal must consider whether any deduction from, or addition to, that figure should be made in light of the other factors in s44(4) above. For example, there may be poor conduct on the part of the tenant which justifies the making of a lower RRO. Or there may be other bad conduct on the part of the landlord which means the RRO should be increased. It seems that here the tribunal will also consider poor conduct on the part of the landlord which is not directly connected to the offence. For example, we have seen tribunals take into account a landlord’s failure to comply with other statutory obligations such as failing to protect a tenant’s deposit.

Judge Cooke’s four-stage approach does not appear to be add anything new to how the tribunal should measure RROs. The requirement to consider the seriousness and circumstances of the offence are not new criteria but part of the landlord’s conduct. There is also the point made by the Chamber President, Fancourt J, in Williams v Parmar that the statutory factors are not the only factors that a Tribunal can take into account and any other relevant factors will also need to be considered.

Outcome of the Appeal

In the case of Acheampong, Judge Cooke decided to remit the matter back to the FTT for determination as there were findings of fact that needed to be made and the Upper Tribunal was not able to substitute its own decision. In the case of Choudhury, Judge Cook reduced the RRO from 100% to 75% of the rent. In her assessment of the seriousness of the offence Judge Cooke referred to the fire safety failings being a significant factor and failure to protect the deposit as a significant breach of duty. However, she considered it was not the most serious offence of its kind.

Comment

Will this lead to a more consistent approach in Tribunal decisions? The guidance is helpful and should put an end to the practice of taking the full rent as the starting point and making deductions based on the statutory factors. While it had already been confirmed in Williams v Parmar that this was the wrong approach, Judge Cooke’s methodology should assist tribunals with their assessments particularly with ensuring the seriousness of the offence is properly considered before determining the starting point for the RRO. Whether this will lead to more consistent RRO awards is a different matter. The Tribunal will need to evaluate the factors in the individual case and reach a conclusion on where on the scale of seriousness the offence lies. No doubt there will be differing views on this and future appeals may revolve around whether the tribunal has carried out that assessment correctly.