Marek And Kahori Kowalek v Hassanein Limited

Under Part 2 of the Housing and Planning Act 2016, rent paid after a landlord has ceased committing a continuing housing offence cannot be recovered by a rent repayment order, even if it discharges arrears arising during the offence. A payment must both be made during the offending period and relate to rent for that period.

A tenancy deposit is not rent while held as security. It may become relevant if released and offset against rent, subject to the statutory conditions. The tenant’s failure to pay rent and accumulation of substantial arrears are relevant conduct under section 44(4), and may justify reducing the award.

Mr and Mrs Kowalek appealed against a First-tier Tribunal decision ordering Hassanein Ltd to repay £11,909.99 under the rent repayment order provisions of Part 2 of the Housing and Planning Act 2016. The landlord had managed an unlicensed property in breach of section 95(1) of the Housing Act 2004, but applied for a licence before the tenants paid a further £2,000.

The appeal concerned whether that later payment, a tenancy deposit, and the tenants’ substantial rent arrears were relevant to the amount recoverable. The appeal was dismissed.

The appeal was dismissed.

1. For a continuing offence under section 95 of the Housing Act 2004, the offence ceased when the landlord’s licence application was duly made and remained undetermined or open to appeal. The £2,000 payment made after the application was therefore outside the eligible period.

2. Section 44(2) of the Housing and Planning Act 2016 imposes two cumulative requirements. The payment must have been made during the period when the offence was committed, and it must relate to rent paid in respect of that period. Rent paid before or after that period is ineligible. Where rent is paid in advance, it may need to be apportioned between the offending and non-offending periods.

3. This conclusion was consistent with Awad v Hooley [2021] UKUT 55 (LC). The tribunal added that, under ordinary contractual principles, appropriation of a rent payment is initially a matter for the paying party. If no appropriation is made, the receiving party may appropriate the payment, consistently with Thomas v Ken Thomas Ltd [2007] 1 EGLR 31.

4. Section 44(4)(a) requires the tribunal to take account of the conduct of both landlord and tenant. The provision imposes no exhaustive definition of relevant conduct. A tenant’s unexplained failure to pay rent and accumulation of substantial arrears are serious breaches of the tenancy and may properly reduce the award. This is not punishment or double counting: a rent repayment order is generally a windfall, and its principal purpose is deterrence, as recognised in Rakusen v Jepsen [2020] UKUT 298 (LC).

5. A tenancy deposit is not rent while held as security for the tenant’s obligations. It cannot be included in a rent repayment order at that stage. If released and used to discharge rent arrears, section 52(2) may treat it as rent, although both requirements in section 44(2) would still have to be satisfied.

• Upper Tribunal (Lands Chamber): appeal against the First-tier Tribunal’s order dismissed.
• First-tier Tribunal (Property Chamber): ordered Hassanein Ltd to repay £11,909.99 to the tenants.