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Something to avoid

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A recent Upper Tribunal decision has overturned the basis of awards in Rent Repayment Orders and made this a far more ‘hostile environment’ for landlords, says Sharon Betton.

In my professional life, I was proud of my reputation as ‘The Landlord’s Friend’. I believed then and believe now, that landlords are often the wrongly painted black sheep but are also often show more compassion than they are given credit for. However, partisan as I am, I am aware of the (hopefully) few landlords that let inadequate and poor properties to vulnerable people, often in ignorance of what standard the property should be.

Standards have risen considerably in the private sector over the last decades. Various measures have been put in place to improve standards. Licensing was one attempt which was unfair on the good landlords and very often ignored by those who preferred to live ‘under the radar’.

Rent Repayment Orders were first introduced by the Housing Act, 2004 as another tool aimed at improving standards. Their primary purpose was to penalise those landlords who failed to obtain the license that was necessary for Houses in Multiple Occupation – properties that were often notoriously bad and tenanted by vulnerable people, unaware that the standard of the property they rented was unacceptable, but also unable to sustain a tenancy with better standards.

The Housing and Planning Act of 2016 made Rent Repayment Orders more prominent as a means of taking action against bad landlords. The Act introduced new landlord ‘offences’:

  • Failure to comply with an Improvement Notice under section 30 of the Housing Act 2004;
  • Failure to comply with a Prohibition Order under section 32 of the Housing Act 2004;
  • Breach of a banning order made under section 21 of the Housing and Planning Act 2016;
  • Using violence to secure entry to a property under section 6 of the Criminal Law Act 1977;
  • Illegal eviction or harassment of the occupiers of a property under section 1 of the Protection from Eviction Act 1977.

The penalties for transgressions could be as substantial as a maximum repayment of up to one year’s rent to the tenant – though this could be reduced by any money spent on the property during that year and was also dependent on the severity of the transgressions. Many Rent Repayment Orders were made for less than the maximum sum.

No landlords want to rent their properties for a year without any profit – in fact, as they are still required to maintain the property, repayment of a year’s rent means they will be running at a loss if an order is made. Not surprisingly, landlords will do as much as they can to have the order reduced.

They may find this is harder to do following judgement in the Valdamay v Stewart case. The landlord had attempted to gain deductions from a Rent Repayment Order of £17,420 decided by the First-tier Tribunal. On appeal, Judge Cooke decided not to allow any additional deductions, but made it clear she was not happy that any deductions should be allowed at all. The Judge’s decision has meant new principles have emerged for setting the amount of a Rent Repayment Order. These are:

  • The rent is for the relevant period, with a maximum of 12 months;
  • It is not a legal principle that the landlord’s profits during the period will limit the award;
  • If the tenant paid for utilities, this will have no bearing on the amount of the order. If the landlord paid for the utilities, these expenses can be deducted. His or her other expenses make no difference to the amount awarded;
  • If the local authority or Court imposes a fine or other civil penalty on the landlord, this will not be deducted from the amount of the order or the amount awarded to the tenant – it seems ludicrous that this should need to be said, after all, why should the tenant receive a lesser amount because the authorities have chosen to punish the landlord?
  • There is no requirement that the amount payable to the tenant should be ‘reasonable’ ;
  • Though one year’s rent is the legal maximum allowable, it will not always be awarded – the amount will depend on the landlord’s conduct and if likely to cause financial hardship, this will be taken into account.

All this could mean that Rent Repayment Orders will be higher now than previously. The cost of meeting standard repair obligations during the course of the tenancy will no longer be given any weight in deciding the amount of the Rent Repayment Order.

The best advice is to avoid being subject to action being taken that could result in a Rent Repayment Order. Take whatever advice is available, through your landlord association, and from the enforcement teams at the Local Authority. Courts will look more sympathetically at a landlord who has tried to avoid action by asking for advice.

It often doesn’t feel like it, but local authorities and enforcement teams are on the same side as you – what they want is an ordered and well-managed private sector.  Most of them (I suppose there are exceptions!) don’t want to make life harder for the majority of landlords who try their best to offer good quality properties, though sometimes they may miss the mark.