UPPER TRIBUNAL (LANDS CHAMBER)            

UT Neutral citation number: [2014] UKUT 0300 (LC)
UTLC Case Number: HA/2/2013

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

HOUSING – house in multiple occupation -  rent repayment orders in favour of occupiers – Residential Property Tribunal ordering repayment of 100% of rent during the relevant period – whether approach correct – held that it was not – relevant considerations – appeal allowed – Housing Act 2004 ss 73 and 74

IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE RESIDENTIAL PROPERTY TRIBUNAL FOR THE SOUTHERN RENT ASSESSMENT PANEL DATED 20TH NOVEMBER 2012

                                               MR JAMES FALLON                              Appellant
  										
and
(1)	MS SAMANTHA WILSON
(2)	MR CHRISTOPHER HUNT
(3)	 MR WESLEY SHILLINGFORD         Respondents

					Re: 12 Stuart Place, 
                                                       Bath 
                                                       BA2 3RQ

Before: Judge Edward Cousins

Sitting at: 43-45 Bedford Square, London WC1A 3AS
On
14th March 2014

CROWN COPYRIGHT 2014

The Appellant appeared in person
There was no attendance by any of the Respondents, and the appeal was unopposed 

The following case is referred to in this decision:
Parker v Waller [2012] UKUT 301(LC); Case Number HA/6/2011
DECISION
THE BACKGROUND TO THE APPEAL
1.	This is an appeal, by way of review, with a view to a re-hearing against the decision of the Residential Property Tribunal for the Southern Rent Assessment Panel (“The Tribunal”) dated 20th November 2012. Mr Fallon is the appellant.  The Respondents have played no part in the appeal process, and the appeal is unopposed. This appeal has a somewhat unusual history. Following a hearing which took place on 8th August 2012 the Tribunal handed down its decision on 20th November 2012 (“the Decision”).  In this the Tribunal made three separate repayment orders (“RROs”) in favour of the three Respondents in respect of rent paid by them for their occupation of 12 Stuart Place, Bath (“the Property”) and ordered that Mr Fallon pay specified sums to the three Respondents within 28 days of the date of the Decision. Mr Fallon then sought permission to appeal the Tribunal Decision in the form of a letter dated 6th December 2012 in which he relied upon the decision of the President in the case of Parker v Waller which was handed down on 26th November 2012. As Mr Fallon indicated in his letter dated 6th December 2012 (which was treated as an application for permission to appeal) there were arguable points of law having regard to this later decision. 
2.	In its subsequent decision dated 17th January 2013 the Tribunal then granted permission to appeal, but on a limited basis.   Two reasons were given for granting permission. First, it was stated that the Tribunal may have wrongly interpreted the law having regard to the provisions of Section 74(8)(b) of the Housing Act 2004 (“the 2004 Act”). Secondly, in the light of the decision in Parker v Waller it was stated that the legislation contained in the 2004 Act is relatively new and that “…..the points in issue may have potentially wide implications.” The Tribunal went on to say that the decision in Parker v Waller “…was the first opportunity that the Upper Tribunal has had to address the issues relating to RROs and the appeal will give the Upper Tribunal another opportunity to clarify matters for the benefit of all.”
3.	However, as the Tribunal did not accept other points made by Mr Fallon in his grounds of appeal he then made representations in a letter dated 31st January 2013 to the Upper Tribunal (Lands Chamber) setting out 9 points as his grounds of appeal.
4.	On 20th June 2013, the Deputy President granted permission to appeal on the following grounds
“1. Having regard to the decision of the Upper Tribunal in Parker v Waller …. there are reasonable grounds to argue that the LVT erred in law in the following respects, namely: (i) by starting from a position that full repayment of rent should be ordered unless it exercised its discretion to limit reimbursement; (ii) by failing to have regard to the fact that the applicant is not a professional landlord; (iii) by failing to have regard to the fact that the rent payments made included charges for utilities and possibly for other services, and (iv) by ordering repayment of a deposit that had already been repaid.
2. Although the LVT itself granted permission to appeal on 17th January 2013, it is not clear whether that permission was intended to cover all of the proposed grounds for appeal recorded in the applicant’s letter dated 6th December 2012 to the RPT which were repeated in his letter dated 31 January 2013 to this Tribunal. This permission extends to all of the grounds requested by the applicant.”
5.	For the purposes of this Appeal I will refer to Mr Fallon’s statement dated 3rd November 2013, together with the annexes lodged in support of that statement. I also refer to the contents of his letter dated 31 January 2013, and his undated statement of case. Other documents to which reference is made are his original submissions made to the Tribunal dated 12th July 2012, and his representations dated 6th December 2012 made to the Tribunal seeking permission to appeal. It also became apparent during the course of Mr Fallon’s submissions at the appeal hearing that there was some documentation upon which he relied in support of his various written submissions, but which had not hitherto been provided. Accordingly, I requested that he produce a number of documents which included bank statements, invoices and receipts. These were duly forwarded to the Upper Tribunal (Lands Chamber) at the end of March 2014. 
Summary of events
