The UT President Clarifies the Correct Approach to RRO Awards

16th November 2021 Commercial Litigation

The way in which the Tribunal should approach assessment of awards made in Rent Repayment Order (RRO) applications has been a hot topic among property and legal practitioners for some time now. The Upper Tribunal (UT) has been aware of the need to clarify the position since Vadamalayan v Stewart and others [2020] UKUT 0183 (LC) and Ficcara & Ors v James [2021] UKUT 0038 (LC). The somewhat confused position as to the appropriate sum to award has been at the heart of settlement discussions and legal arguments with not much assistance being provided by the authorities, who have arguably only further muddied the already murky waters.

The opportunity recently presented itself to the UT in Williams v Parmar & Ors [2021] UKUT 244 (LC). One of the grounds on which this appeal was permitted in the UT was based on an argument that the RRO award should be reduced to account for the landlord’s mortgage payments to limit the landlord’s liability to their profit. This argument based on Vadamalayan was bound to fail in its original formulation but it evolved into a wider argument as to the factors which the Tribunal should take into consideration when deciding the award, which the UT was prepared to entertain.

The President of the UT, Mr Justice Fancourt, heard this appeal and he took the opportunity to clarify the position on the correct approach for assessing RRO awards:

“40. (…) there is no presumption in favour of the maximum amount of rent paid during the period, and the factors that may be taken into account are not limited to those mentioned in s.44(4), though the factors in that subsection are the main factors that may be expected to be relevant in the majority of cases.”

The President also found that the FTT had interpreted s.44(4)(a), Housing and Planning Act 2016 (the “2016 Act”)

“too narrowly if it concluded that only meritorious conduct of the landlord, if proved, could reduce the starting point of the (adjusted) maximum rent. The circumstances and seriousness of the offending conduct of the landlord are comprised in the “conduct of the landlord”, so the FTT may, in an appropriate case, order a lower than maximum amount of rent repayment, if what a landlord did or failed to do in committing the offence is relatively low in the scale of seriousness, by reason of mitigating circumstances or otherwise. In determining how much lower the RRO should be, the FTT should take into account the purposes intended to be served by the jurisdiction to make an RRO: see [43] below.”

The President rejected the landlord’s argument that the reasonableness of the award should be considered and set out that the correct approach is for the Tribunal to consider as being:

“50. (…) specifically what proportion of the maximum amount of rent paid in the relevant period, or reduction from that amount, or a combination of both, is appropriate in all the circumstances, bearing in mind the purpose of the legislative provisions.”

Mr Justice Fancourt proceeded to clarify that when deciding what amount should be ordered, the Tribunal should consider both parties’ conduct, the landlord’s financial circumstances and whether they have ever been convicted of a relevant offence, as well as any other relevant factors.

On application of the facts of Williams and consideration of the relevant factors set out by the President, the UT made an award of 80% of rent (less utility figures) for each tenant apart from one which had been living in an undersized bedroom and received an award of 90% of rent. The UT considered the landlord’s conduct in her being a professional landlord and having no explanation for operating an unlicensed HMO; and the fact that the condition of the property had serious deficiencies identified by an environmental health officer, which required substantial works in order to be rectified.

Williams leaves landlords and lawyers with some welcome clarification:

  1. The reasonableness of the amount is irrelevant and the landlord’s profit does not constitute a limit to the size of a RRO award.
  2. The maximum award is not the starting point in the assessment of the amount.
  3. The Tribunal should take into consideration the factors set out in s.44(4)(a), any other factors that appear to be relevant and the context of the purpose underlying Part 4 of the 2016 Act when assessing what award should be made.

To a large extent the UT has returned the position to what it was pre-Vadamalayan. That is, that there is no specific starting point in setting an appropriate level of the RRO. The Tribunal should take into account the entirety of the facts and then set a penalty based on that consideration and not take an artificial position of starting at a specific proportion of the rent, whether 0%, 50%, or 100%, and then adjusting from there.

The importance of the issues considered in Williams is clearly recognised by this decision being handed down by Mr Justice Fancourt. The role of the UT President is largely titular and it is unusual for the President to be hearing appeals. While Williams is only binding on the FTT and technically not on other Upper Tribunals, the reality is that a decision by the President is very important and few will ignore it. The UT has clearly intended to make a point and streamline the approach taken on RRO awards. It will take a brave UT or FTT Judge to ignore this message.

As a side effect of all of this debate it is worth noting that the overall award appears to have risen slightly. Before Vadamalayan the figure had tended to settle around half the rent. It appears that the figure is now higher, settling at 75-80% of the rent which is a considerable increase in the level of award.​​​​​

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David Smith is a Partner located in Londonin our Commercial Litigation department

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Neli Borisova is a Solicitor located in Londonin our Commercial Litigation department

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