The Court of Appeal has upheld the decision of the Upper Tribunal (Lands Chamber) in Kowalek and another v Hassanein Ltd [2022] EWCA Civ 1041; [2022] PLSCS 122. The UT’s approach to the interpretation of sections 44(2) and 44(4)(a) of the Housing and Planning Act 2016 was found to accord with the policy aim of deterring rogue landlords from committing housing related offences.
Section 44(2) provides that the amount of a rent repayment order must be determined in accordance with the rent paid by the tenant during the relevant period the offence in question was being committed. By virtue of section 44(4)(a), the First-tier Tribunal must also take into account the conduct of both the tenant and the landlord when determining the amount of an RRO.
In 2019, the respondent landlord granted the appellants an assured shorthold tenancy of a flat situated in Kilburn Park Road, London NW6. In 2018, the local housing authority designated the area in which the property was situated as being subject to selective licensing. The respondent failed to obtain a licence and only applied for the same on 27 January 2020.
On 10 January 2020, the appellants applied to the FTT for an RRO in the sum of £23,819.98. At the material time, the appellants were facing possession proceedings on the grounds of rent arrears. On 28 January 2020, the date of the first hearing of the possession claim, the appellants paid the sum of £2,000 towards their arrears. The appellants subsequently increased the amount of the RRO claimed to include this payment.
On 4 September 2020, the FTT made an RRO in the sum of £11,909.99. It found the respondent guilty of being in control of or managing an unlicensed house contrary to section 95(1) of the Housing Act 2004. In accordance with section 95(3), the FTT found that the respondent stopped committing the offence once it applied for a licence on 27 January 2020.
Having regard to the ordinary meaning of section 44(2) of the 2016 Act, the FTT found that only rent paid at the material time the relevant offence was being committed could be taken into consideration when determining the amount of an RRO. Accordingly, the sum of £2,000 paid by the appellants had to be disregarded.
On the issue of conduct, the FTT stated that the payment of rent was a tenant’s “paramount duty”. The appellants’ substantial arrears was material to the issue of conduct, for which the FTT reduced the amount of the RRO by 50%. The UT upheld the FTT’s decision.
The Court of Appeal dismissed the appellants’ appeal. It found that the maximum amount of an RRO must be “determined without regard to rent which, while it might have discharged indebtedness which arose during the period specified in section 44(2), was not paid in that period”. The UT observed that this accorded with the policy aim of deterring rogue landlords from committing housing-related offences.
The Court of Appeal also found that the appellants’ rent arrears were relevant to the issue of conduct. It rejected the appellants’ contention that an RRO could not be reduced in the present case where the level of arrears, if any, was the subject of extant proceedings. On the basis of the evidence, the Court of Appeal noted that the FTT had found that the appellants were in substantial arrears.
By way of guidance, the Court of Appeal advised that in cases where the existence or extent of rent arrears was the subject of pending proceedings in the county court, and which could be material to the size of an RRO, it would be appropriate for the application for an RRO to be heard after the county court claim had been determined or, in the alternative, for the proceedings in the FTT and the county court to be heard together.
Elizabeth Dwomoh is a barrister at Lamb Chambers
