Peter Knibbs and Lorenza Picciano from BPE Solicitors’ Litigation team, discuss the regulations surrounding HMOs and the impact of rent repayment orders on residential landlords.
The Housing Act 2004 (“the 2014 Act”) introduced ‘Rent Repayment Orders’ (“RRO”), whereby a local authority can apply to the First Tier Tribunal (“the FTT”) for an order that a landlord must repay up to 12 months’ rent to a tenant, where the landlord has failed to licence a House in Multiple Occupation (“HMO”) without reasonable excuse.
In England the way by which RROs are granted is now governed by the Housing and Planning Act 2016 (“the 2016 Act”). In Wales they continue to be governed by the 2004 Act.
So, what does this all mean?
What is an HMO?
An HMO is a building or part of a building which consists of one or more units of living accommodation, not consisting of a self-contained flat or flats. The living accommodation must be occupied by three or more tenants who do not form a single household and it must be their main residence. Moreover, two or more of the households who occupy the living accommodation must share toilet, bathroom or kitchen facilities.
These are set out in Part 2 of the 2004 Act and are controlled by the local housing authority for the property in question.
Who can apply to obtain an RRO?
Both a tenant and a local authority can apply to the FTT for an RRO against a landlord.
When can a RRO application be made?
The application must be made within the 12 months from the date of the landlord’s breach of the HMO licensing requirements.
Breaching the HMO licensing requirements is a criminal offence, however the 2016 Act is clear that an RRO can be made regardless of whether a landlord has been convicted of the offence.
How much will a landlord have to repay?
The amount to be repaid by the landlord depends on who is making the application:
- If by the tenant then the FTT can order up to 12 months’ rent to be repaid;
- If by the local authority the FTT can order up to 12 months’ universal credit to be repaid.
In deciding how much to order, the FTT must consider: the conduct of the landlord and tenant, the financial circumstances of the landlord and whether the landlord has been convicted of an HMO licensing offence.
In any case, under s.44(3) of 2016 Act, the amount the landlord is ordered to repay must not exceed the rent paid in the 12 months’ before the offence, less any universal credit paid to the tenant.
The burden on proof lies on the Applicant
In order for either a tenant or local authority to obtain an RRO against a landlord, they must satisfy the FTT beyond reasonable doubt that the landlord committed the offence in question. This departs from the civil standard of proof (on the balance of probabilities) as the FTT is being asked to determine whether the landlord has committed an offence (albeit in civil proceedings). It is envisaged that tenants will seek a local authority’s assistance in pursuing landlords, given the high standard of proof required.
Can landlords defend against an RRO?
There are several defences available to the Landlord, the primary one being where the landlord can show they had a ‘reasonable excuse’ for committing the offence.
The term “reasonable excuse” is not defined, and is necessarily a broad term, which is likely to favour the landlord as the landlord can call upon an unlimited list of possible excuses, providing they are ‘reasonable’. Such excuses could include serious illness, a reasonable oversight by the landlord, wrong or negligent advice from the Landlord’s agent, or that the landlord has received conflicting or incorrect advice from the local authority.
However, the burden of proof lies with the Landlord to satisfy the FTT they have a ‘reasonable excuse’ for the offence. The standard of proof is on a balance of probabilities, meaning it could be easier for the landlord to establish their defence than it is for a tenant or local authority to establish that the landlord committed a licensing offence in the first place.
The making of RROs is becoming increasingly common so landlords are advised to be mindful of the HMO licensing requirements contained within the Housing Act 2004. Otherwise there is a risk of their tenant or local authority applying for, and obtaining, an RRO against them.
For advice and support in relation to rent repayment orders or any other property disputes, please contact either Peter Knibbs at firstname.lastname@example.org or call 01242 248239 or Lorenza Picciano at email@example.com or call 01242 248406 or another member of the BPE Litigation team
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