Xiaohan Xu & Ors v USAF Management 11 Limited & Ors

Introduction

1. This is an appeal from a rent repayment order made by the First-tier Tribunal in favour of the appellants, who contend that the amount awarded was too low because the FTT made an error of law. The appellants are, or have been, tenants of student accommodation in Liverpool, living in three different blocks. The three respondents are related companies and each was the landlord of one of the blocks. They all applied for rent repayment orders, and the FTT designated the application brought by Xiaohan Xu as the lead case among 15 applications. The names of all fifteen appellants are set out in the schedule to this decision.

2. The appellants were represented by Mr George Penny and the respondents by Mr Paul Whatley, and I am grateful to them both.

3. The FTT’s decision to make a rent repayment order, and as to the proportion of the rent to be repaid, was intended to apply to each of the applications before it. It did not set out in its decision the sum of money that each applicant was to be repaid, nor the number of orders made against each of the respondents, and it appears that those details have not yet been settled pending this appeal, which was brought with the permission of the FTT. The legal background

4. The Housing Act 2004 requires certain rented houses to be licensed, including not only houses in multiple occupation but also properties in areas designated by the local housing authority as areas of selective licensing under section 80 of the 2004 Act . Section 95 of that Act provides that it is an offence to be in control of or to manage a property that requires a selective 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 95 of the 2004 Act .

5. 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 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.”

6. A rent repayment order is not an award of compensation. In Garro and others v LDC (Ferry Lane) GP3 Limited [2024] UKUT 40 (LC) the Deputy President said: “73. To my mind fairness to individual tenants is not a relevant consideration in the quantification of rent repayment orders. The regime introduced by the 2016 Act is not intended to compensate tenants for a wrong they have suffered; it is intended to deter and punish landlords who fail to comply with their obligations, whether or not their tenants have suffered any disadvantage as a result, and to encourage compliance in future. In Kowalek v Hassanein Ltd , Newey LJ explained the policy underlying the legislation as follows: [2022] EWCA Civ 1041 ‘Consistently with the heading to part 2, chapter 4 of part 2 of the 2016 Act , in which section 44 is found, has in mind "rogue landlords" and, as was recognised in Jepsen v Rakusen , [2021] EWCA Civ 1150 , "is intended to deter landlords from committing the specified offences" and reflects a "policy of requiring landlords to comply with their obligations or leave the sector": see paragraphs 36, 39 and 40. "[T]he main object of the provisions", as the Deputy President had observed in the UT ( [2022] 1 WLR 324 Rakusen v Jepsen , [2020] UKUT 298 (LC) [2021] HLR 18 , at paragraph 64; reversed on other grounds), "is deterrence rather than compensation". In fact, the offence for which a rent repayment order is made need not have occasioned the tenant any loss or even inconvenience (as the Deputy President said in Rakusen v Jepsen , at paragraph 64, "an unlicensed HMO may be a perfectly satisfactory place to live") and, supposing damage to have been caused in some way (for example, as a result of a failure to repair), the tenant may be able to recover compensation for it in other proceedings. Parliament's principal concern was thus not to ensure that a tenant could recoup any particular amount of rent by way of recompense, but to incentivise landlords.’”

7. However, the conduct of the landlord is a relevant consideration, and there will be cases where the tenants have endured difficult conditions because of the landlord’s conduct, and that is clearly relevant to the amount of rent ordered to be repaid. In its decision in Acheampong v Roman [2022] UKUT 239 (LC) the Tribunal discussed the authorities relevant to the quantum of the order and said this: “20. The following approach will ensure consistency with the authorities: a. Ascertain the whole of the rent for the relevant period; b. Subtract any element of that sum that represents payment for utilities that only benefited the tenant, for example gas, electricity and internet access. It is for the landlord to supply evidence of these, but if precise figures are not available an experienced tribunal will be able to make an informed estimate. c. Consider how serious this offence was, both compared to other types of offence in respect of which a rent repayment order may be made (and whose relative seriousness can be seen from the relevant maximum sentences on conviction) and compared to other examples of the same type of offence. What proportion of the rent (after deduction as above) is a fair reflection of the seriousness of this offence? That figure is then the starting point (in the sense that that term is used in criminal sentencing); it is the default penalty in the absence of any other factors but it may be higher or lower in light of the final step: d. Consider whether any deduction from, or addition to, that figure should be made in the light of the other factors set out in section 44(4) .

