Aug

Agents find themselves in the firing line for Rent Repayment Order

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The two tenant applicants, Jenny Dos Santos and Margarita Gandara brought the case against property agents L Hub London. The hearing was held by way of a remote video hearing, the only practical solution at the time, not being objected to by the parties.

The Applicants and Respondent (managing agents) each filed a Bundle of Documents of supporting evidence, references to which are made in this tribunal’s decision.

Applicant 1, Ms Dos Santos sought a Rent Repayment Order (“RRO”) in the sum of £7,260 against the Respondents pursuant to Part I of the Housing and Planning Act 2016. The Respondent being the Manager of the tenanted property at 22 Durham Road E16.

Applicant 2, Ms Gandara also sought a Rent Repayment Order (“RRO”) in the sum of £7,800 against the Respondents.

The applicants sought the rent repayments under Part 2 of the 2004 Act which relates to the designation of areas subject to additional licensing of houses in multiple occupation* (HMO).

Under section 56, a local housing authority (“LHA”) may designate an area of their district to be subject to Additional Licensing in relation to designated HMOs specified.

The London Borough of Newham, where the property was situated, introduced an Additional Licencing Scheme designating areas for Additional Licensing of all Houses in Multiple Occupation. The scheme came into force on 1 January 2018 and runs until 31 December 2022.

The tribunal was satisfied that the House required a licence under the Scheme as an HMO. It was common ground, the tribunal noted, that the rental property in question was not licensed.

Section 72 of the Act specifies that a number of offences in relation to the licencing of houses may be committed where a person having “control of or managing” an HMO which is required to be licensed, but is not so licensed.

A key point noted by the tribunal was that the section does not use the word “landlord” and section 263 defines the concepts of a person having “control” and/or “managing” premises. These definitions the tribunal concluded are wide enough to include a number of different people in respect of a property. “Where there is a chain of landlords, more than one may be liable. It may also extend to a managing agent.”

So in the tribunal’s interpretation of the Act “person having control”, in relation to premises, means (unless the context otherwise requires) the person who receives the rack-rent** of the premises (whether on his own account or as agent or trustee of another person), or who would so receive it if the premises were let at a rack-rent.

The tribunal relied on a previous Court of Appeal judgement in Rakusen v Jepson and Others (22 July 2021), which reversed an Upper Tribunal decision, concluding that section 40(2)(a) only enables an RRO to be made against an immediate landlord and not a superior landlord, a decision which the tribunal said was binding on the tribunal and that it was not open to the tribunal to make an order against the freeholder.

An exchange of emails between the Respondent (managing agent) and the freeholder in July 2016 was put forward referring to the need for a licence for the property, but no clear decision as to how this was to be handled was arrived at between them, and the Respondent continued to manage the property.

The Tribunal’s Decision

The Tribunal concluded that it was satisfied beyond reasonable doubt that the Respondents had committed an offence under section 72(1) of the 2004 Act of control of an unlicensed HMO.

The property required a licence under Newham’s Additional Licencing Scheme and at no time during both Applicants’ period of occupation, was it licenced or an application for a licence made.

The tribunal was further satisfied that the Respondents (managing agents) were “persons having control” of the property as they received the rack-rent of the premises from the Applicants.

The tribunal made a rent repayment order in favour of the Applicant 1 in the sum of £7260 and in favour Applicant sin the sum of £7800. The tribunal also ordered the Respondents to refund to the

Applicants the tribunal fees of £300.

The case highlights the importance of the need for both landlords and managing agents to check regularly with their local authority about any changes to local licencing rules.

*The Housing Act 2004 introduced licensing for houses in multiple occupation (HMOs). Licensing is mandatory for all HMOs which have three or more storeys and are occupied by five or more persons forming two or more households. Additional HMO licensing schemes enable councils to require licencing of HMOs which are not covered by mandatory licensing, i.e., an HMO where at least 3 tenants live, forming more than 1 household.

**In modern usage, the term rack-rent is usually a rent that represents the full open market annual value of a holding, often simply called the market rent. Less frequently, a rack-rent may also be “the maximum rent permitted by law”, or in an earlier interpretation, an extortionate rent.

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