6.	Mr Fallon states that he was originally informed by his managing agents (Tangerine) in about September 2011 that he needed to apply for an HMO if he wanted to let the Property. For one reason and another, including apparently receiving incorrect forms from the appropriate Council (Bath and North East Somerset Council), Mr Fallon states that he did not get round to dealing with the necessary application to register the Property as an HMO, and the Property was duly let to the Respondents and two other persons from about September/October 2011 in the absence of compliance with the necessary statutory provisions. Subsequently he was contacted by the Council and there was a meeting at the Council Offices on 24th January 2012 when the relevant application form was handed to him. The application form was then submitted on 8th February 2012, and Mr Fallon states that he was granted a temporary licence on 26th March 2012 apparently following a pre-licence inspection.  This inspection is referred to in a letter from the Council dated 22nd March 2012 in which certain works were specified as being necessary, none of which (according to Mr Fallon was particularly serious).  The full licence was granted on 10th April 2012.  Mr Fallon states that he did not realise at the time that the matter was as serious as he had previously understood. However, he was prosecuted for non-compliance with the statutory provisions contained in the 2004 Act, and 11th April 2012 he pleaded guilty an offence contrary to section 72(1) and (6) of the 2004 Act, and was fined £585, together with the imposition of a victim surcharge of £15, and costs of £200.
7.	The Respondents, for their part, each applied to the Tribunal for separate RROs by applications respectively dated 19th April 2012, 15th May 2012, and 1st June 2012. In its decision the Tribunal made an order in their favour for the repayment of 100% of the rent that each of them had paid in the 12 months preceding date of each application. The amount totalled £7119.18. It is from that decision that Mr Fallon appeals, with permission, and he raises a number of matters directed to the lawfulness of the Tribunal’s order. It is to be noted that the other two tenants in the property did not seek RROs
THE STATUTORY PROVISIONS
Introduction
8.	Pursuant to the provisions contained in Part 2 of the 2004 Act there is a requirement that every house in multiple occupation (“HMO”) must be licensed. Mr Fallon is the owner of a house in multiple occupation, namely the Property, and each of the Respondents at the material times occupied a room in the house as tenants of Mr Fallon at an inclusive rent i.e. no further sums were payable by each of them in respect of utilities and council tax. At the time the Property was not licensed as an HMO. Under section 73 of the 2004 Act an occupier of accommodation in an unlicensed HMO may apply to the Tribunal for a rent repayment order (“RRO”), and, if certain conditions are satisfied, the Tribunal may order the landlord to repay to the applicant such amount of the rent paid in the 12 months immediately preceding the application as may be specified in the order. Under section 74 of the 2004 Act the amount to be repaid is to be such amount as the Tribunal considers reasonable in the circumstances, and in determining what amount would be reasonable the Tribunal is required to have regard in particular to certain specified matters. 
The statutory provisions
9.	Under section 61 of the 2004 Act (which is to be read together with the provisions contained in section 55) every HMO which falls within any relevant description of an HMO must be licensed. The application for a licence is to be made to the local housing authority under section 73, and the authority may grant or refuse a licence as set out in section 64. Before granting a licence the local housing authority must be satisfied about a number of matters, including whether (1) the house is suitable for multiple occupation, (2) the licence holder is a fit and proper person to be the licence holder, (3) the proposed manager of the house is a fit and proper person for that purpose, and (4) the proposed management arrangements are otherwise satisfactory (see section 64). Under section 67 a licence may include such conditions as the local housing authority consider appropriate for regulating the management, use and occupation of the house, and its condition and contents. Section 61(1) provides that a person commits an offence under the 2004 Act if he is a person having control of, or managing, an HMO which is required to be licensed, but is not so licensed. Under sub-section (7) such person is liable on summary conviction to a fine not exceeding £20,000. 
10.	The relevant provisions as contained in Sections 73 and 74 of the 2004 Act are set out in Annex A.
THE GROUNDS OF APPEAL
11.	As set out above, the Deputy President granted the permission to appeal on four grounds. I propose to address each of these grounds in turn. 
The first ground – the exercise of discretion
12.	This ground is directed to the point as to whether the Tribunal had erred in deciding that full repayment of rent under the RROs should be ordered, unless it exercised its discretion to limit reimbursement. Mr Fallon states in his letter dated 31st January 2013 that the Tribunal appears to have started from the position that a repayment of the maximum amount paid in respect of rent should be made unless there were reasons for not doing so. Mr Fallon contends that this approach is wrong in principle and that he had given considerable information concerning his finances and his conduct as a landlord which went to the question of discretion. Mr Fallon submits that the Tribunal did not take any of this into account. He relies upon the provisions contained within Section 74(6)(d) of the 2004 Act where it is provided that the Tribunal must, in particular, take into account “the conduct and financial circumstances of the appropriate person”. 
The second ground – “professional landlord”
13.	As Mr Fallon states, apart from renting out a house that he had owned briefly in 1995, the Property is the first property that he has ever rented out. It was purchased by Mr Fallon in December 1998 and at that stage it had been converted into two flats and had been previously rented out on that basis. However, in June 2001 Mr Fallon restored the Property to a townhouse and moved into it with his family. Since then for various reasons as set out in his statements, in about September 2011 he subsequently decided to rent out this property through agents, and also engaged a firm to manage it.  It was at about this point in time that he applied for an HMO licence, but there were one or two complications in the submission of the application which meant that a valid submission was not made at the appropriate time which resulted in Mr Fallon’s conviction, to which I have made reference above. 
