Court of Appeal hands down ruling on quantum of rent repayment orders

The Court of Appeal has held that the maximum amount of a rent repayment order cannot include rent which was paid - rather than accrued - when the licensing offence concerned was not being committed.

Barristers' chambers 42 BR, from whom Mathew McDermott and Robert Winspear appeared for the respondents, said the Court also held that a tenant’s rent arrears may be taken into account when calculating an order.

In Kowalek & Anor v Hassanein Ltd [2022] EWCA Civ 1041 Lord Justice Newey, sitting with Lord Justice Coulson and Lord Justice Warby, heard the challenge to an Upper Tribunal ruling.

Marek and Kahori Kowalek had rented a flat in Kilburn from property firm Hassanein. They argued the repayment order made against Hassanein Limited was for too small a sum.

Mr and Mrs Kowalek were given an assured shorthold tenancy for 24 months at a monthly rent of £3,553.33.

The flat is in an area designated for selective licensing under section 80 of the Housing Act 2004 and so Hassanein had to obtain a licence. However, it did not as it said it was unaware of this rule.

Mr and Mrs Kowalek stopped paying rent regularly in August 2019 and despite some payments substantial arrears accumulated and Hassanein issued possession proceedings.

These came before the County Court in January 2020, by which time Mr and Mrs Kowalek had applied to the First Tier Tribunal (FTT)  for a rent repayment order.

This was served on Hassanein later that month and initially sought repayment of £23,819.98, but they subsequently increased the amount claimed by £2,000 to take account of their payment of that sum on the day of the first hearing in the County Court.

Hassanein had the day before this applied for a licence, which was granted in March 2020.

Newey LJ said under the Housing Act 2004 Hassanein ceased to commit any offence once it applied.

In two cases heard on the same day at the County Court in October 2021, District Judge Griffiths ordered the Kowaleks to forfeit a deposit of £4,920 they had paid as a contribution towards damage at the property and that they should pay Hassanein £23,926.64 for rent arrears.

DJ Griffiths also gave judgment in favour of the Kowaleks for £4,920 as a result of the company failing to protect the tenancy deposit and directed that that sum be offset against the amount due under the other order.

The FTT meanwhile concluded there should be a rent repayment order to Mr and Mrs Kowalek of £11,909.99.

The Kowaleks appealed to the Upper Tribunal (UT) unsuccessfully arguing that this was too low.

Newey LJ said the issues raised by appealing the UT decision were: can a payment made when a landlord is no longer committing an offence be taken into account when assessing a rent repayment order if it related to rent which fell due when the offence was still being committed; was the £2,000 payment made on the first day of the County Court case made while Hassanein was committing an offence; was the FTT entitled to take the rent arrears into account as ‘conduct’ of the Kowaleks under section 44(4) of the 2004 Act?

On the first point, Newey LJ agreed with the UT that the maximum amount of a rent repayment order “must be determined without regard to rent which, while it might have discharged indebtedness which arose during the period specified…was not paid in that period”. He said in the light of this the point about the £2,000 payment need not be considered.

The Court of Appeal judge said the FTT had set the rent repayment order at half the possible maximum “in large part because of the rent arrears which had accrued”.

The FTT had been “plainly entitled to have regard to the arrears when considering what the rent repayment order should be”.

Newey LJ concluded that in other cases it might be appropriate for the application for a rent repayment order to be heard only after a claim for rent in the County Court had been determined or, for the proceedings in the FTT and the County Court to be heard together.

Justin Bates and Brooke Lyne of Landmark Chambers appeared pro bono for the appellants.

Mark Smulian