21. I would add that step (c) above is part of what is required under section 44(4) (a). It is an assessment of the conduct of the landlord specifically in the context of the offence itself; how badly has this landlord behaved in committing the offence? I have set it out as a separate step because it is the matter that has most frequently been overlooked.” The factual background to the appeals and the FTT’s decision

8. The local housing authority made a selective licensing designation for the area in which the appellants were tenants, which came into effect on 1 April 2022. The properties in which the appellants held studio flats were unlicensed from that date until 14 July 2023. The appellants applied for rent repayments on the basis that from 1 April 2022 until it applied for licences their landlord was committing the offence created by section 95 of the 2004 Act . The FTT heard their applications, taking Xiaohan Xu as the lead case, in December 2024, and these appeals are from its decision delivered on 24 January 2025.

9. The respondent did not dispute that they had committed the offence. The FTT heard evidence from one of its employees, who explained why the respondent failed to licence the building. Essentially it became aware of the new licensing requirement in the spring of 2022, but the matter was then overlooked during a period of internal re-organisation. In November 2022 the omission was spotted and a plan put in place to identify which properties in a large portfolio required a licence. There were technical problems, and the local authority’s system struggled to cope with around 1,400 applications from this group of companies. An application for a licence was made on 15 June 2023 and therefore the offence ceased to be committed on that date.

10. The FTT said: “The explanation that is proffered is, to the Tribunal’s mind, evidence of an inexcusable delay, at least in the period up to November 2022. What occurred may have been the result of an omission but it is a serious one and one that should not have been made by a Respondent acting to the extent that it is in the sphere of commercial residential letting.”

11. The FTT decided to make rent repayment orders, referred to the passage quoted above from Acheampong , and observed that in Daff v Gyalui and Aiach-Kohen [2023] UKUT 134 (LC) the Tribunal expressed the view that, of the 7 types of offences that could be the basis of a rent repayment order, the licensing the licensing offences were among the less serious.

12. At paragraph 51 of its decision the FTT set out the relevant factors in the present case, being: a. the reason for the failure to licence, b. the nature and quality of the accommodation, c. the expertise of the landlord, d. the impact of the failure to licence on the applicant, and e. the need for a rent repayment order “to be a deterrent to rogue landlords.”

13. At its paragraph 53 the FTT said: “Point b) may be answered simply. There appears to be no complaint as to the nature and condition of the property. This is not a situation where the offence may be considered to be aggravated by issues of disrepair, or interference with quiet enjoyment of the flat, reflecting further upon a landlord in breach of its licensing obligations.

14. As to point c), the FTT at paragraph 54 went on to observe that the respondent was a large commercial landlord. At paragraph 55 it said: “In relation to point d), there would appear to have been little, if any, effect upon the Applicant’s occupation and enjoyment of the property at any stage of the relevant period arising from the absence of any licence.”

15. The FTT also observed that the respondent was not a “rogue landlord” and that there was no need for a deterrent to further offending. It discussed section 44 of the 2004 Act . At paragraph 62 it concluded: “It appears to the Tribunal that no factor weighs decisively in favour of a conclusion one way or the other. Without referencing again those factors, the Respondent has made a mistake that should not have been made. The Applicant, by the nature of these proceedings is a beneficiary of an order where, in the circumstances of this case, there has been no damage done. That suggests to the Tribunal that an order than draws a line in the middle is appropriate. That is an order for repayment of 50% of the available amount - £3,451.00 rounded to the nearest pound.”

