Last week the Supreme Court gave judgment in the case of Rakusen v Jepsen & Ors, which concerned the issue of whether Rent Repayment Orders (RROs) could be made against a “superior landlord” in a chain of tenancies. The Supreme Court unanimously ruled that RROs could only be made against a tenant’s immediate landlord, and not against a landlord higher up in a chain of tenancies, which will give comfort to those who do not have direct contracts with occupiers.
In this case, the leaseholder of a flat in London, Mr Rakusen, had leased the property to Kensington Property Investment Group Ltd (KPIG) in 2016. KPIG subsequently granted separate agreements to three individuals who were granted a right to occupy one room in the flat. However, KPIG failed to obtain a required licence as a house in multiple occupation (HMO) under the Housing Act 2004.
In 2019, the three individuals applied for RROs against Mr Rakusen, alleging that he had committed an offence by being in control of an unlicenced HMO. Mr Rakusen argued that the application should be struck out because RROs could only be made against a tenant’s immediate landlord and not a superior landlord. The First-tier Tribunal and Upper Tribunal both refused to strike out the application, but the Court of Appeal reversed the decision and the claim was struck out.
The case was subsequently appealed to the UK Supreme Court who unanimously dismissed the appeal, ruling that RROs could only be made against a tenant’s immediate landlord and not a superior landlord. The Court held that the straightforward interpretation of section 40(2) of the Housing and Planning Act 2016 indicated that RROs 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 noted that the wording of the provision referred only to the immediate landlord and did not extend to superior landlords. The Court found that it would be unnatural to interpret “landlord under a tenancy” as referring to any landlord other than the landlord of the tenancy which generates the rent of which repayment is sought. The Court also found that it would be strained to say that a superior landlord is “repaying” rent to a tenant from whom it had never received any rent. You can find further details of the case, including the full judgment here.
The ruling has significant implications for the private rental sector in the UK. Landlords who are higher up in a chain of tenancies will no longer be liable for RROs if their immediate tenant commits certain housing related offences. This means that tenants will need to take action against their immediate landlord, rather than a superior landlord, if they believe that their landlord has committed an offence that warrants an RRO.
The ruling also highlights the importance of complying with regulations and obtaining necessary licences, as failure to do so could lead to significant penalties, banning orders and entry onto the Rogue Landlord database and even criminal conviction. Landlords need to ensure that they comply with all relevant regulations and licencing requirements to avoid potential legal issues.
If you’d like advice on any of the issues mentioned, please get in touch with Natalie Dowding at [email protected] or 020 7725 8040.