[2024] UKUT 255 (LC)

The respondents made their application for rent repayment orders in February 2021 but for reasons which are unclear it was not determined until October 2023. The basis of the application was that Mr Kumar was said to have committed the offence, contrary to section 72(1), 2004 Act, of being a person having control of or managing an unlicensed HMO.

The FTT accepted Mr Neilson’s submission on behalf of the respondents that the effect of LML granting sub-tenancies for terms continuing beyond the end of its own Headlease on 30 September 2019 was that LML effectively assigned the remainder of its interest in those parts of the House to the sub-tenants. Accordingly, from the grant of each sub-tenancy, Mr Kumar became each respondent’s landlord.

In response to Mr Kumar’s objection that he neither managed nor had control of the House, having let it to LML, the FTT referred to the definitions of “person having control” and “person managing” in section 263, 2004 Act, both of which it said applied to Mr Kumar.

By section 263(1), “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 an agent or trustee of another person), or who would so receive it if the premises were let at a rack rent. The FTT explained that a “rack-rent” is a rent which is not less than two-thirds of the full net annual value of the premises. It decided that Mr Kumar was the person who receives the rack-rent of the premises because: “LML were liable to pay him their own rent which itself satisfied the definition of a rack rent and he would have received the Applicants’ rents but for the arrangement he had with LML”.

Additionally, by section 263(3), in the case of an HMO, “person managing” means the person who, being an owner or lessee of the premises receives (whether directly or through an agent or trustee) rents or other payments from persons who are in occupation as licensees or tenants of parts of the premises or who would so receive those rents or other payments but for having entered into an arrangement with another person who is not an owner or lessee of the premises by virtue of which that other person receives the rents or other payments. The FTT considered that Mr Kumar was also a person managing the House, but it did not explain how it arrived at that conclusion and Mr Neilson and Mr Morris both agree that it was wrong because Mr Kumar did not receive any rent from persons in occupation.

The respondents each sought a rent repayment order for the maximum period available under section 44(2), 2016 Act, which the FTT said was from 20 September 2019 to 1 April 2020. Mr Kumar explained to the FTT that for much of that period he was out of the country. He had relied on LML’s professionalism after they had been recommended to him by his previous agents, Chestertons, whom he also trusted. As to the possibility that these facts might amount to a reasonable excuse for Mr Kumar being in control of an unlicensed HMO, which would provide him with a complete defence, the FTT said this:

“The Tribunal raised with [Mr Kumar] whether he wished to seek to rely on the defence under section 72(5) of having a reasonable excuse. In response, [Mr Kumar] eschewed any claim that he was ignorant of his obligations as a landlord for licensing or housing standards. He has at least two other properties in the same borough, Wandsworth, and is familiar with compliance with standards set by the local authority.”

The FTT said no more about the defence of reasonable excuse and appears to have proceeded on the basis either that Mr Kumar did not want to rely on it, or that his familiarity with HMO licensing meant that the fact that he let the House to an apparently reputable company while he was out of the country did not provide him with such an excuse. It was satisfied that Mr Kumar had committed the offence of having control of or managing an unlicensed HMO and that “as the [respondents’] landlord” he was a person against whom a rent repayment order could be made.

The FTT then went on to consider the amount of the award it should make and after an extended commentary on the applicable principles and having considered factors relied on by the parties, it decided that Mr Kumar should be required to repay 60% of the rent which each of the respondents had paid. Mr Kumar was therefore ordered to pay £2,490.98 to Mr Kolev, £2,586.67 to Mr Niven and £2,471.60 to Ms Marshall. In making that order the FTT did not remind itself that the respondents had paid their rent to LML and not to Mr Kumar (although in its earlier account of the facts it had recorded that, after the expiry of its Headlease on 30 September 2019 “LML collected the rents from [the respondents] and paid sums to [Mr Kumar] in purported discharge of the rent agreed in their tenancy”).