14.	The status of Mr Fallon as a non-professional landlord appears in his original submissions made to the Tribunal dated 12th July 2012.  This was made in the context of his submissions on the history of his family’s occupation of the Property.  Reference is made to this in paragraph 25 of the Decision. This point is repeated by Mr Fallon when seeking permission to appeal to the Tribunal in his original submission dated 6th December 2012, and in his later written submissions dated 31st January 2013 and 3rd November 2013. The relevant provisions of the 2004 Act do not contain any reference to “non-professional landlords” but Mr Fallon in his later submissions on the subject relies upon observations made by the President in Parker v Waller as part of his appeal. 
The third ground – whether the RROs should include charges for utilities and possibly for other services
15.	Mr Fallon asserts that the Tribunal was wrong to disregard his submission that the cost of the outgoings should be deducted from the rent repaid in the calculation of the appropriate RRO. He relies upon the case of Parker v Wilson in this regard in that he states that in calculating the rent repayment figure the President not only deducted the utility and management costs, but also deducted mortgage repayments.  On the appeal Mr Fallon did supply a breakdown of his finances including copies of his tax returns, but had not provided documentary evidence in support of such expenditure - hence my direction to him at the conclusion of the hearing on 14th March 2014 that these documents should be supplied.
16.	It is apparent from the documentation later provided that the rent payments made were inclusive in that Mr Fallon paid out of the gross rents received from the three Respondents those sums which included mortgage interest repayments, management charges and house insurance, and payment made in respect of utility charges such as gas, electricity, water rates, council tax, together with sums paid in respect of repairs and maintenance. He submits that such payments considerably minimised the profits made from the rental earnings in respect of the Property. He further submits that it was unreasonable for the Tribunal to have ordered the repayment of the whole of the rents received in respect of the RROs, and wrong to disregard his submission in this regard. As he states in the case of Parker v Waller, the President took the correct figure as being the net profit made by the landlord in the assessment period. 
17.	In so far as the breakdown of the figures is concerned, Mr Fallon states that his profit for the Property for the year ended 5th April 2012 was £1,427 (see appendix 14), but that this also included rent from other tenants who had opted not to pursue a RRO. Mr Fallon also provided a breakdown of his rental receipts and costs during the 6 month period to the 24th January 2012, being profit for the period of £958.42, along with details of his rental income for the full year ending 5th April 2012 (see appendix 14). As stated, he also provided a copy of his tax return for the relevant year (see appendix 15). It will be noted that he spent £871.50 during the 6 month period to 24th January 2012 on a new carpet, a new oven, and a new washer-dryer. Once these items of capital expenditure are deducted then his net profit is reduced to £556. 
18.	Mr Fallon also makes the point that in Parker v Waller it is to be noted that the President deducted the fine and costs imposed which Mr Parker that had had to pay from the net profit prior to the assessment of the amount of the RRO. As he states, in his case the fine together with the costs which he was ordered to pay in Bath Magistrates Court was £800 (see appendix 13). If this exercise is adopted then he made not profit at all, but in fact is in debit.
The fourth ground - the inclusion of a deposit in the RRO 
19.	Mr Fallon also makes the point that the Tribunal failed to take into account that part of the payment made by one of the tenants (Mr Shillingford) was a deposit, and that this has subsequently been repaid to the tenant (see appendix 18). In paragraph 23 of the Decision there is passing reference made by the Tribunal to an “initial payment of £559.88 [which] was not explained although it may have included a deposit…”, but in the final reckoning this payment was included as part of the sum due to the tenant under the RRO.   In Parker v Waller the question of any deposit paid did not feature in the case. However, having regard to the principles set out by the President in that case Mr Fallon submits that it is a matter of principle that a deposit which is subsequently repaid should not be taken into account when making the RRO. 
Other Grounds
20.	In paragraph 2 of the Deputy President’s decision he states that the permission granted by him extends to all of the grounds requested by Mr Fallon. As to the grounds set out in Mr Fallon’s letter dated 31st January 2013 permission was originally granted by the Tribunal in respect of grounds one and two, but the permission was refused in respect of grounds three, four, five, six, eight and nine. No reference was made in respect of ground seven by the Tribunal although this is related to the desire on the part of the Tribunal for clarification based upon the decision in Parker v Waller as to the correct approach to adopt when determining RROs. As to grounds eight and nine the points are made by Mr Fallon that, unlike the circumstances in Parker v Waller, the Property was not in a state of disrepair, and only a small amount of work was required to be effected to it. Further, he asserts that the tenants had no complaint about their treatment whilst residing therein. He says that these are points that should have been taken into account by the Tribunal but they do not appear to have been considered. In so far as ground nine is concerned, he also makes the point that the period of default in his case was much shorter than in the case of Parker v Waller. Mr Fallon submits that all these points go to the question of the discretion of the Tribunal.

