Any residential landlord who lets out a property without a required licence commits a criminal offence and can expect to be hit hard in the pocket. The law is not a blunt instrument, however, and the Upper Tribunal (UT) emphasised in a guideline case that the financial circumstances of any given landlord must be taken into account when fixing the amount of a rent repayment order (RRO).

The case concerned a one-bedroom flat in an area covered by a selective licensing scheme imposed under Part 3 of the Housing Act 2004. For about nine months, its owner let it to two students without obtaining a licence. She thereby committed an offence under Section 95(1) of the Act. The First-tier Tribunal subsequently issued an RRO against her, requiring her to refund to the tenants about 80 per cent of the £22,230 in rent they had paid.

In upholding her challenge to that order, the UT noted that, by Section 44 of the Housing and Planning Act 2016, a landlord's financial circumstances must be taken into account when assessing the amount of an RRO. The middle-aged landlord had, for many years, been in very poor health. She had no income from employment or self-employment, did not receive social security benefits and had no investment income. After she had to give up work, she rented out the flat, which had until then been her home, on a short-term basis in order to make ends meet.

She was not without capital resources, but her modest property portfolio, which she had acquired with a view to providing herself with a retirement pension, was heavily mortgaged. Rising interest rates meant that she derived no net income from the properties. Bereft of savings, she funded herself by drawing down rapidly dwindling capital secured on one of them. Overall, her financial position was precarious.

The UT found that her offence was very much towards the bottom end of the scale of seriousness. There was no evidence that she had deliberately sought to avoid her responsibilities. Her debilitating ill health contributed to her lack of awareness of the selective licensing scheme. She was living abroad temporarily when the scheme was introduced and, as soon as she became aware of the need for a licence, she duly applied for one. Overall, the UT found that justice would be served by reducing the RRO to £2,000, to be divided equally between the tenants.