The Tenants’ cross-appeal
32.The sole ground of the Tenants’ cross-appeal and the focus of Mr Sprack’s submissions was that the FTT had failed to take relevant matters into consideration when determining the amount of the rent repayment order. Specifically, it had failed to have regard to the uncontested evidence of Mr MFum concerning non-compliance with relevant fire safety regulations; nor had it dealt with the Tenants’ allegation that the Landlord had mounted a campaign of harassment against them including instructing security guards to conduct surveillance and serving notices terminating their tenancy accompanied by statements misrepresenting what would happen if they did not vacate the flat on the required date. It was apparent from paragraph 31 of the decision that the FTT had only taken account of ‘good conduct’ issues, which it considered justified a deduction of 35% from the total amount of rent claimed. No account had been taken of ‘bad conduct’ in the weighing of factors relevant to the amount of the order.33.I accept Mr Sprack’s submission. The absence of any reference in the decision to the alleged acts of harassment suggests either that the FTT did not consider that these were relevant to the amount of the rent repayment order, or (in relation to the suggested surveillance) it did not accept that it had occurred. But Mr Hadjiioannou’s evidence did not dispute that security guards might well have been observing and filming tenants at the property, including Dr Osserman, because of some suggested concern about access to the roof of the building. The FTT did not say whether it accepted Dr Osserman’s evidence about what had happened to him or what he had been told by security guard who had been filming him, nor did it say what it made of Mr Hadjiioannou’s explanation or whether what there might have been some innocent explanation for the suggested surveillance. 34.The FTT did not mention the section 21 notices or the Landlord’s motive for serving them. There was no doubt that the notices had been served in response to the Tenants’ complaints. Although Mr Hadjiioannou said the suggestion that there was an element of “revenge” was “speculation”, his own explanation explicitly linked the decision to terminate the tenancy with the Tenants’ dissatisfaction with the condition of the building: “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.” 35.Nor did the FTT refer to the Landlord’s failure to provide gas safety or energy performance certificates until they became necessary to terminate the tenancy.36.It is of course true that a tribunal is not required to deal with every point raised by a party in evidence or submissions, but it must deal with the points of substance which are capable of affecting the outcome. If it considers that it is unnecessary to resolve a factual dispute because it will make no substantial difference to the decision, a tribunal should explain why that is so (unless the reason is so obvious that an explanation is unnecessary). If it does not do so the parties will be left feeling that part of the case has not been considered without knowing why and without knowing whether the point left unresolved might have made a difference. 37.Whether the omissions in the FTT’s decision are treated as evidence of a failure to take relevant considerations into account when assessing the appropriate penalty, or as a failure to provide adequate reasons for the decision does not matter. The FTT was required to have regard to the conduct of the Landlord in reaching its decision, and the Tenants’ case highlighted specific examples of poor conduct on which they relied. It was essential that the FTT deal with those examples when it explained its decision.38.Although Mr Sprack did not base his appeal on this point, it is also the case that the FTT misdirected itself on the relevant law. As section 74(1) explains, section 74, 2004 Act, to which the FTT referred as the source of its discretion, applies to rent repayment orders made under section 73(5). Since 2016, that sub-section has applied only in Wales, and the power to make a rent repayment order in respect of an HMO in England has been found in Chapter 4 of Part 2 to the Housing and Planning Act 2016. The amount of a rent repayment order is now to be determined by the FTT applying section 44, 2016 Act, which, unlike section 74(5), 2004 Act, makes no reference to what is “reasonable in the circumstances”. Instead, section 44(2) provides that the amount of the order “must relate to rent paid” during the relevant period. Section 44(3)-(4) then provide that:“(3) The amount that the landlord may be required to repay in respect of a period must not exceed – (a) the rent paid in respect of that period, less (b) any relevant award of universal credit paid (to any person) in respect of rent under the tenancy during that period. (4) In