THE DECISION
21.	Drawing together the various strands and having regard to the decision of the President in the case of Parker v Waller, and in particular paragraph 26, in my judgment the appeal must be allowed and the RROs be set aside. I find that the Tribunal was in error in two material respects. First it failed to exercise its discretion properly, or at all. Secondly the Tribunal in the exercise of its purported discretion it failed to determine what payment was reasonable in the circumstances. In particular I refer to the Tribunal’s failure to have regard to the provisions of section 74(6)(d) as to the conduct and financial circumstances of the appropriate person, i.e. Mr Fallon. 
22.	My reasons are as follows:-
(1)	Athough in paragraph 9 of the Decision the Tribunal makes reference to its discretion, and in paragraph 10 refers to determining what repayment amount was reasonable  in the circumstances, it then states in paragraph 46 that it had considered applying its discretion and limiting the reimbursement it should order, but that it had “no hesitation” in ordering that the full amounts sought should be reimbursed by Mr Fallon to each of the Respondents. In other words it applied the test incorrectly and proceeded on the basis that a repayment of the maximum amount of rent paid should be made unless there were reasons for not doing so. In my judgment this is the wrong test on a true construction of the provisions of section 74(5) and (6). 
(2)	In Parker v Waller it is stated in paragraph 26(ii) that there is no presumption a RRO should be for the total amount received by the landlord during the relevant period unless there are good reasons why it should not be. “The RPT must take an overall view view of the circumstances determining what amount would be reasonable”.  This I find the Tribunal failed to do.
(3)	 As to the question of the utility payments and the like, in paragraph 26(vi) of the decision the President stated that such payments made as part of the rent count as part of the periodical payments in respect of which an RRO may be made.  However, since the landlord will not of himself have benefited from these it would only be in the most serious cases that they should be included in the RRO.  It is stated in paragraph 45 of the Decision that the expectation that Mr Fallon had as to the deduction from the rent repaid of the sums paid by him in respect of gas. electric, management charges etc “…cannot be correct as all landlords are subject to the usual outgoings and expenditure of running a house and the statute is intended to compensate the tenant for having paid rent which they should not have paid until the house was properly licensed.” 

