Hannah Chinn & Ors v Marie-Louise Høilund-Carlsen & Anor

Introduction

1. This is an appeal from a rent repayment order made by the First-tier Tribunal. It is brought by the tenants in whose favour the order was made; they argue that a higher amount should have been ordered.

2. The appellants, Ms Chinn, Ms Morie and Ms O’Prey, have been represented in the appeal Mr James Cairns of Justice for Tenants; the respondent landlords, Ms Høilund-Carlsen and Dr Quantick, have been represented by Steele Raymond Solicitors LLP The legal background

3. The Housing Act 2004 requires certain rented houses to be licensed, including some (but not all) houses in multiple occupation (“HMOs”). Section 72(1) of that Act provides that it is an offence to be in control of or to manage a property that requires an HMO licence and is not so licensed. The Housing and Planning Act 2016 gives the FTT jurisdiction to make a rent repayment order when it is satisfied to the criminal standard of proof that the landlord has committed one of a number of listed offences, including the offence under section 72 of the 2004 Act .

4. The FTT may order a landlord to repay up to twelve months’ rent. In doing so, it is directed by section 44 of the 2016 Act to take into account “in particular” a number of factors: “(4) In determining the amount the tribunal must, in particular, take into account— (a) the conduct of the landlord and the tenant, (b) the financial circumstances of the landlord, and (c) whether the landlord has at any time been convicted of an offence to which this Chapter applies.”

5. The Tribunal’s decision in Acheampong v Roman [2022] UKUT 239 (LC) provides guidance as to the points the FTT should have in mind when considering the quantum of a rent repayment order. The factual background

6. On 25 February 2023 the first two respondents, Ms Morie and Ms Chinn, took an assured shorthold tenancy of flat 2 , 198B Peckham Rye London SE22 0LU (the Flat). The tenancy agreement was prepared by Kinleigh Folkard & Hayward (KFH), the letting and managing agent, for a term of 24 months starting on 25 February 2023 at a rent of £2700.00 per calendar month naming the respondents as landlord.

7. The flat is in an area where the local housing authority has made an additional licensing designation under section 56 of the Housing Act 2004 with the effect that a house or flat with three or more occupants living as two or more separate households would require an HMO licence.

8. It is not now in dispute that the two named tenants lived there with the third respondent, Ms O’Prey, and that they formed three separate households. How that came about is important. Before the tenancy was granted the respondents made it clear to the agents that they did not want to let the flat as an HMO, because that would breach the terms of their mortgage. So when the agents passed on to them an offer from a group of four prospective tenants they rejected it, because they knew that a letting to four tenants would require an HMO licence. Ms Høilund-Carlsen’s witness statement in the FTT gave her account of what happened next: “8. On 1 February 2023 we received an email from the agents, having had two offers for the Property. One was for a group of four young men offering to rent the Property for £3,100, and the other was an offer from the Applicants, offering to rent the Property for £2,700 per month …

9. We decided not to go with the group of four young men for a number of reasons, one of which was that our mortgage would not allow us to rent the Property out as a House of Multiple Occupancy (“HMO”) and we were aware that four sharers would breach this requirement.

10. We were happy to rent the Property to the Applicants, but also enquired with the agents as to whether they would also constitute an HMO (and would therefore not be able to take the Property either.)

11. Around this time the agent, Tom Holland of Kinleigh Folkard and Hayward, mentioned to us that sometimes tenants get around a landlord’s refusal to take three tenants by pretending that two of them would be renting the Property and then sneaking the third in without the landlord’s knowledge. Tom made it sound to us like this was commonplace, and told us that it would have no effect on the HMO status of a property if this was done as it was out of the control or knowledge of the landlord.

12. We weren’t overly strict as landlords, so we weren’t too concerned about the possibility of two tenants moving a third in. We wanted to make sure that we weren’t going to be breaching our mortgage, and we wanted to be comfortable we weren’t breaching any other rules, but so long as those ends were achieved I was quite comfortable for the tenants to do what they wanted, so long as they were happy and looking after the Property.

13. Shortly after this conversation, on 14 February 2023, we received an email from Tom Holland telling me that two of the Applicants, Hannah Chinn and Alais Morie, would like to go ahead and rent the Property (a copy of which is shown at exhibit MLHC2). The email expressly said that with two tenants on the agreement we would not need an HMO licence.

14. Having been told that sometimes some tenants move their friends in, we were alive to the possibility that that may have been the tenants’ intention here. However, we were never at any point told that that would be happening, and we were certainly not aware that the lettings agent had encouraged the tenants to do so.

15. I recognised that it would be completely impossible to police the Property to stop a third tenant moving in with two named tenants, even if we had turned down this particular group of candidates. We therefore felt that we would be best served by granting the tenancy to two tenants who seemed responsible, mature and trustworthy, as we felt these tenants did, and trusting that they would not do anything silly.

16. The tenancy agreement to Ms Chinn and Ms Morie completed on 25 February 2023, and as far as we were aware they moved in straightaway.”

