Case Study: Rothberg Rent Repayment Order
1. Case Overview:
This case involves a rent repayment order (RRO) granted by the First-Tier Tribunal (Property Chamber) against Mr. Daniel Rothberg, Mr. Bruce Rothberg, and Mr. David Reuben Rothberg, (jointly the Respondents) in favor of a tenant, Ms. S.A. Song. The applicant was represented by Mr. K. Sharma of counsel instructed by Legal Road Ltd. The core issue was the landlords’ failure to obtain the necessary license for a House in Multiple Occupation (HMO) under the Housing Act 2004. This failure led to a successful claim by the tenant for a rent repayment order.
2. Key Parties:
- Applicant: Ms. S.A. Song (Tenant)
- Representative of Applicant: Mr. K. Sharma of counsel instructed by Legal Road Ltd.
- Respondents:
- Mr. Daniel Rothberg (Landlord 1)
- Mr. Bruce Rothberg (Landlord 2)
- Mr. David Reuben Rothberg (Landlord 3)
- Representative of Respondents: Not Represented
- Tribunal:
- Tribunal Judge S.J. Walker
- Tribunal Member A. Lewicki FRICS
3. The Property:
- The property in question was an HMO located at Flat 33 Hillside Court, 409 Finchley Road, London, NW3 6HQ.
- It is described as one of 61 flats in a 1930s character mansion block.
4. Issue at Hand:
- The main issue was that the Respondents, as the landlords, had failed to obtain the required HMO license from the London Borough of Camden (LBC).
- LBC had a designation under section 56 of the 2004 Act in place from December 8, 2015 which required properties occupied by 3 or more people forming 2 or more households to be licensed, including those in purpose-built blocks.
- The Applicant sought a rent repayment order under sections 43 and 44 of the Housing and Planning Act 2016, due to the landlord operating an unlicensed HMO.
5. Timeline:
- Offence Period: 13 October 2019 to 12 October 2020
- Application Date: 23 October 2020.
- Hearing Date: 2 June 2021 (remote video hearing)
- Decision Date: 13 July 2021
6. Evidence and Arguments:
- Applicant’s Case: The applicant argued that the property was an HMO, that the landlords failed to obtain an HMO license, and that they were therefore entitled to a rent repayment order for the period they were in occupation.
- Respondents’ Defense: The respondents accepted that an offence had been committed. However, they argued for a reduction in the amount of any order. They claimed that the rent included utilities and other services and that such costs should be deducted. They claimed also that they had acted in good faith, that the tenant had caused them considerable problems and that she had breached the terms of her agreement.
- Tribunal’s Findings:
- The Tribunal found that the property was an HMO requiring a license and that the Respondents failed to obtain the required license.
- The Tribunal did not accept the argument that costs of utilities, services, and/or tenant conduct should lead to a reduction in the RRO amount, taking into account the decision in Vadamalayan v Stewart [2020] UKUT 0183 (LC) and Ficcara v James [2021] UKUT 38 (LC).
- The Tribunal concluded that the Respondents were aware that a license may be needed as far back as May 2019.
- It found no grounds for reducing the order due to the issues that the Respondents had brought up.
- The Tribunal was satisfied that there was jurisdiction to make a RRO in this case.
7. Outcome:
- The Tribunal granted a Rent Repayment Order requiring the Respondents to jointly pay the Applicant a total of £11,268.
- The Tribunal also granted the Applicant an order for the re-imbursement of the fees of £300 paid for bringing the application. Payment to be made within 28 days.
- The Tribunal did not grant any application for legal costs.
8. Legal Principles and Significance:
- HMO Licensing: This case reinforces the need for landlords to comply with HMO licensing regulations, as failure to do so can result in rent repayment orders.
- Joint Liability: The case also highlights that where a property is jointly owned, the Tribunal will assess the facts and their liabilities as a whole.
- Reasonable Excuse: The case explores what does not constitute a reasonable excuse, particularly when a landlord is aware a license may be needed.
- “Starting Point” for RRO Calculation: The Tribunal reinforces that the starting point for RRO calculations is the total rent paid within the relevant period, and that the landlord’s costs, profits, or tenant conduct are generally not deductible under Sections 44(3) and (4) as per Vadamalayan. This is except in limited circumstances such as when a landlord is paying for utilities directly for a tenant, and where the tenant is using a varying amount of such utilities. The amount is calculated by reference to the rent paid in a relevant period.
- Licence vs Tenancy: The Tribunal’s decision also shows that the power to make a RRO applies to both licensees and tenants and that it is not limited to assured shorthold tenancies as contended by the Respondents.
- “Letting”: The definition of “letting” is also defined to include licences. The definition of “tenancy” is defined so as to include a licence.
9. Analysis and Discussion:
- This case showcases the importance of landlords conducting due diligence on licensing requirements and the limitations of the “reasonable excuse” defense.
- It also serves as a reminder that a landlord’s personal circumstances or tenant behavior are not grounds to avoid a rent repayment order where a clear violation of housing law has occurred. The landlord should ensure that there is compliance before the tenants are in occupation.
- The case demonstrates that it is the overall conduct of all landlords and not just one individual landlord where property is jointly owned that is to be assessed.
- The Tribunal made it clear that it was not appropriate to deduct the costs of utilities and/or services as a way of reducing any order.
- The Tribunal made it clear that a landlord should be able to take into account the costs of the utilities when setting the level of rent.
This case study provides a thorough overview of the proceedings, the legal principles involved, and the outcome of a complex RRO case. It underscores the legal obligations of landlords and the rights of tenants in housing disputes.
