LDC (Ferry Lane) GP3 Ltd v Valentina Garro & Ors

A landlord’s ignorance of an additional HMO licensing scheme will rarely constitute a reasonable excuse where it has not taken reasonable steps to keep abreast of regulatory requirements. A local authority’s alleged failure to consult the landlord before designating an additional licensing area does not excuse non-compliance once the scheme is in force.

Under section 44 of the Housing and Planning Act 2016, a rent repayment order must relate to rent paid, but there is no presumption that the full rent is repayable. A tribunal may make an allowance for utilities paid by the landlord and consumed for the tenant’s benefit, before assessing a proportionate penalty by reference to the seriousness of the offence and the statutory factors.

The appellant, a large provider of purpose-built student accommodation, controlled two cluster flats which were HMOs subject to Haringey’s additional licensing designation. It failed to obtain licences for more than three years. The respondents, student tenants, obtained rent repayment orders under section 44 of the Housing and Planning Act 2016 after the First-tier Tribunal rejected the appellant’s reasonable-excuse defence and awarded 50% of rent after a utility-cost allowance.

The appellant appealed the rejection of its defence and the amount awarded. The tenants sought permission to cross-appeal, principally challenging the deduction for utilities. The central issues were whether inadequate consultation could amount to a reasonable excuse and whether section 44 permitted an allowance for utility costs paid by the landlord.

1. Appeal and cross-appeal dismissed. The First-tier Tribunal was entitled to reject the appellant’s reasonable-excuse defence. Any failure by Haringey to consider, consult, or notify providers of purpose-built student accommodation could potentially have been challenged by judicial review, but it could not excuse the appellant’s failure to comply with a licensing scheme lawfully applying to its HMOs.

2. The reasonable-excuse defence required evidence that the appellant had taken reasonable steps to keep informed of licensing requirements. The burden lay on the appellant. It provided no adequate evidence of such steps, despite its scale, its designated staff responsibility for HMO licensing, and its subscription to a student-accommodation management code. A large professional landlord will generally find it more difficult to justify ignorance of applicable regulation. Proper publicity by the authority assists landlords, but a failure properly to publicise a scheme would only be relevant where the landlord had nevertheless taken reasonable steps to remain informed.

3. The First-tier Tribunal was not bound to treat Hallett v Parker [2022] UKUT 165 (LC) as fixing a benchmark award. Individual Upper Tribunal decisions on quantum provide guidance and promote consistency, but the assessment remains fact-sensitive. The First-tier Tribunal had identified the relevant considerations and adequately explained its 50% award.

4. Section 44 of the Housing and Planning Act 2016 does not create a presumption that the whole rent paid must be repaid. The amount must relate to rent paid, which permits an award calculated as a proportion of rent, rent less particular sums, or a combination of both. It was proper to allow for utilities paid by the landlord but consumed by tenants. Such expenditure differs from repairs, maintenance, furnishing, insurance, and other costs which preserve or enhance the landlord’s property. Quantification is an evaluative exercise directed to punishment, deterrence, and removal of the financial benefit of offending, rather than compensation or fairness between tenants.

• Upper Tribunal (Lands Chamber): The appellant’s appeal from the First-tier Tribunal was dismissed. Permission was refused for most of the tenants’ proposed cross-appeal, granted on the utility-cost point of principle, and that cross-appeal was dismissed.
• First-tier Tribunal (Property Chamber): In a decision handed down on 11 May 2023, the tribunal made rent repayment orders under section 44 of the Housing and Planning Act 2016, rejecting the landlord’s reasonable-excuse defence and awarding 50% of rent after utility-cost deductions.