The FTT’s decision
was made under section 40 of the Housing and Planning Act 2016 which allows a rent repayment order to be made if it is established, beyond reasonable doubt, that a landlord has committed an offence to which Chapter 4 of Part 2 of the 2016 Act applies. The relevant offence in this case was that the Landlord had had control or management of an unlicensed HMO, contrary to section 72(1) of the Housing Act 2004. The Landlord’s defence was that it had a reasonable excuse for that state of affairs, because the managing agents it had instructed to manage the building on its behalf had failed to inform it (as they were contractually bound to do) that the property was subject to an additional licensing scheme introduced by the local housing authority shortly after the original letting to the Tenants commenced. 3.The FTT rejected the Landlord’s defence but granted it permission to appeal on the issue of reasonable excuse, and on the quantum of the rent repayment order. 4.The Tenants did not initially seek to challenge the FTT’s decision, but once permission was given to the Landlord to appeal, they sought and obtained permission to cross-appeal on the grounds that the FTT’s decision to award repayment of only 65% of the rent they had paid during the relevant period failed to take into account five of the six conduct issues which they had relied on as justifying a much higher award.5.A few weeks before the hearing and without any explanation being given the Landlord withdrew its appeal. It subsequently chose not to be represented at the hearing of the Tenants’ cross-appeal. 6.At the hearing of the cross-appeal the Tenants were represented by Mr Michael Sprack, as they had been before the FTT. I am grateful to him for his helpful submissions. The facts7.The Tenants were formerly all tenants of the Landlord at Flat 8, Simpson’s House. Simpson’s House is part of a former industrial building in Dalston which comprises 2-4 Somerford Grove, and 6 Somerford Grove. It immediately adjoins and is attached to Olympic House, a building at 8 Somerford Grove which also belongs to the Landlord. Both Simpson’s House and Olympic House have been converted to provide self-contained flats. Flat 8 is a three-bedroomed flat with a kitchen, living room and two bathrooms. 8.On 18 September 2018 the Landlord granted a single tenancy of Flat 8 to the Tenants at a rent of £2,361 a month. Two weeks later, on 1 October 2018, the local housing authority introduced an additional licensing scheme which required that all HMOs in the area to which the scheme applied should be licensed under Part 2 of the Housing Act 2004. 9.Although the three Tenants took a single tenancy of the whole flat and shared their housing and utilities costs, it has never been disputed that the six conditions comprising the self-contained flat test in section 254(3), 2004 Act were satisfied while they were in occupation and the flat was therefore an HMO. Nor has it been disputed that the additional licensing scheme applied to it.10.The Landlord is a large property investment company and it appointed Tower Quay Ltd as its letting and managing agent for Simpson’s House. The contract between the Landlord and the agent required the agent to ensure that the Landlord complied with all relevant statutory provisions relating to the management and occupation of the property. The FTT had before it a written statement by a director of the agent accepting that it should have advised the Landlord that a licence was required but that it had not done so.11.At the start of the tenancy the Tenants complained to the agent about various matters concerning the flat and the building, including the installation of extractor fans in the bathrooms and the provision of keys for a mailbox. Later they raised further concerns, including about the presence of mice in the building and damage caused to the front door by vandals which in turn led to a problem of the theft of post from the common parts. They also joined with other tenants of the building in forming a tenant’s association, Somerford Grove Renters.12.On 8 September 2019 the tenancy was renewed for a further year.13.In March 2020, following the nationwide lockdown imposed in response to the Coronavirus pandemic, Dr Osserman joined as a co-signatory to a letter to the Landlord asking for financial help for tenants and a guarantee of security of occupation. The Landlord’s response was unsympathetic and attracted publicity in The Guardian on 21 April 2020 under the headline “Tenants told to use lunch and holiday savings to pay full rent”. One of those quoted in the newspaper article was Dr Osserman’s husband, Marc Sutton, who also resides in the flat, although he is not one of the tenants. At about the same time Dr Osserman gave interviews to journalists about what he described in his evidence as “cruel treatment during a pandemic from a wealthy commercial landlord”. After that, Dr Osserman believed that he was being subject to surveillance. He later gave evidence to the FTT that security guards had followed him and filmed him in the building, and that when he questioned one of them he was told that the guard had been instructed to do so by Tower Quay, the Landlord’s agents.14.Three months after the newspaper article appeared the Tenants were given notice under section 21 of the Housing Act 1985. The notice was dated 20 July 2020 and required the Tenants to leave the flat after 21 September 2020. It was invalid because emergency legislation introduced in March 2020 had extended the minimum period of notice to three months.15.The notice was followed by an email from the Landlord’s agent on 21 July which stated that the reason the tenancy would not be renewed was a “business decision”. The email also included a statement that “Failure to surrender the premises on the date required by law will result in forfeiture of your deposits, proceedings for immediate possession and could harm your credit rating.” In response to this threatening communication the Tenants sought the advice of the local housing authority, three of whose officers visited the flat on 10 August. 