Fallon v Wilson & Ors

Factual and Procedural Background

This appeal arises from a decision of the Residential Property Tribunal for the Southern Rent Assessment Panel dated 20th November 2012 concerning rent repayment orders (RROs) made in favour of three occupiers of a house in multiple occupation (HMO) located at 12 Stuart Place, The City. The Tribunal ordered the landlord, referred to here as the Appellant, to repay 100% of the rent paid by each occupier during the relevant period. The Appellant sought permission to appeal, relying on a recent Upper Tribunal decision, Parker v Waller, which was handed down shortly after the Tribunal’s decision. Permission to appeal was granted on a limited basis by the Tribunal and later extended by the Deputy President of the Upper Tribunal (Lands Chamber).

The Appellant is a non-professional landlord who failed to timely apply for an HMO licence for the Property, resulting in a conviction and fine under the Housing Act 2004. The Respondents were tenants who each applied for RROs after occupying the Property without a valid licence. The Tribunal originally ordered full repayment of rent without deducting any expenses or considering the Appellant’s financial circumstances. This appeal challenges the Tribunal’s approach to discretion, calculation of repayment amounts, and consideration of relevant factors under the Housing Act 2004.

Legal Issues Presented

1. Whether the Tribunal erred in law by starting from the position that full repayment of rent should be ordered unless discretion was exercised to limit reimbursement.
2. Whether the Tribunal failed to take into account the Appellant’s status as a non-professional landlord in exercising its discretion.
3. Whether the Tribunal was correct to include charges for utilities and other services in the RROs without deduction.
4. Whether the Tribunal erred by including a deposit that had already been repaid in the calculation of the RRO.

Arguments of the Parties

Appellant's Arguments

• The Tribunal incorrectly assumed that full repayment of rent is the starting point and that discretion only operates to reduce this amount, contrary to the proper interpretation of section 74 of the Housing Act 2004.
• The Appellant, being a non-professional landlord with limited letting experience, argued that his conduct and financial circumstances should reduce the repayment amount.
• The Appellant submitted that rent payments were inclusive of utilities, mortgage interest, management charges, insurance, and maintenance costs, which minimized any profit and should be deducted from the repayment sum.
• The Appellant contended that the Tribunal wrongly included a deposit in the repayment order that had already been returned to the tenant, which should not be recoverable under an RRO.
• The Appellant relied heavily on the decision in Parker v Waller, emphasizing that the Tribunal should assess the net profit made by the landlord rather than gross rent received.

The opinion does not contain a detailed account of the Respondents' legal arguments.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook a detailed analysis of the statutory framework under the Housing Act 2004, particularly sections 73 and 74, which govern rent repayment orders for unlicensed HMOs. It identified two principal errors in the Tribunal’s decision: first, the Tribunal incorrectly applied the presumption that full repayment of rent was mandatory unless discretion was exercised to reduce it. The correct approach, as clarified in Parker v Waller, is that there is no such presumption and the Tribunal must take an overall view to determine a reasonable repayment amount.

Second, the Tribunal failed to properly exercise its discretion by not considering the Appellant’s conduct and financial circumstances as required by section 74(6)(d). The Tribunal’s dismissal of the Appellant’s non-professional status and financial evidence was deemed incorrect. The court emphasized that the Appellant’s limited profit, the relatively short period of default, minor repairs needed, and absence of tenant complaints were relevant mitigating factors.

Regarding the inclusion of utility and other costs in the rent repayment calculation, the court found the Tribunal’s approach flawed. While such payments are part of the rent, the Tribunal should have considered that the landlord did not benefit from these outgoings and only in serious cases should these be included in the RRO. The court held that the Tribunal’s failure to deduct these costs was an error.

The court also addressed the issue of the deposit included in the repayment order, finding that since the deposit had been repaid to the tenant, it should not have been included in the RRO, consistent with the principles in Parker v Waller.

In sum, the court found that the Tribunal did not apply the correct legal principles in assessing the RROs, failed to properly exercise discretion, and did not adequately consider the Appellant’s submissions and relevant statutory factors.

Holding and Implications

The appeal is ALLOWED and the rent repayment orders previously made by the Residential Property Tribunal are set aside.

The direct effect of this decision is that the Appellant is no longer required to repay the full rent sums ordered by the Tribunal. The court’s ruling clarifies that tribunals must exercise discretion properly under sections 73 and 74 of the Housing Act 2004, considering the landlord’s conduct, financial circumstances, and relevant deductions such as utilities and repaid deposits. No new precedent beyond the application of Parker v Waller was established, but the decision reinforces the need for careful, fact-sensitive assessments in RRO cases.