Authors:Cameron Neilson and Jamie McGowan
Created:2024-01-30
Last updated:2024-02-02
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Cameron Neilson and Jamie McGowan set out why practitioners should consider rent repayment orders and give a brief outline on how to go about claiming them.
2023 was an eventful year for rent repayment orders (RROs). In this article, we set out the basic steps to follow in RRO applications, identify some common issues that applicants encounter, and summarise some key recent developments. But first, we consider their important role in policing the private rented sector.
RROs are effective at upholding standards. Unlike most other forms of civil enforcement (RROs are sanctions, not compensation), the financial penalty awarded against landlords is retained by those directly affected by the breach: occupants.
Procedure
Housing and Planning Act (HPA) 2016 s40 enables the First-tier Tribunal (FtT) to make an order for up to 12 months’ rent to be repaid to an occupant when one of the seven offences in s40(3) has been committed. We have not addressed the particular elements to be made out as they are unique to each offence.
Limitation
Applicants have 12 months from the final day of an offence to file an application. This can be problematic and we have seen the rule applied strictly in cases where an offence occurs over a discontinuous period.
3For a strict interpretation, see 56 Vermeer Court, 1 Rembrandt Close, London E14 3XA LON/00BG/HMF/2022/0063; for a liberal interpretation, see 261A Station Road, Harrow, HA1 2TB LON/00AQ/HMF/2022/0238.Respondent
The question of against whom to bring a claim has been subject to significant development and, for the time being, can be a complex consideration.
Rakusen v Jepsen and others [2023] UKSC 9; April 2023
Legal Action 44 remains a key case that considered the identity of the appropriate respondent to an RRO.
The Supreme Court found that the natural interpretation of HPA 2016 s40 is that it applies only to the ‘landlord’ sharing a direct contractual relationship with the occupant (the immediate landlord), and not a superior landlord. It is worth noting that ‘landlord’ for these purposes also includes a licensor (s56).
The appellant argued, among other things, that this interpretation has the undesirable effect of preventing many people capable of committing the relevant offences (per s40(3)) from having RROs awarded against them, thus encouraging the use of smokescreens such as rent-to-rent set-ups to avoid liability.
Thankfully, the Supreme Court has been taken up on its invitation: ‘[I]f this is thought to be a problem any reform would be a matter for parliament’ (para 43). Due to subsequent lobbying efforts by many of those involved in the case, the
Renters (Reform) Bill (RRB) seeks to enable RROs against superior landlords.
4Proposed amendments can be found at Gov NC21, pages 52–53 of the Renters (Reform) Bill (Amendment Paper) of 15 November 2023. However, until the RRB becomes law, this will remain a tricky preliminary matter for many applicants to navigate.
Quantum
Once the appropriate respondent, commissioning of an offence and absence of a defence
5Defences are not discussed here, they are unique to the seven offences set out in HPA 2016 s40(3). have been established, and the tribunal decides that it will exercise its discretion to make an order (which is not ordinarily a live issue
6Newham LBC v Harris [2017] UKUT 264 (LC); October 2017 Legal Action 33 at para 30.), the final consideration is quantum. The four key factors relevant to this assessment are as follows:
1. Maximum rent
First, the tribunal will determine the whole of the rent paid during the period in respect of which an RRO is sought, representing the maximum award. This is ordinarily a relatively straightforward point to prove by using bank statements. However, the timing of payments matters.
It was held in
Kowalek v Hassanein Ltd [2021] UKUT 143 (LC); September 2021
Legal Action 41 that rent must have been paid (a) during, and (b) in relation to a time when the offence was being committed (with some exceptions
7The payment of rent need not coincide with an offence in order to be repaid by way of an RRO in the case of HPA 2016 s40(3) offences: (1) violence for securing entry per Criminal Law Act 1977 s6(1)); and (2) eviction or harassment of occupiers per Protection from Eviction Act 1977 s1(2), (3) or (3A).). This has harsh consequences for occupants who are required to pay a significant amount of rent upfront (and possibly outside of the relevant period), as is the case, for example, for many international students.
We therefore welcome the proposed rewording by the RRB,
8Clauses 78(4)(a)(i) and 78(5)(a)(i) of the RRB as amended in the Public Bill Committee, 6 December 2023. amending ‘rent paid during’ in HPA 2016 ss44(2) and 45(2) to ‘rent paid in relation to’, which will remove the need for rent to be paid during the period in which the offence is committed. However, for now, this is another problem with which applicants will have to contend.
2. Subtracting utilities
Payments in respect of utilities such as gas, electricity and water are not considered ‘rent’, and the tribunal may deduct these from its final RRO award. When utilities are included in rent, evidence such as bills may be adduced to enable a precise calculation. Otherwise, the tribunal may make an informed estimate.
It is important to note that the question of deductions for bills remains unsettled. Although it is increasingly common for the tribunal to only make deductions in respect of expenditure that exclusively benefitted the occupier (such as utilities), there are recent examples of deductions being made for other bills such as council tax.See
9Irvine v Metcalfe and others [2021] UKUT 60 (LC) at para 11, upholding the FtT decision in which deductions for council tax were made.3. Seriousness
Each of the seven HPA 2016 s40(3) offences has its own ‘default’ level of seriousness, by reference to the respective maximum sentence on conviction. The seriousness of a particular offence should also be considered in each case.
10Acheampong v Roman and others [2022] UKUT 239 (LC) at para 20(c) sets out the process, with examples of factors aggravating seriousness, such as lack of fire safety features and failure to protect a tenant’s deposit, set out at para 31. This provides a starting point for the percentage of the maximum rent that the tribunal should award, typically ranging from 40 to 85 per cent.
4. HPA 2016 s44(4)
Finally, HPA 2016 s44(4) requires the tribunal to consider factors that may warrant deductions from or additions to an award. These are: (a) conduct of either party; (b) any previous convictions of the landlord; and (c) the landlord’s financial circumstances.
Factors (b) and (c) are relatively simple questions of fact, whereas ‘conduct’ is broad. There is some unavoidable overlap between ‘seriousness’ and ‘landlord conduct’, although the former must focus on how the offence came to be committed.
11Acheampong v Roman and others at para 21.We have seen discrepancies as to whether conduct outside the ‘relevant period’ is considered. Often, it is not, but there have been cases where even conduct at the hearing has been taken into account.
12A landlord’s false accusation of fraud against the tenants at the hearing was taken into account as bad conduct in 714 Lordship Lane, London N22 5JN LON/00AP/HMF/2021/0299 at para 110. Once any necessary adjustments have been made in respect of these factors, the tribunal will arrive at a final award.
Summary
We welcome the upcoming legislative changes discussed in this article. They will remove some common stumbling blocks for applicants. Awards are also due to increase significantly, with the RRB increasing the maximum award period from 12 to 24 months.
13See note 4 above.The views expressed in this article are those of the authors and not necessarily their employers.