(4)	I find that the Tribunal was incorrect in its analysis in this regard, and I consider that the Tribunal failed to construe the provisions of the 2004 Act correctly in the light of paragraph 42 of Parker v Waller. Mr Fallon paid for all the outgoings of the Property, as set out in paragraph 16, above. These sums should have been taken into account by the Tribunal when assessing the amount payable under the RROs. Mr Fallon received no benefit himself, and in my judgment the circumstances were not serious enough to justify a different approach. 
(5)	Further, I find that the Tribunal in the purported exercise of its discretion failed to take into account Mr Fallon’s conduct and financial circumstances as it should have done in accordance with the provisions of  section 74(6)(d) of the 2004 Act.  In paragraph 38 of the Decision the Tribunal states that Mr Fallon’s “personal circumstances” were taken into account, but “the Tribunal takes the view that ignorance of the law is not a defence.” I consider that this was an incorrect analysis of the approach that the Tribunal should have adopted when considering these provisions.
(6)	In so far as conduct is concerned in paragraph 43 of the Decision it is stated by the Tribunal that “the only relevant matter to the landlord’s conduct is that he continued to let out a property without obtaining a licence.” In this context, however, I find that Mr Fallon was not a “professional landlord” in that the Property was, and is, the only property operated by him as an HMO. I  also find that he had no intention of deliberately flouting the law. Further relevant matters in relation to conduct are the following: (1) the period of default prior to 24th January 2013 – this being the correct date for the assessment of the RROs – was relatively short; (2) there were only minor matters of repair to put right in the Property; (3) the tenants apparently had no complaints, or at least none of any substance, and two tenants did not even seek RROs; (4) the rent was low, and Mr Fallon paid for everything.  As he put it, the accomodation was similar to “serviced accomodation”, although clearly there were no cleaning facilities provided. 
(7)	I find that the Tribunal failed to take into account the background circumstances as to the ownership of the Property and the fact that it had been formerly occupied by Mr Fallon and his family before, and that it was only on their move to Devon that circumstances changed. 
(8)	In so far as Mr Fallon’s financial circumstances is concerned, the Tribunal went on to state in paragraph 39 of the Decision that “the fact remains that the tenants have been paying rent in an HMO which Mr Fallon had allowed to be occupied illegally.” However, it is clear that the Tribunal failed to take into account that Mr Fallon made little profit on the lettings especially when the sums in resepct of capital expenditure is taken into account.   The imposition of the RROs meant that his profit for the period was negligible.