16.A second section 21 notice was served by the Landlord on 10 September 2020, but this too was invalid and was withdrawn on 18 November when a gas safety certificate and an energy performance certificate were served on the Tenants for the first time. 17.At about this time the Tenants were advised by the local housing authority that the flat was an unlicensed HMO, and on 28 October 2020 they made their application to the FTT for a rent repayment order.18.A third section 21 notice, this time of the required six months duration, was served on 23 November. In compliance with that notice the Tenants left the flat on 26 April 2021. The Tenants’ case before the FTT19.The Tenants filed evidence in support of their application which included a witness statement prepared by a Housing Officer employed by Hackney Council, Mr MFum. He gave evidence that the flat was an unlicensed HMO and described what he had found when he inspected it on 10 September 2020, including that the staircase and corridors were fitted with a linked smoke alarm. Mr MFum said that he was experienced in the assessment of housing standards, but the only defect which he pointed out in the flat itself was that the smoke detector fitted in the kitchen “was loose and hanging off the ceiling”; He added that this defect needed to be remedied at the earliest opportunity “in order to provide an effective early warning in the event of fire” and that “failure to remedy the defective fire detector element within the shared kitchen constitute an offence” namely a breach of the requirement of regulation 4(2) of the HMO Management Regulations that the manager of an HMO must “ensure that any fire fighting equipment and fire alarms are maintained in good working order”. Mr MFum did not say that he had tested the smoke detector, nor did he say that it was not working but his description of it as “defective” suggests that he considered that the detector was not in good working order.20.The only other matter of concern to Mr MFum was a “defective and misleading Fire Notice” displayed in the common parts of the building which advised residents, if they discovered a fire, to call the fire brigade and “state 6 Somerford Grove”. He did not suggest in terms that this was a breach of the HMO Management Regulations, but he was concerned that in the event of a fire it might cause the fire brigade to be misdirected. As Mr MFum pointed out, 6 Somerford Grove has a separate entrance, and the correct address of the building in which the flat is located is 2-4 Somerford Grove. 21.Mr MFum’s evidence was not challenged by the Landlord.22.Evidence was also given by Dr Osserman with supporting witness statements from the other Tenants. In his statement Dr Osserman identified a number of issues of concern to them. He described the history of complaints about work required to the flat and to the common parts of the building and referred to a more recent delay in repairing the boiler in February and March 2021 which had meant that his bedroom was inaccessible for a week while works were undertaken. He also described the establishment of the tenants’ association, his correspondence with the Landlord at the start of the pandemic, and the publicity given to the landlord’s unsympathetic response. He explained that he had been told by one of the security guards that Tower Quay had given him and his colleagues instructions to film him. Finally, he referred to the first two section 21 notices and concluded his evidence by stating: “Given the poor conduct I have described, I believe our landlord should be subject to the maximum penalty permitted under law”.23.The Tenants were represented by Mr Sprack at the hearing before the FTT. In a skeleton argument he argued that the appropriate rent repayment order should be “at the top of the range”. He relied on six examples of poor conduct by the Landlord taken from the evidence of Dr Osserman and Mr MFum.The landlord’s case before the FTT 24.The Landlord was also represented by counsel before the FTT and did not dispute that the flat had been an unlicensed HMO between at 1 September 2019 and 31 August 2020. One of its directors, Mr Hadjiioannou, provided a witness statement on which he was cross examined. The Landlord also relied on a witness statement of a director of Tower Quay, Mr Datta, who explained that he was too unwell to attend the hearing and that no other director was sufficiently familiar with the circumstances of the case to give evidence in his place.25.Mr Hadjiioannou’s main point was that the landlord had relied on and been let