Trinity Social Housing Law barrister, Henry Percy-Raine has prepared the following summary of the recent case of Kowalek & Anor v Hassanein Ltd  EWCA Civ 1041.
This appeal concerned issues surrounding how a rent repayment order should be properly quantified.
In February 2019, the Respondent company granted the Appellants an assured shorthold tenancy of a flat for a term of 24 months at a monthly rent of £3,553.33. Three months’ rent was paid in advance along with a deposit of £4,920. The area in which the flat was situated was a designated area subject to selective licensing under s.80 of the Housing Act 2004 (“HA 2004”). The Respondent should have licensed the flat but failed to do so.
The Appellants stopped paying rent regularly in August 2019, and over the following nine months made payments totalling £2,500. In December 2019, the Respondent issued possession proceedings. On 10th January 2020, the Appellants applied to the First-tier Tribunal (Property Chamber) (“the FTT”) for a rent repayment order.
On 27th January 2022, the Respondent applied to the local housing authority for a licence (which was granted on 23rd March); accordingly it ceased to commit any offence under s.95 Housing Act 2004 from 27th January (by virtue of s.95(3) HA 2004). The possession claim came before the County Court on 28th January 2020. The Appellants paid a further £2,000 on the same date.
On 9th September 2020, the FTT concluded that there should be a rent repayment order in the Appellants’ favour of £11,909.99. This included a reduction of 50 per cent taking account of the rent arrears. The FTT also considered that the £2,000 payment made on 28th January 2020 was outside the scope of the rent repayment order.
The appeal to the Upper Tribunal (Lands Chamber) (“the UT”) was dismissed on 18th June 2021. The Deputy Chamber President considered that money paid when a landlord is no longer committing a relevant offence cannot be taken into account even if the payment relates to rent which became due when an offence was being committed (accordingly the £2,000 payment of 28 January 2020 was properly disregarded by the FTT) and that failure to pay rent is “conduct” which can be taken into account.
On 8th October 2021, the possession claim was resolved by way of an order that the full deposit be allocated towards damage to the property and a further order that the Appellants pay £23,926.64 for rent arrears. The Appellants received a set-off sum against the rent arrears of £4,920 for the Respondent’s failure to protect the deposit.
Mr and Mrs Kowalek challenged the UT’s decision to the Court of Appeal. Three issues were raised in the grounds of appeal:
i) Can a payment made at a time when a landlord is no longer committing an offence be taken into account when assessing the amount of a rent repayment order if it related to rent which fell due when the offence was still being committed?
ii) Is the £2,000 payment which Mr and Mrs Kowalek made on 28 January 2020 to be attributed to rent for a period when the Respondent was committing an offence under section 95 of the 2004 Act?
iii) Was the FTT entitled to take the rent arrears into account as “conduct” of the Appellants for the purposes of section 44(4) of the 2004 Act?
The decision of the Court of Appeal
On the first ground, Newey LJ agreed with the Deputy President that rent not paid during the period specified in s.44(2) of the Housing and Planning Act 2016 (“the 2016 Act”) cannot be included when considering the maximum amount payable under a rent repayment order . This was supported by both a literal reading of the wording of s.44(2) of the 2016 Act and the policy underlying the legislation [22-23]. In view of this conclusion, the second ground no longer fell for consideration .
On the third ground, Newey LJ noted that section 44(4) of the 2016 Act refers to “the conduct of … the tenant” in general terms, and there is no basis for understanding it to mean exclusive of rent arrears . Moreover, having regard to the decisions of the Court of Appeal in Regalgrand Ltd v Dickerson & Wade  29 HLR 620 and the Upper Tribunal in Awad v Hooley  UKUT 0055 (LC), there was previous authority to support the Court being able to take rent arrears into account as ‘conduct’. Accordingly, the Court of Appeal was unanimous that the appeal would be dismissed.
Newey LJ also observed, as a matter of procedure, in a case where there is a dispute as to the existence or extent of rent arrears which is the subject of pending County Court proceedings and which dispute is thought to be material to the size of any rent repayment order, it might be appropriate for the application for a rent repayment order to be heard after the County Court claim has been determined or alternatively for the proceedings to be heard together .