16. That is the determination appealed, and that is the only paragraph in the FTT’s decision with which the appellants find fault. The appeal

17. The FTT granted permission to appeal on one ground, namely that “The Tribunal erroneously took into account in its determination the effect of the relevant housing offence upon the Applicant(s).” The grounds of appeal, which were not drafted by Mr Penny, argued that the fact that the landlord’s offence had no impact on the tenants was “an irrelevant consideration under the law”, on the basis of the passage quoted above from the Tribunal’s decision in Garro v LDC (Ferry Lane) .

18. Mr Penny wisely did not pursue that argument. The rent repayment order regime is of course not compensatory. But the conduct of the landlord is relevant, and therefore the fact that the failure to licence had no impact on the tenants because the property was in good condition cannot be said to be irrelevant. Conversely, the landlord’s poor conduct is relevant where the property is in bad condition – as it was for example in Williams v Parmar [2021] UKUT 244 (LC) , where the property was in such poor condition that it could not have been licensed.

19. Mr Penny did not contend that the absence of impact on the tenants was irrelevant, and he was content with the way the FTT addressed that at its paragraphs 53 and 55. He took no issue with the FTT’s judgment down to and including the first two sentences of paragraph 62. But with the third sentence, he argued, the FTT took a wrong turn. By focusing, at the point of decision, on the fact that there had been “no damage done” the FTT made the absence of harm to the tenant “the only factor to which significant attention is devoted” (from Mr Penny’s skeleton argument), and treated the rent repayment order as if it was a compensatory order. It should have been looking at the seriousness of the offence and instead used the logic of compensation. That, said Mr Penny, was a misdirection, and had the FTT not made that error of focus at the crux of its decision it might well have made a larger award.

20. Mr Penny referred to the changes to the rent repayment order regime that will be made when the Renters Rights Act 2025 comes into force and noted that it can be inferred that Parliament intends rent repayment awards to represent substantial windfalls to tenants. Discussion and conclusion

21. In my judgment the FTT made no error. It took into consideration all the relevant factors. The list at its paragraph 51, put together after explicit consideration both of the terms of the statute and of the Tribunal’s guidance in Acheampong , cannot be faulted and indeed no criticism is made of it. The FTT then went through those factors. In terms of the seriousness of the offence, it rightly directed itself that the licensing offences are not the most serious of the offences that can prompt a rent repayment order. And it carefully went through the factors that went to the seriousness of this instance of licensing offence such as the impact if any on the tenants. As Mr Whatley put it, it is difficult to see how the FTT can appraise how badly the landlord has behaved without a consideration of the effects of its behaviour on the tenants. The FTT also looked at the respondent’s own position as a professional landlord, and observed that it should have done better in terms of keeping track of licensing requirements; equally the FTT was alive to the fact that the very size of the respondent’s operation meant that it had difficulty in making its applications.

22. As the FTT itself said, no factor weighed decisively in the mix.

23. The FTT had a discretion. The factors that it took into consideration did not point to a particularly high or particularly low award. The Tribunal will not interfere with the FTT’s exercise of its discretion unless there has been an error of law or some other irrationality, even if the order made is not the same as the one it might have made itself. The third sentence of paragraph 62, which is all that the appellants take issue with, comes nowhere near to an error of law. To characterise it as such is to seize upon the wording and give it a disproportionate significance. I do not think that the FTT regarded the absence of impact on the tenants as the only factor of significance, nor as the overriding factor, even though that was the one it mentioned last before reaching its conclusion. It certainly was not making a compensatory award; on the FTT’s own account there was nothing to compensate the tenant for.

24. There was no error of law in the FTT’s decision and the appeal fails. Upper Tribunal Judge Elizabeth Cooke 19 December 2025 Schedule: List of appellants XIAOHAN XU ABBIE WYNNE-EVANS SHANE THOMPSON DREW VICARY EMILY BENCE SHMAIM SHAH CHRISTOPHER TADD YINA LU JINGNCHENG LIU LIU MING SUM FAN ZHU JAMES SKELLOM QI ZHENG YIFAN ZHU YARUI ZHANG 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.