(9)	Finally, although the purpose of the imposition of an RRO is prevent a landlord from profiting from renting properties illegally, Mr Fallon as the landlord, however, suffered two penalties, the fine and the RROs. As the President stated in paragraph 26(ii) of Parker v Waller, regard should be had to the total amount that the landlord would have  to pay by way of fine and under an RRO, and the RPT should take this into consideration. There may be tension between the two.  In my judgment it is necessary to take this aspect into account, which I find that the Tribunal failed to do in its deliberations. 
23.	Thus, for the reasons set out above, I consider that the Tribunal erred in several material respects.  Having regard to all the circumstances I therefore allow the appeal, and I order that the RROs be set aside.

Dated: 1st July 2014

Judge Edward Cousins

ANNEX A

“73 Other consequences of operating unlicensed HMOs: rent repayment orders

(1) For the purposes of this section an HMO is an “unlicensed HMO” if— 
(a) it is required to be licensed under this Part but is not so licensed, and 
(b) neither of the conditions in subsection (2) is satisfied. 
(2) The conditions are— 
(a) that a notification has been duly given in respect of the HMO under section 62(1) and that notification is still effective (as defined by section 72(8)); 
(b) that an application for a licence has been duly made in respect of the HMO under section 63 and that application is still effective (as so defined). 
(3) No rule of law relating to the validity or enforceability of contracts in  circumstances involving illegality is to affect the validity or enforceability of— 
(a) any provision requiring the payment of rent or the making of any other periodical payment in connection with any tenancy or licence of a part of an unlicensed HMO, or 
(b) any other provision of such a tenancy or licence. 
(4) But amounts paid in respect of rent or other periodical payments payable in connection with such a tenancy or licence may be recovered in accordance with subsection (5) and section 74. 
(5) If— 
(a) an application in respect of an HMO is made to a residential property tribunal by the local housing authority or an occupier of a part of the HMO, and 
(b)the tribunal is satisfied as to the matters mentioned in subsection (6) or (8), 
the tribunal may make an order (a “rent repayment order”) requiring the appropriate person to pay to the applicant such amount in respect of the housing benefit paid as mentioned in subsection (6)(b), or (as the case may be) the periodical payments paid as mentioned in subsection (8)(b), as is specified in the order (see section 74(2) to (8)). 
(6) If the application is made by the local housing authority, the tribunal must be satisfied as to the following matters— 
(a) that, at any time within the period of 12 months ending with the date of the notice of intended proceedings required by subsection (7), the appropriate person has committed an offence under section 72(1) in relation to the HMO (whether or not he has been charged or convicted), 
(b) that housing benefit has been paid (to any person) in respect of periodical payments payable in connection with the occupation of a part or parts of the HMO during any period during which it appears to the tribunal that such an offence was being committed, and 
(c) that the requirements of subsection (7) have been complied with in relation to the application. 
(7) Those requirements are as follows— 
(a) the authority must have served on the appropriate person a notice (a “notice of intended proceedings”)— 
(i)informing him that the authority are proposing to make an application under subsection (5), 
(ii)setting out the reasons why they propose to do so, 
(iii)stating the amount that they will seek to recover under that subsection and how that amount is calculated, and 
(iv)inviting him to make representations to them within a period specified in the notice of not less than 28 days; 
(b) that period must have expired; and 
(c) the authority must have considered any representations made to them within that period by the appropriate person. 
(8) If the application is made by an occupier of a part of the HMO, the tribunal must be satisfied as to the following matters— 
(a) that the appropriate person has been convicted of an offence under section 72(1) in relation to the HMO, or has been required by a rent repayment order to make a payment in respect of housing benefit paid in connection with occupation of a part or parts of the HMO, 
(b) that the occupier paid, to a person having control of or managing the HMO, periodical payments in respect of occupation of part of the HMO during any period during which it appears to the tribunal that such an offence was being committed in relation to the HMO, and 
(c) that the application is made within the period of 12 months beginning with— 
(i)the date of the conviction or order, or 
(ii)if such a conviction was followed by such an order (or vice versa), the date of the later of them. 
(9) Where a local housing authority serve a notice of intended proceedings on any person under this section, they must ensure— 
(a) that a copy of the notice is received by the department of the authority responsible for administering the housing benefit to which the proceedings would relate; and 
(b )that that department is subsequently kept informed of any matters relating to the proceedings that are likely to be of interest to it in connection with the administration of housing benefit. 
(10) In this section— 
“the appropriate person”, in relation to any payment of housing benefit or periodical payment payable in connection with occupation of a part of an HMO, means the person who at the time of the payment was entitled to receive on his own account periodical payments payable in connection with such occupation; 
“housing benefit” means housing benefit provided by virtue of a scheme under section 123 of the Social Security Contributions and Benefits Act 1992 (c. 4); 
“occupier”, in relation to any periodical payment, means a person who was an occupier at the time of the payment, whether under a tenancy or licence or otherwise (and “occupation” has a corresponding meaning); 
“periodical payments” means periodical payments in respect of which housing benefit may be paid by virtue of regulation 10 of the Housing Benefit (General) Regulations 1987 (S.I. 1987/1971) or any corresponding provision replacing that regulation. 
(11) For the purposes of this section an amount which— 
(a) is not actually paid by an occupier but is used by him to discharge the whole or part of his liability in respect of a periodical payment (for example, by offsetting the amount against any such liability), and 
(b) is not an amount of housing benefit, 
is to be regarded as an amount paid by the occupier in respect of that periodical payment. 