determining the amount, the tribunal must, in particular, take into account – (a) the conduct of the landlord and the tenant;(b) the financial circumstances of the landlord; and (c) whether the landlord has at any time been convicted of an offence to which this Chapter applies.”39.Nor was the FTT right when it directed itself that that the “starting point” in determining the amount of the order should be the whole amount of the rent paid for the relevant period. It issued its decision on 21 July 2021, before the publication of this Tribunal’s decision in Williams v Parmar [2021] UKUT 0244 (LC) explaining that the concept of a 100% “starting point” was based on a misreading of the Tribunal’s earlier decision in Vadamalayan v Stewart [2020] UKUT 0183 (LC) and was wrong. It is clear from the FTT’s direction and to the reference in paragraph 32 of the FTT’s decision to “a deduction limited to 35%” that the FTT applied a mistaken approach to the determination of the amount of the order.40.Those misdirections and the omission to take account of the evidence on conduct issues provide more than enough justification for setting aside the FTT’s decision. But unusually in this case the question whether, having identified significant errors of law in the FTT’s decision, I should proceed to set it aside, is not straightforward.41.The right of appeal against a decision of the FTT made under Part 2, 2016 Act (including against a rent repayment order) is conferred by section 53 of the 2016 Act. A person “aggrieved by a decision” may appeal to the Tribunal under section 53(1); if the appeal is on a point of law, it must be brought instead under section 11 of the Tribunals, Courts and Enforcement Act 2007. In either case this Tribunal’s consideration of the appeal is regulated by section 12 of the 2007 Act (see section 53(5), 2016 Act).42.Section 12, 2007 Act provides, so far as relevant:“12 Proceedings on appeal to Upper Tribunal(1) Subsection (2) applies if the Upper Tribunal, in deciding an appeal under section 11, finds that the making of the decision concerned involved the making of an error on a point of law.(2) The Upper Tribunal–(a) may (but need not) set aside the decision of the First-tier Tribunal, and(b) if it does, must either–(i) remit the case to the First-tier Tribunal with directions for its reconsideration, or(ii) re-make the decision.(4) In acting under subsection (2)(b)(ii), the Upper Tribunal–(a) may make any decision which the First-tier Tribunal could make if the First-tier Tribunal were re-making the decision, and(b) may make such findings of fact as it considers appropriate.43.Thus, if the Tribunal is satisfied that the decision of the FTT contains an error of law it “may (but need not) set aside the decision”; where the appeal succeeds on a ground other than error of law (i.e. under section 53, 2016 Act) the Tribunal has the same power, but not an obligation, to set the decision aside. If it exercises that power and sets the decision aside it must either remit the case to the FTT for reconsideration or re-make the decision.44.The Tenants were clear in their instructions to Mr Sprack that they did not want the case to be remitted to the FTT for it to provide additional reasons or make further findings dealing with the issues it had previously overlooked. They have been kept out of the repayment due to them because of the Landlord’s appeal, which was eventually abandoned, and they do not want the resolution of their claim to be further delayed. Mr Sprack therefor invited me to re-make the decision.45.But nor were the Tenants keen to lose the benefit of the decision in their favour that the landlord should repay at least 65% of the rent. What they wanted to do, in effect, was to “bank” the 65% assessment based on the matters which the FTT took into account, and then to have this Tribunal supplement that award by grafting on an additional sum reflecting the other matters which the FTT had not dealt with.46.One difficulty with the course which Mr Sprack invited me to adopt is that it is neither one thing nor the other; it neither involve setting aside the FTT’s decision, nor remitting it for reconsideration, so it is not within the power conferred by section 12(2)(b). A second difficulty is that the FTT arrived at its figure of 65% by a flawed process which started with the assumption that repayment of 100% of the rent paid should be ordered unless there was a reason to reduce that figure. That error makes the FTT’s award an unsafe starting point from which to embark on remaking the decision.47.I cannot take the course suggested by Mr Sprack. If I am to remake the decision I must remake it from scratch, as it were, having regard to the unchallenged findings of fact made by the FTT and to such further findings as can be made from the material which was before it. What I cannot do is