Supreme Court rules that Superior Landlords not subject to Rent Repayment Orders

The Supreme Court has recently given judgment in the case of Rakusen v Jepson, on the question of whether a rent repayment order (RRO) could only be made against a tenant’s immediate landlord, or whether a superior landlord in a chain of tenancies could also be liable under the Housing and Planning Act 2016.

Briefly, an RRO is an order for a landlord to repay to a tenant a sum of money paid in rent if a landlord has committed one of a number of housing related offences.  The most common perhaps is a failure to obtain a licence to rent out a property in multiple occupation (an HMO licence).  If such an offence takes place, the tenant(s) can apply to the First-tier Tribunal (Property Chambers) for an RRO.  Under an RRO, a landlord can be required to repay up to twelve months’ rent to the tenant(s).

In the present case, the  Supreme Court unanimously held that an RRO could only be made against a tenant’s immediate landlord and not against any superior landlord(s) further up the chain of tenancies.

The Background

The key facts were as follows:

  1. Mr Rakusen was the leaseholder of a flat on Finchley Road in North London. In May 2016 he granted a tenancy of the flat to Kensington Property Investment Group Ltd (Kensington).

 

  1. Kensington then entered into agreements with Mr Jepson and various other tenants, granting them each possession of one room of the flat for an aggregate fee of £2,297 per month. Kensington was therefore the tenants’ immediate landlord to whom they paid rent.  Mr Rakusen was their superior landlord.

 

  1. It was common ground between the parties that the flat was a ‘house in multiple occupation’ (or an HMO) and so required to be licenced under Part 2 of the Housing Act 2004. However, Kensington never obtained an HMO licence.

 

  1. In September 2019 Mr Jepson and various other tenants applied to the First-tier Tribunal for an RRO of £26,140 against Mr Rakusen instead of Kensington, pursuant to Section 41 of the Housing and Planning Act 2016. This was on the basis that he had committed the offence of being a person having control of or managing an HMO which was not licenced as required.

 

  1. Mr Rakusen invited the First-tier Tribunal to strike out the application on the basis that an RRO can only be made against the immediate landlord of the person making the application. The First-tier Tribunal refused to strike out the application, holding that Mr Rakusen was “a” landlord of the flat, albeit not “the” landlord of the tenants. Mr Rakusen appealed to The Upper Tribunal with permission of the tribunal judge.

 

  1. The Upper Tribunal dismissed Mr Rakusen’s appeal, holding that that an RRO can be made against a superior landlord. The Upper Tribunal judge granted permission to appeal to the Court of Appeal.

 

  1. The Court of Appeal allowed Mr Rakusen’s appeal, holding that an RRO could not be made against a superior landlord. The tenants then appealed to the Supreme Court.

The Supreme Court agreed with the Court of Appeal, finding unanimously that an RRO could only be made against a tenant’s immediate landlord. The Court considered the wording of section 40(2) of the Housing and Planning Act 2016 and took the view that the RRO could only be made against “the landlord under a tenancy of housing in England” who could be required to “repay an amount of rent paid by a tenant”.   The Court found that it would require an artificial interpretation of section 40(2) to extend its scope to superior landlords and it would be straining language to require a superior landlord to “repay” rent it had never actually received.

The Court did acknowledge that this might make RROs less effective against rogue landlords, in particular “rent to rent” landlords where a company or individual takes a tenancy from the freeholder and sub-lets the property.  Under the Court’s interpretation, rogue superior landlords can avoid RROs, however there are other sanctions under the Housing Act 2004 and criminal sanctions which can be imposed.

The decision will no doubt come as a welcome relief to superior landlords, whilst also clarifying a previously uncertain point of law.

This article is not intended and should not be relied upon for legal advice,  Should you wish to discuss your matter, please contact Joe Reeves of our Litigation Department on 0207 481 6383 or joe.reeves@wellerslawgroup.com.