A Key Decision for Landlords on Rent Repayment Orders (RROs)

Last week, the Supreme Court unanimously decided that RROs cannot be made against a superior landlord in Rakusen v Jepsen [2023] UKSC 9. Legal Director Phil Parkinson summarises the case and considers the implications of the decision for both immediate and superior landlords…

Rent Repayment Orders

A rent repayment order (RRO) is an order of a First-tier Tribunal requiring a landlord to repay a specified amount of rent. The Housing Act 2004 introduced rent repayment orders to cover situations where the landlord of a property had failed to obtain a licence for a property that was required to be licensed, specifically offences in relation to licensing of Houses in Multiple Occupation and offences in relation to licensing of houses. The Housing & Planning Act 2016 introduced a range of measures to cover a wider range of offences. (see Housing and Planning Act 2016 (legislation.gov.uk).

The Case

The respondent was the superior landlord of property in London that was let out to the appellants. In May 2016, a short residential tenancy was granted to a company who subsequently entered into separate agreements with the appellants with each granted a right to occupy one room in the property in exchange for a fee.  As a result of that arrangement the flat was required to be licenced as a 'house in multiple occupation' or 'HMO' under the Housing Act 2004, however, no licence was ever obtained.

In 2019, the appellants applied for RROs against the respondent on the basis that he was said to have committed an offence of being in control or management of an unlicenced. The respondent denied that he had committed such an offence and applied to strike out the appellants' claims, arguing that a RRO could only be made in favour of the appellants against their immediate landlord.

The First-tier Tribunal refused to strike out the appellants' claims and the Upper Tribunal dismissed the respondent's appeal, maintaining that it was possible to make a RRO against a superior landlord. However, the Court of Appeal reversed that decision and the appellants subsequently appealed to the Supreme Court.

In focus, the key issue for the Supreme Court was in determining whether the wording of section 40 and 41 Housing and Planning Act 2016 meant that a rent repayment order could be made against only a tenant’s immediate landlord, or also against a superior landlord.

The Decision

The appeal was dismissed - an RRO cannot be made against a superior landlord.

The central statutory provision in question is section s 40(2) of the Housing and Planning Act 2016 (HPA 2016). A straightforward interpretation of the words in section 40(2) is that a Rent Repayment Order cannot be made against a superior landlord and can only be made against the immediate landlord of the tenancy that generates the relevant rent.

The conclusion reached by the Court was that the additional relevant interpretative factors on balance supported or were consistent with the straightforward interpretation of the words of section 40(2), including:

• When RROs had been originally introduced by the HA 2004, they could only be made against the immediate landlord. There was no indication, including in pre-legislative material, that a purpose was to change that when the legislative scheme had been revised in 2016.
• There was no suggestion that RROs could be made against other non-landlord offenders. It appeared that the purpose had been to restrict RROs to those who directly benefitted from the payment of rent: namely, immediate landlords.
• With a range of other sanctions available including fines, civil penalties and banning orders, it was a matter for Parliament to decide whether those were sufficient.
• Allowing an RRO to be made against a superior landlord could create complexity as to how much was payable by whom and to whom where there was a chain involving numerous tenancies.
• The straightforward interpretation was supported by reading s 40(2)(a) together with s 44(3) of the 2016 Act. Support was also to be found in the fact that certain offences under the Protection from Eviction Act 1977 expressly extended the definition of landlord to include 'any superior landlord', but that had not been done in the provisions relating to RRO.
• Taken as a whole, the pre-legislative materials were consistent with the straightforward interpretation that RROs were not available against a superior landlord and supported by the principle that where there was any doubt as to whether a statutory provision imposed a penalty on someone, it ought to be resolved in favour of not imposing the penalty.

Implications:

It is interesting to note that the decision clearly delineates the applicability of RROs to immediate landlords, as opposed to being made available against superior landlords. To do so would undermine the clear definition of an RRO, as set out in section 40(2) of the 2016 Act, and as highlighted above, require reformed or new legislation. However, in conclusion, clarification has been provided on a contentious point and that the straightforward “interpretation” in this case is, as the Supreme Court notes, “the simple” and “correct answer” to the question posed.