9. What the letting agent told the respondents, by email on 14 February 2023, was this: “We’ve ran into a slight issue. Due to the landlord’s mortgage (it’s a bit different as it’s through the army) they can’t change the mortgage type to a HMO for 3 people. We can go ahead with the tenancy but what this would mean is that we could only name two of you on the documents. So tenancy agreement for example. One of the 3 would just need to pay the others for bills rent etc rather than this being set up in 3 names. I think referencing should be fine.”

10. So the agents knew exactly what was happening. And of course the letting to two of the three occupants did not change the fact that an HMO licence was required.

11. The three appellants left the property in November 2023 after one of them was assaulted by a neighbour (who was not the respondents’ tenant). They then applied to the FTT for a rent repayment order on the basis that the flat should have had an HMO licence and had been unlicensed throughout their occupation. The FTT’s decision

12. The FTT went through the facts and the law, and found that there were indeed three occupants from February to November 2023 so that an HMO licence was required. It said: “59. The tribunal finds that the Respondents were aware they were required to obtain an HMO licence from their conduct at the commencement of the tenancy agreeing to a tenancy agreement naming 2 tenants instead of 3.”

13. The respondents argued that they were misled by the letting agent who told them that no licence was required, and that it was reasonable to rely on that advice; on that basis they said that they had the defence of reasonable excuse under section 72(5) of the Housing Act 2004 . The FTT rejected that argument; it did not regard reliance on a letting agent as reasonable (contrasting the case where a solicitor’s advice was relied on). It pointed out that the respondents’ evidence was that they did not check whether a licence was required in the circumstances, and said: “79. …It would have been a simple matter to become informed on this without a trawl through the legislation. The term used in evidence was that the tenancy agreement showing two tenants was a fudge.”

14. The FTT determined that it should make a rent repayment order. In determining the amount to be repaid it took into account section 44 of the 2004 Act , set out above, and the Tribunal’s guidance in Acheampong . It decided that the appropriate starting point in view of the nature of the offence was 50% of the rent. It said this: “79. The Tribunal has then considered that the Respondents are not experienced landlords familiar with the licensing regimes for housing. It has also considered the state of repair of the property and accepts the evidence of the tenants who all stated in evidence that the Flat was a lovely flat with spacious rooms overlooking parkland which is what attracted them to it in the first place.

80. The tribunal also takes into account complete failure of the Respondents to seek an HMO licence at any stage. …

84. Failing to licence a house which is required to be licensed is a serious offence and is part of a policy to ensure housing is of an appropriate quality. The tribunal regards the complaints about repair as being normal incidents which could occur in any property and makes no adjustment for this. The tribunal has regard to the fact that the Respondents were not professional landlords and have left the sector by selling the property. We also take into account the fact the Applicants were released early from the agreement following the assault in October 2023.

85. Taking all these factors into account the tribunal determines that the appropriate level of rent repayment order is 35%.”

15. The FTT ordered the respondents to pay £7,225 (being 35% of £20,645) to the three appellants. The appeal The appellants’ arguments

16. The appellants say that the FTT was wrong to reduce the award for those reasons. The fact that the landlord was not a professional landlord was not relevant; the important point was that this was a deliberate failure to licence, as the FTT found at its paragraph 59. The appellants point out that although the respondents said they relied on their agent there was no evidence that they actually believed the agents’ advice. The FTT found that they knew a licence was required, and it found that the naming of two tenants instead of three was a “fudge” (FTT’s paragraph 79).

17. In giving permission to appeal the Deputy President said this: “This Tribunal will not entertain an appeal against an exercise of discretion by the FTT (including an assessment of the appropriate penalty in a rent repayment case) unless it is arguable that the FTT has seriously erred in its assessment, for example, by failing to take account of material considerations. It is arguable that in this case the FTT gave the respondents credit for being small landlords without taking account of its own finding that they were aware of the need to obtain a licence. It is arguable that the fact a landlord operates on a small scale is only relevant in a case where the landlord is unaware of the need to obtain a licence. Where a landlord, of whatever scale, is aware of their obligation to obtain a licence and does not do so, it is arguable not only that the seriousness of the offence has not been mitigated, but that it has been aggravated. If the FTT has reduced the penalty imposed by reference to a factor which ought to have caused it to be increased, that would be a sufficient reason for this Tribunal to interfere with its exercise of discretion. The respondents’ position

18. In response to the appeal, the respondents remind the Tribunal, rightly, that the FTT’s decision about the quantum of the rent repayment order was an exercise of judgment with which the Tribunal should not lightly interfere; the mere fact that a differently constituted panel, or the Tribunal itself, might have made a different decision is not enough (referencing TRW Limited v Panasonic Industry Europe GmbH, Panasonic Automotive Systems Europe GmbH [2021] EWCA Civ 1558 , at paragraph 20 and following).

