Rent Repayment Order Defence for HMO Licensing

Rent Repayment Order Defence for HMO Licensing

Rent Repayment Orders (RROs) are an essential enforcement tool for addressing breaches of housing law, particularly in cases where landlords fail to comply with licensing requirements for Houses in Multiple Occupation (HMOs). For landlords, understanding how tribunals assess RROs, the defences available, and what constitutes a “reasonable excuse” is vital to navigating the complexities of housing regulations.

This blog provides an in-depth exploration of RROs, tribunal considerations, relevant case law, and common defences, equipping landlords and tenants with the knowledge needed to handle such cases effectively.

What is a Rent Repayment Order (RRO)?

A Rent Repayment Order is a financial penalty that allows tenants or local authorities to recover up to 12 months’ rent from a landlord who has breached specific housing laws. Under the Housing and Planning Act 2016, RROs can be made in cases where the landlord has:

  • Failed to obtain a mandatory HMO licence (Housing Act 2004, Section 72)
  • Committed an illegal eviction or harassment offence
  • Breached a banning order
  • Violated improvement or prohibition notices

For HMOs, the most common ground for an RRO is a landlord’s failure to licence the property, as required under Part 2 of the Housing Act 2004.

How Tribunals Assess Rent Repayment Orders

The First-tier Tribunal (Property Chamber) (FTT) is responsible for deciding whether to grant an RRO and, if so, the amount to be repaid. The tribunal considers several factors when assessing RRO applications:

1. The Extent of the Breach

Tribunals will assess whether the landlord’s failure to licence the HMO was deliberate, negligent, or a result of oversight. In London Borough of Waltham Forest v Marshall (2018), the tribunal emphasised that deliberate breaches would attract the maximum penalty, whereas unintentional failures might result in lower repayment amounts.

2. Financial Gain

The tribunal will evaluate the landlord’s financial gain from renting out an unlicensed property. For example, in Vadamalayan v Stewart & Ors (2020), the tribunal considered the full rental income over the period of non-compliance as the starting point for the RRO.

3. Tenant’s Conduct

The tribunal may take the tenant’s behaviour into account, particularly if their actions contributed to or exacerbated the breach. However, this is rarely a decisive factor unless exceptional circumstances exist.

4. Landlord’s Compliance with Other Legal Obligations

If a landlord has complied with other legal obligations, such as health and safety requirements, the tribunal may reduce the amount of rent to be repaid. This was demonstrated in Goldsbrough & Anor v CA Property Management Ltd (2020), where the landlord’s adherence to property standards influenced the final award.

5. Period of Non-Compliance

The RRO will typically cover the period during which the landlord was operating without a licence. In Fallon v Wilson (2018), the tribunal only considered rent for the specific months during which the property was unlicensed.

Defences Available to Landlords

While RROs are a powerful remedy for tenants and local authorities, landlords may have defences that can mitigate or nullify their liability. The key defences include:

1. The “Reasonable Excuse” Defence

Under Section 72(5) of the Housing Act 2004, landlords can argue that they had a “reasonable excuse” for failing to licence the HMO. While the definition of “reasonable excuse” is not explicitly provided in the legislation, tribunals generally assess this defence on a case-by-case basis. Common examples include:

  • Misleading advice from authorities: In Rogue Landlord Project v Jhooti (2019), the tribunal accepted that the landlord relied on incorrect advice from the local council.
  • Illness or incapacity: Personal circumstances, such as hospitalisation or severe illness, may constitute a reasonable excuse, as highlighted in Holland v Colchester Borough Council (2016).
  • Unforeseen delays in licensing applications: If a landlord made genuine efforts to comply but was delayed due to administrative issues or local authority errors, the tribunal may consider this a reasonable excuse.

However, ignorance of the law or failure to research licensing requirements is generally not accepted as a defence, as seen in Partridge v Gupta (2020).

2. Lack of Knowledge of Licensing Requirements

Landlords may argue that they were unaware the property required an HMO licence. However, tribunals have consistently held that ignorance is not a valid excuse unless extraordinary circumstances exist.

3. Procedural Errors in the RRO Application

Landlords can challenge RROs on procedural grounds, such as the applicant failing to meet the legal requirements for submitting a claim or providing insufficient evidence of rent paid.

4. Licence Application in Progress

If the landlord applied for a licence before enforcement action commenced, this could be a mitigating factor, though it is unlikely to constitute a full defence.

Case Law on Rent Repayment Orders

  1. Vadamalayan v Stewart and others (2020) UKUT 0183 (LC)
    This case clarified that tribunals should start with the total rent received by the landlord during the breach period and then consider mitigating factors when determining the final award.

  2. Goldsbrough & Anor v CA Property Management Ltd & Ors [2019] UKUT 311 (LC) 
    The tribunal reduced the amount of rent to be repaid due to the landlord’s compliance with other obligations, such as maintaining property standards.

  3. Fallon v Wilson & Ors [2014] UKUT 0300 (LC)
    The tribunal limited the RRO to the specific months during which the landlord operated the property without an HMO licence.

  4. London Borough of Waltham Forest v Marshall (2018)
    This case highlighted that deliberate and persistent breaches would result in the maximum penalty under an RRO.

  5. Partridge v Gupta (2020)
    Ignorance of the licensing requirement was rejected as a defence, reinforcing the importance of landlords’ duty to research legal obligations.

What Constitutes a Reasonable Excuse Defence?

The “reasonable excuse” defence is a key consideration in RRO cases. For a tribunal to accept this defence, landlords must demonstrate:

  • Genuine Effort to Comply: Evidence that the landlord made efforts to obtain a licence but was hindered by circumstances beyond their control.
  • Exceptional Circumstances: Illness, incapacity, or incorrect advice from local authorities may constitute a reasonable excuse.
  • Lack of Malice or Negligence: Tribunals are more likely to accept the defence if the failure to licence was due to an honest mistake rather than deliberate negligence.

However, landlords should note that “reasonable excuse” defences are interpreted narrowly, and the burden of proof lies on the landlord.

Conclusion

Rent Repayment Orders serve as a critical enforcement mechanism for ensuring compliance with HMO licensing laws. Tribunals assess RROs by considering the landlord’s conduct, the severity of the breach, and mitigating factors, while also accounting for tenant behaviour and the landlord’s efforts to comply.

Landlords facing an RRO application must carefully prepare their defence, paying particular attention to procedural requirements and the possibility of raising a “reasonable excuse” defence. For tenants and local authorities, understanding the tribunal’s approach and gathering robust evidence is essential for securing a successful claim.

By staying informed of case law and legal obligations, landlords can minimise the risk of RROs and ensure their properties remain compliant with housing regulations.

For further advice on RROs, HMO licensing, or housing law, consider seeking professional legal assistance to navigate the complexities of this area effectively.

If you need landlord defence experts, contact us now.