Previously in the first part of this series, we discussed the basis of rent repayment orders and when an application could be made. This blog discusses the Tribunal's discretion and the factors taken into account when deciding the level of the award.
Tenant's Application
The Tribunal's approach in rent repayment order proceedings differs depending on the person making the application and the alleged offence. For example, where an application is made by a tenant and it relates to a property licensing offence, then the amount of any rent repayment award would be at the discretion of the Tribunal. In exercising their discretion, the Tribunal will take into the statutory factors under section 44 (4) of the Housing and Planning Act 2016 ("the Act"). We discuss these factors in further detail below.
Where a landlord is convicted of any offence other than a property licensing one, then the Tribunal does not have to apply the statutory factors and must order the maximum amount unless it is unreasonable to do so due to exceptional circumstances.
Local Authority Application
If the Applicant is the local authority and the landlord is convicted of one of the relevant offences or has received a financial penalty in respect of the offence (with no prospect of appeal against the penalty), then the Tribunal must order the maximum amount for the full 'relevant period', capped at 12 months' rent, unless it is unreasonable to do so.
If a landlord is not convicted (or given a financial penalty), then different rules for the award apply to each of the offences. For example, where the application is made on the basis of an alleged unlawful eviction, harassment or violent re-entry, then the Tribunal will order the landlord to repay the rent paid 12 months preceding the date of the alleged offence.
In regards to an alleged property licensing offences, the award must relate to the rent paid during the period the landlord was committing the offence, not exceeding 12 months' rent.
Government Guidance for Local Authorities
In addition, where a local authority makes the application, the Government has recommended in their guidance 'Rent Repayment Orders under the Housing and Planning Act 2016' that local authorities take into account the following factors when considering how much rent they should seek to recover from a landlord. These include:
- Whether the rent repayment order would have a real economic impact on the landlord;
- Whether the order would deter the landlord from repeating the offence;
- Whether the order would dissuade others from committing similar offences; and
- If the landlord has obtained any other financial benefits as a result of committing the offence and if this can be removed.
A local authority is able to bring an RRO claim even if they have sought to impose a financial penalty for the same offence, meaning that it is therefore possible for a landlord to incur a double penalty.
Tribunal's Award under a Rent Repayment Order
The Tribunal's first step in deciding the amount of an RRO is to establish the 'relevant period'. The relevant period is provided for under section 44(2) of the Act which states that any RRO must relate to the amount of rent paid during the period, not exceeding 12 months, during which the landlord was committing the relevant offence.
Next, the Tribunal will consider the starting point of the financial award. It was recently confirmed in the case ofVadamalayan v Stewart and others (2020) UKUT 0183 (LC) that the starting point of any award under a rent repayment order is the full amount of the rent paid during the relevant period.
Previously, the general approach for Tribunals was to deduct any costs the landlord had incurred in maintaining the property during the relevant period. However, in Vadamalayan the Upper Tribunal confirmed that any expenditure incurred by the landlord for maintaining the property would not be deducted from the overall award as these were part of the landlord's obligations under the tenancy agreement. However, the UT further went on to state that Tribunals can instead discount any payments made by the landlord towards utility bills as these are services provided by third parties and used by tenants at their own rate and enjoyment.
Where the Tribunal is not to award the maximum amount, the Tribunal must take into account statutory factors under section 44 (4) of the Act:
(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.
In Vadamalayan the Upper Tribunal's decision appears to suggest that only these factors would be taken in to account, but the Act does state that these are factors which must 'in particular' be taken into account – which suggests that the Tribunal does still have a general discretion.
The Tribunal's approach to rent repayment orders is not to merely compensate tenants for a landlord's breach but to impose penalties on landlords who commit the relevant offences.
Conclusion
The Tribunal's discretion in setting the amount an RRO has become more limited under the Housing and Planning Act 2016. They are still bound to take into account the factors under the section 44 (4) of the Act however, the recent case of Vadamalayan now prevents the Tribunal's from deducting any additional costs incurred by a landlord other than utility payments. In most cases the starting point for RRO award will be the full rent paid during the relevant period and it may be difficult to persuade the Tribunal to make further reductions unless they fall clearly within the statutory factors.
In the last part of this series, we will talk about negotiation and out-of-court settlement.
Originally published by Anthony Gold, July 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