19. The respondents point out that the FTT’s findings were not clear. At paragraph 59 the FTT stated that they knew they needed a licence. At paragraph 79 the FTT stated that they were not experienced landlords familiar with the licensing regime. The reference to the “fudge” at the FTT’s paragraph 76 does not make things any clearer. Furthermore in refusing permission to appeal the FTT said that he respondents “should not have relied on their managing agent”, while describing the agent as “reputable”.

20. Therefore, the respondents argue, the Tribunal cannot safely proceed on the basis that the FTT found that they were in deliberate breach of the licensing requirements.

21. The respondents add that the FTT’s starting point of 50% was consistent with other Tribunal decisions. Discussion and conclusion

22. I agree that the FTT’s decision was unclear. At paragraph 59 it said clearly that the respondents knew they should have had a licence. Later it said that they relied on the agent’s advice and should not have done, and that appears to be reflected in the FTT’s refusal of permission to appeal.

23. I think the conundrum can be resolved by looking again at Ms Høilund-Carlsen’s own evidence. The advice she said they were given was that if the tenants had a third person living with them: “it would have no effect on the HMO status of a property if this was done as it was out of the control or knowledge of the landlord.”

24. So she was not told that if a third person was also in occupation but not on the tenancy agreement then no licence would be required. She was told that that would be the case provided that the landlord did not know about the third person. Her witness statement then goes onto say that she was not told that a third person was there, and that she did not know that the agent encouraged the tenants to have Ms O’Prey live with them. She went on to mention a visit to the property where she “did not see any other occupiers at the Property, and I had no reason to conclude from that visit that more than two people were occupying the Property.”

25. Ms Høilund-Carlsen’s words are carefully chosen. At no point did she actually say that she did not know there was a third person living at the property. The appellants’ evidence was that she was well aware; in particular, Ms O’Prey, whose name was not on the tenancy agreement, gave evidence about a telephone conversation where she spoke with the Ms Høilund-Carlsen, who expressed “no hint of surprise or confusion about who I was”. The FTT did not reject that evidence and did not say that it was challenged, so I take it that the FTT accepted it.

26. The strong impression gained from Ms Høilund-Carlsen’s witness statement is of a landlord who knew the legal position and was striving to distance herself from arrangements that she knew were being , as the FTT put it, “fudged”, which I take to mean manipulated in order to avoid a licence requirement of which the landlord was aware.

27. On the basis of that evidence it is unsurprising that the FTT found that: “59. … the Respondents were aware they were required to obtain an HMO licence from their conduct at the commencement of the tenancy agreeing to a tenancy agreement naming 2 tenants instead of 3.”

28. The FTT did go on to say that the respondents relied on the agent’s advice; but I think once one appreciates what that advice was it is hardly surprising that it did not afford the respondents a defence and did not change the FTT’s finding that the respondents knew what that a licence was required.

29. As to the quantum of the rent repayment order, I agree with the Deputy President’s comments: the fact that a landlord is inexperienced, or has only the one property, is relevant only in cases of inadvertent breach. In the present case, the FTT started at 50% , and reduced the award to 35% on the ground of the landlord’s inexperience, of the good state of the property, and of the fact that the respondents had sold the flat and had left the letting market (so that no deterrent effect, so far as they were concerned, was necessary). The reduction on account of the landlords’ inexperience should not have been made; instead, the deliberate breach was an aggravating factor. That is not simply a difference of opinion; having found a deliberate breach of the licensing requirements the FTT was wrong to reduce the award on account of the landlord’s inexperience and wrong not to increase it on account of the deliberate breach. The FTT’s decision as to quantum is set aside because it took into account an irrelevant consideration and failed to take into account a relevant one. The Tribunal’s substituted decision

30. It would be disproportionate and in no-one’s interest for this matter to be remitted to the FTT for re-consideration of the decision as to quantum.

31. I substitute the Tribunal’s order that the respondents repay 50% of the relevant rent. That is quite a modest increase in the award for a deliberate breach, but I recognise that the FTT did regard two other points (the nature of the property, and the fact that the landlords had left the letting market) as relevant mitigation.

32. That means that the respondents are liable to pay £10,322 altogether. The FTT did not break that down into individual sums payable to each appellant; if the parties can agree the individual sums then I will make an order in those terms. Judge Elizabeth Cooke 10 March 2026 Paragraph 2 amended on 16 March 2026 as to the appellants’ representation Right of appeal Any party has a right of appeal to the Court of Appeal on any point of law arising from this decision. The right of appeal may be exercised only with permission. An application for permission to appeal to the Court of Appeal must be sent or delivered to the Tribunal so that it is received within 1 month after the date on which this decision is sent to the parties (unless an application for costs is made within 14 days of the decision being sent to the parties, in which case an application for permission to appeal must be made within 1 month of the date on which the Tribunal’s decision on costs is sent to the parties). An application for permission to appeal must identify the decision of the Tribunal to which it relates, identify the alleged error or errors of law in the decision, and state the result the party making the application is seeking. If the Tribunal refuses permission to appeal a further application may then be made to the Court of Appeal for permission.