On the Fourth day of Christmas - Jessica Wisternoff
On the Fourth day of Christmas . . . Today Jessica Wisternoff from Irwin Mitchell’s Real Estate Disputes team examines whether a rent repayment order could be made against a superior landlord under section 40(2) of the Housing and Planning Act 2016 when there is an intermediary landlord.
The Supreme Court has decided whether a rent repayment order (RRO) could be made against a superior landlord under section 40(2) of the Housing and Planning Act 2016 (2016 Act), in the case of Jepson and Others v Rakusen [2023] UKSC 9.
What is a rent repayment order?
An RRO is a sanction imposed on landlords who commit an offence under chapter 4 of the 2016 Act in relation to housing in England let by the landlord. A RRO requires the landlord subject to the order to repay rent to the tenant as a result of the offence.
Factual background
Mr Rakusen, the superior landlord, granted a lease of a flat to Kensington Property Investment Company (KPIG). KPIG then sub-let the flat to three subtenants, Jepsen, Murphy and McArthur, each occupying a room within the flat. The subtenants entered into individual tenancy agreements with the intermediate landlord. Each flat was required to be licensed as a house in multiple occupation (HMO), but no license was ever obtained.
The application & the decision
The subtenants attempted to claim a RRO against the superior landlord, totalling £26,140, on the grounds that the superior landlord was in control or managing an unlicensed HMO. The superior landlord opposed the application on the basis that the RRO could only be made against the immediate landlord under the tenancies held by the subtenants.
Section 40(2) of the 2016 Act states that a RRO can be made against ‘the landlord under a tenancy of housing’. The subtenants argued that this wording was sufficiently wide to allow a RRO to be made against a superior landlord. The Supreme Court disagreed, and decided that the wording ‘landlord under a tenancy of housing’ was straightforward, and should be taken in its literal meaning: the landlord under the tenancy which generated rent to be repaid. Accordingly, an RRO could only be made against a tenant’s immediate landlord. The subtenants claim therefore failed on appeal, and an RRO was not made against the superior landlord.
Comment
The decision will be welcome for property investors, worried that they could be held liable for the actions of intermediate landlords. Concerns were raised by the Supreme Court in respect of rogue landlords who set up shell companies as intermediate landlords, knowing that the superior landlord cannot be subject to an RRO. However, that was not a particular issue in this case, so it is a question for another day.