74 Further provisions about rent repayment orders

(1) This section applies in relation to rent repayment orders made by residential property tribunals under section 73(5). 
(2) Where, on an application by the local housing authority, the tribunal is satisfied— 
(a)that a person has been convicted of an offence under section 72(1) in relation to the HMO, and 
(b)that housing benefit was paid (whether or not to the appropriate person) in respect of periodical payments payable in connection with occupation of a part or parts of the HMO during any period during which it appears to the tribunal that such an offence was being committed in relation to the HMO, 
the tribunal must make a rent repayment order requiring the appropriate person to pay to the authority an amount equal to the total amount of housing benefit paid as mentioned in paragraph (b). 
This is subject to subsections (3), (4) and (8). 
(3) If the total of the amounts received by the appropriate person in respect of periodical payments payable as mentioned in paragraph (b) of subsection (2) (“the rent total”) is less than the total amount of housing benefit paid as mentioned in that paragraph, the amount required to be paid by virtue of a rent repayment order made in accordance with that subsection is limited to the rent total. 
(4) A rent repayment order made in accordance with subsection (2) may not require the payment of any amount which the tribunal is satisfied that, by reason of any exceptional circumstances, it would be unreasonable for that person to be required to pay. 
(5 )In a case where subsection (2) does not apply, the amount required to be paid by virtue of a rent repayment order under section 73(5) is to be such amount as the tribunal considers reasonable in the circumstances. 
This is subject to subsections (6) to (8). 
(6) In such a case the tribunal must, in particular, take into account the following matters— 
(a) the total amount of relevant payments paid in connection with occupation of the HMO during any period during which it appears to the tribunal that an offence was being committed by the appropriate person in relation to the HMO under section 72(1); 
(b) the extent to which that total amount— 
(i)consisted of, or derived from, payments of housing benefit, and 
(ii)was actually received by the appropriate person; 
(c) whether the appropriate person has at any time been convicted of an offence under section 72(1) in relation to the HMO; 
(d)the conduct and financial circumstances of the appropriate person; and 
(e)where the application is made by an occupier, the conduct of the occupier. 
(7) In subsection (6) “relevant payments” means— 
(a) in relation to an application by a local housing authority, payments of housing benefit or periodical payments payable by occupiers; 
(b) in relation to an application by an occupier, periodical payments payable by the occupier, less any amount of housing benefit payable in respect of occupation of the part of the HMO occupied by him during the period in question. 
(8) A rent repayment order may not require the payment of any amount which— 
(a) (where the application is made by a local housing authority) is in respect of any time falling outside the period of 12 months mentioned in section 73(6)(a); or 
(b) (where the application is made by an occupier) is in respect of any time falling outside the period of 12 months ending with the date of the occupier’s application under section 73(5); 
and the period to be taken into account under subsection (6)(a) above is restricted accordingly. 
(9) Any amount payable to a local housing authority under a rent repayment order— 
(a) does not, when recovered by the authority, constitute an amount of housing benefit recovered by them, and 
(b) until recovered by them, is a legal charge on the HMO which is a local land charge. 
(10) For the purpose of enforcing that charge the authority have the same powers and remedies under the Law of Property Act 1925 (c. 20) and otherwise as if they were mortgagees by deed having powers of sale and lease, and of accepting surrenders of leases and of appointing a receiver. 
(11) The power of appointing a receiver is exercisable at any time after the end of the period of one month beginning with the date on which the charge takes effect. 
(12) If the authority subsequently grant a licence under this Part or Part 3 in respect of the HMO to the appropriate person or any person acting on his behalf, the conditions contained in the licence may include a condition requiring the licence holder— 
(a)to pay to the authority any amount payable to them under the rent repayment order and not so far recovered by them; and 
(b)to do so in such instalments as are specified in the licence. 
(13) If the authority subsequently make a management order under Chapter 1 of Part 4 in respect of the HMO, the order may contain such provisions as the authority consider appropriate for the recovery of any amount payable to them under the rent repayment order and not so far recovered by them. 
(14) Any amount payable to an occupier by virtue of a rent repayment order is recoverable by the occupier as a debt due to him from the appropriate person. 
(15) The appropriate national authority may by regulations make such provision as it considers appropriate for supplementing the provisions of this section and section 73, and in particular— 
(a)for securing that persons are not unfairly prejudiced by rent repayment orders (whether in cases where there have been over-payments of housing benefit or otherwise); 
(b)for requiring or authorising amounts received by local housing authorities by virtue of rent repayment orders to be dealt with in such manner as is specified in the regulations. 
(16) Section 73(10) and (11) apply for the purposes of this section as they apply for the purposes of section 73.