down by its agent, which had been responsible for ensuring regulatory requirements were met but had been unaware of the need for an HMO licence and had not given appropriate advice. He also dealt with other complaints raised in the Tenants’ evidence including the following points:a.the tenancy agreement required the tenants to carry out regular checks on the smoke detectors and to inform the landlord if any was not working, but no notice of any defect had been received;b.the fire notices in the building correctly referred to Olympic House, because that was where the site security guards, who were “fire trained”, were based and was where the Fire Brigade would attend first on arrival; no issue concerning the form of the notices had been raised by the Fire Brigade on their regular inspections, although the notices had now been changed;c.the provision of gas and energy certificates was the responsibility of an independent contractor;d.compensation had been agreed with the Tenants for delays and problems relating to the replacement of the broken boiler;e.the Landlord had given no instructions to Tower Quay to film or harass any of the Tenants, and he could think of no reason why the agents would do so on their own initiative; security staff were required to monitor “issues with tenants accessing the roof which was dangerous” so “if Mr Osserman was filmed by a security officer it seems likely that this was a misunderstanding connected to concerns about tenants accessing the roof”.26.Mr Hadjiioannou also explained the Landlord’s reasons for serving the section 21 notices. He rejected as “speculation” the suggestion that this was revenge for the Tenants’ involvement in setting up the tenants’ association. He explained instead that: “It was clear that the applicants were not happy with the position at Simpson House, so it was not in anybody’s interest to continue the relationship.”The FTT’s decision27.The FTT found that an offence had been committed and dismissed the Landlord’s reasonable excuse defence. In view of the withdrawal of the Landlord’s appeal I need say no more about that aspect of the case, other than to emphasise that the Tribunal should not be taken to have formed any view on the strength or weakness of that appeal. The circumstances in which reliance on an agent may provide a reasonable excuse for a landlord neglecting to licence an HMO were considered by the Tribunal in its recent decision in Aytan v Moore [2022] UKUT 027 (LC), at [40].28.The FTT also recorded the Tenants’ case that the Landlord’s conduct had been poor due to the neglect of fire safety, the breakdown of the boiler and consequent lack of heating and hot water, the poor maintenance of the building and the lack of pest control. It noted that they sought repayment of the full amount of the rent they had paid for the maximum permitted period of 12 months. It did not refer to the allegations concerning surveillance or the service of section 21 notices after the formation of the tenants’ association, nor to Mr Hadjiioannou’s denial that these were related to complaints and agitation by the Tenants.29.When it considered the quantum of the rent repayment order the FTT began by directing itself that the “starting point” in determining the amount of the order should be the whole amount of the rent paid for the period of 12 months claimed. It referred to section 74(5) and (6) of the Housing Act 2004 which it said “sets out the matters that must be considered by the tribunal”. It quoted those sub-sections including section 74(5) which provided that the amount required to be paid is to be “such amount as the tribunal considers reasonable in the circumstances”. As I will explain, each of those preliminary directions which the FTT gave itself was out of date and inaccurate. 30.The FTT then found that the Tenants’ complaints of disrepair were dealt with appropriately and in a timely manner and they had been compensated for the inconvenience they had experienced. The instances of vandalism and pest problems had not been ignored by the Landlord’s agent, and the Tenants appeared to the FTT to have had unrealistic expectations about how quickly the necessary works could be completed. It nevertheless found that there were no matters concerning the conduct of the Tenants which needed to be reflected in the appropriate order.31.The FTT dealt with the issue of the Landlord’s conduct as follows:“31. The tribunal also considered the conduct of the respondent in determining the appropriate amount of any RRO. The tribunal considers it is entitled to consider both any ‘good’ and ‘bad’ conduct by the landlord. As stated above the tribunal considers that overall, the respondent was reactive to complaints made by the applicants through its managing agents and its repairing contractors. Further, the tribunal finds that the respondent acted responsibly by engaging an experienced managing/letting agent and the ill-health of Mr Datta and its disabling impact upon him and his ability to manage the subject property could not have been foreseen by the respondent.32. The tribunal considers that a deduction limited to 35% should be applied to the amount of RRO order sought by the applicants, in order to reflect the respondent’s ‘good conduct’, thereby amounting to £18,420.96 (rounded) to be equally divided among the three applicants.”