The court of appeal has ruled in the case of Kowalek & Anor v Hassanein Ltd that rent paid (rather than rent accrued) whilst a licensing offence wasn't being committed can't be taken into account when calculating the maximum amount of a rent repayment order (RRO) and that rent arrears can be taken into account when making that calculation.

The Kowaleks (the tenants) rented a flat from Hassanein Ltd for 24 months at a rent of £3,553 per month. The flat was in an area of Kilburn, London that was a designated selective licence area but the property management firm had not applied for a licence for the flat as they said that they were unaware that they had to have a licence to operate the flat.

The tenants appealed against the decision of the Upper Tier tribunal on the amount of the RRO saying it was was too small. The tenants had stopped paying their rent regularly in August 2019 and substantial rent arrears built up causing the management company to seek repossession of the flat. The repossession case in the County Court started in January 2020 but the tenants had already applied for an RRO in the amount of £23, 819 but increased by £2000 to take into account the amount of rent paid on the day the repossession case started. The day before this, the management company applied for a licence (so a licensing offence then ceased being committed under the 2004 housing act) which was granted in March 2020.

The First Tier tribunal ordered an RRO in the amount of £11,909 and the tenants appealed against this amount to the upper tribunal but lost. In the further appeal to the Court of Appeal Lord Justice Newey said the questions raised were:

1. can a rent payment made when the landlord is no longer committing an offence be taken into account when assessing the amount of an RRO if it related to rent due when the offence was still being committed?
2. was the £2000 paid on the first day of the repossession hearing made whilst the landlord was still committing an offence?
3. was the First Tier tribunal entitled to take rent arrears into account as tenant "conduct" under the housing & planning act 2016 section 44(4)?

Newey LJ said that the RRO amount must be calculated without regard to rent which was not paid during the time the offence even if it was paid to reduce arrears which accrued during the time of the offence; The £2000 payment thus need not be given consideration; the First Tier tribunal was entitled to take into account the conduct of the tenant (the rent arrears build up) when calculating the RRO amount. Analysis of the case can be read here and the case transcript is reported here.