make new findings of fact on contested evidence which is available to me only in written form. 48.I nevertheless recognise that the Landlord had permission to appeal on the quantum of the rent repayment order as well as on the defence of reasonable excuse and it chose to abandon that appeal. It would be unfair in those circumstances for the Tenants to see an FTT decision in their favour set aside and replaced by one by this Tribunal which awarded them a lesser sum. Before considering whether to set aside the FTT’s decision, or to leave it undisturbed despite its flaws, I will therefore consider what rent repayment order I would make on the unchallenged material before me.49.The matters to which I have regard are first, the importance of HMO licensing as a tool for improving housing standards and the need to ensure compliance with additional licensing schemes made by local housing authority; additional licensing schemes may only be made where an authority considers that a significant proportion of HMOs in the area are being managed ineffectively (section 56(2), 2004 Act). Rent repayment orders are one means by which the objectives of such schemes can be promoted, and non-compliance curbed.50.Secondly, I take into account that the Landlord is a substantial property investment company with resources sufficient to ensure that is complies fully with its responsibilities. The Landlord is not in the same position as a private landlord with a small number of properties who does not have the skills, experience, time or inclination to manage them personally to a high standard and who instead employs an agent to do so. Smaller landlords should be encouraged to seek the assistance of professional managing agents, because in general their tenants are likely to benefit; that encouragement should be reflected in appropriate cases in the rent repayment order regime (as the Tribunal has recently recognised in Ayan and before that in the financial penalty case Ekwezoh v LB Redbridge [2021] UKUT 180 (LC), at [50], where the landlord’s decision to employ an agent was an important factor in justifying the imposition of no penalty). There is less reason to extend the same encouragement to a more substantial commercial enterprise like the Landlord in this case. It could no doubt manage its property portfolio to a high standard in-house but chooses instead to delegate management to agents, for perfectly good commercial reasons; it does not thereby divest itself of its responsibilities or the risks of non-compliance which they carry. The failure to licence was not an isolated omission as the Landlord did not provide gas safety or energy efficiency certificates, for which it also blamed its agents. Those additional failures suggest more than just an isolated lapse by a manager in poor health failing to keep up with a recently introduced licensing requirement, but indicate instead that the Landlord’s business practices involved a systematic or institutional neglect of regulatory requirements. On the other hand, the fact that the Landlord was let down by its agent is not irrelevant, and I take it into account.51.Thirdly, I take into account the condition of the property. The policy underlying the rent repayment regime is directed towards the maintenance of good housing standards. It is consistent with that policy that a landlord who lets a property in good condition and who complies with its repairing obligations should be treated differently from one who lets property in a hazardous or insanitary condition. There have clearly been some issues in this case with repairs, but I am not prepared to go behind the FTT’s finding that complaints of disrepair were dealt with appropriately and in a timely manner and the Tenants had been compensated for the inconvenience they had experienced in relation to the broken boiler. I bear in mind also that, with one exception, Mr MFum found no defects worthy of comment when he inspected the flat. Subject to that exception I approach my assessment on the basis that the Tenants were not exposed to greater risks or deprived of practical protections which they would have obtained if the Landlord had applied for a licence.52.I then come to more contentious matters and those which were not take into account by the FTT. 53.Proper compliance with a landlord’s duties in relation to fire precautions is of the utmost importance but in some respects the evidence concerning the Landlord’s suggested failure to take safety measures in breach of regulation 4 of the 2006 Regulations is incomplete. I am satisfied on the unchallenged evidence of Mr MFum, an experienced environmental health officer, that the kitchen smoke detector which was “loose and hanging off the ceiling” when he carried out his inspection, was evidence of a breach of the Landlord’s duty to keep fire alarms “maintained in good working order”. Whether the condition of the detector amounted to a criminal offence would depend on whether the Landlord had a reasonable excuse for it being in that condition (see section 234(3), 2004 Act). The evidence of Mr Hadjiioannu was that the Tenants had not reported the defect to the Landlord’s agent. Where a defect is within premises demised to tenants, I would accept that an absence of notice would amount to a reasonable excuse for the existence of an isolated defect. I note also that Mr MFum took no action in relation to the defect other than to warn that a failure to remedy it would amount to an offence. 