ANNEX B

“26.	It can be concluded from this statement that the occupier RRO provisions have a number of purposes – to enable a penalty in the form of a civil sanction to be imposed in addition to the fine payable for the criminal offence of operating an unlicensed HMO; to help prevent a landlord from profiting from renting properties illegally; and to resolve the problems arising from the withholding of rent by tenants (sc on the basis of illegality).  What amount it would be “reasonable in the circumstances” for an RPT to order to be repaid under an RRO must be considered in relation to these purposes.  The following points, in my view, should be borne in mind:
(i) Since the RRO provisions are in their nature penal, an RPT must be satisfied on every matter that is determinative of the tenant’s entitlement to an order or its amount.  It must be satisfied of the matters set out in section 73(8), and it must take into account the particular matters set out in section 74(6) as well as any other matters that may be material.
(ii) Since the landlord is liable to suffer two penalties – a fine and an RRO – it will be necessary to take this into account.  An RPT should have regard to the total amount that the landlord would have to pay by way of a fine and under an RRO.  There may be a tension between the imposition of a fine and the making of an RRO.  The maximum fine is £20,000, and this shows the seriousness with which Parliament regards the offence.  In the present case the magistrates imposed a fine of £525, which would suggest that they did not consider this particular offence to be other than minor.  The RPT, however, is entitled to take a different view about the seriousness of operating the HMO without a licence.
(iii) There is no presumption that the RRO should be for the total amount received by the landlord during the relevant period unless there are good reasons why it should not be.  The RPT must take an overall view of the circumstances in determining what amount would be reasonable.
(iv) Paragraph (a) of section 74(6) requires the RPT to take into account the total amount of rent received during any period during which it appears to it that the offence was being committed.  It needs to do that because the RRO can only be made in respect of rent received during that period.  It is limited to the period of 12 months ending with the date of the occupier’s application (see section 74(8)).  But the RPT ought also to have regard to the total length of time during which the offence was being committed, because this bears upon the seriousness of the offence.
(v) The fact that the tenant will have had the benefit of occupying the premises during the relevant period is not, in my judgment a material consideration or, if it is material, one to which any significant weight should be attached.  This is because it is of the essence of an occupier’s RRO that the rent should be repaid in respect of a period of his occupation.  While the tenant might be viewed as the fortunate beneficiary of the sanction that is imposed on the landlord, it is only misconduct on his part (see paragraph(e)) that would in my view justify the reduction of a repayment amount that was otherwise reasonable.
(vi) Payments made as part of the rent for utility services count as part of the periodical payments in respect of which an RRO may be made.  But since the landlord will not himself have benefited from these, it would only be in the most serious case that they should be included in the RRO.
(vii) Paragraph (d) requires the RPT to take account of the conduct and financial circumstances of the landlord.  The circumstances in which the offence was committed are always likely to be material.  A deliberate flouting of the requirement to register will obviously merit a larger RRO than instances of inadvertence – although all HMO landlords ought to know the law.  A landlord who is engaged professionally in letting is likely to be more harshly dealt with than the non-professional.”