54.In the absence of evidence of notice being given of the defect, and in the face of the FTT’s positive assessment of the Landlord’s general responsiveness to requests for repair, I am not prepared to attribute weight to the condition of the fire detector. 55.Nor is it possible to for me to give weight to the suggested inadequacy of the warning notice displayed in the common parts of the building. The Tenants, supported by Mr MFum, suggest the notice gave incorrect information but Mr Hadjiioannu insisted it correctly recorded what the fire service needed to know. Which of them was correct could no doubt be resolved by further evidence if the matter was remitted to the FTT, but in the absence of evidence I cannot make a positive finding that the notice was defective. I note additionally that there is no specific duty under the 2006 Regulations to display warning notices in the common parts of blocks of flats (regulation 4(3) deals only with notices displayed in the HMO itself. Regulation 7(1)(b) imposes a duty to ensure that all common parts of the HMO are maintained in a safe condition, but that again would not appear to apply to the common parts of a building containing self-contained flats. 56.With some hesitation I am also unable to reach a conclusion on the allegation that the Tenants were subjected to surveillance by the Landlord’s agent. For an agent to take photographs or videos of Tenants who had complained with a view to intimidating or unsettling them, would undoubtedly be conduct capable of being taken into account in determining the amount of a rent repayment order. But the FTT made no findings in relation to those allegations, despite having heard the evidence of both sides. The incidents were disputed in the evidence of Mr Hadjiioannou and I cannot rule out the possibility of an innocent explanation.57.On the other hand, I give considerable weight to the Landlord’s decision to serve notices to terminate the tenancy in response to complaints by the Tenants about the need for repairs and their other expressions of dissatisfaction. Mr Hadjiioannou said the tenancy was terminated because it was not in either party’s interests for the landlord and tenant relationship to continue. He cannot speak for the Tenants, who did not want to leave. I infer that the Landlord regarded termination of the tenancy as being in its interests because the Tenants were, at best, an inconvenience. Accepting Mr Hadjiioannou’s denial that the “commercial decision” had nothing to do with the formation of a tenants’ association, it can only have been because of the Tenants’ requests for work to be done. 58.The Landlord had the right to terminate the tenancy under the general law and cannot be criticised simply for having done so; nor can the Tenants be criticised for insisting on repairs being carried out. Nevertheless, the purpose of the rent repayment order regime is to secure compliance with the law on housing standards, one object of which is to ensure that HMOs are safe and free from serious defects. For a landlord to respond to legitimate requests by its tenants concerning repairs and the condition of the building by vindictively terminating the tenants’ right of occupation can only deter the making of such requests thereby putting the achievement of satisfactory housing standards at risk. If such behaviour goes unmarked it may discourage these or other tenants from requesting that repairs be carried out and encourage this or other landlords to avoid their obligations. For that reason I take it into account.59.The Landlord can also be criticised for misrepresenting the consequences for the Tenants of non-compliance with the original section 21 notice; both the Landlord and its agent would have known that a tenant who has not vacated by the date stated in a section 21 notice does not risk forfeiting their deposit or adverse credit scores (provided they continue to pay what is due from them).60.Having regard to these factors the order I will make is that the Landlord repay to each of the three Tenants the sum of £7,500, that being a little under 80% of the total rent of £28,339.92 which they paid during the period from 1 September 2019 to 31 August 2020 to which their application relates.