Rakusen v Jepsen (HOUSING – RENT PAYMENT – whether a rent repayment order may be made against a superior landlord) (2020) UKUT 298 (LC)
In Goldsbrough & Anor v CA Property Management Ltd & Ors (HOUSING – HOUSE IN MULTIPLE OCCUPATION) [2019] UKUT 311 (LC) (our note here) the Upper Tribunal had held that Housing and Planning Act 2016 rent repayment order applications did not have to be against the immediate landlord alone, but could be against both the immediate landlord and a superior landlord, so long as both had committed the relevant offence. In this Upper Tribunal appeal, the limits of the Goldsborough decision were tested.
Mr R was the leaseholder of a flat on the Finchley Road in London. He had granted a tenancy of the flat to Kensington Property Investment Group Ltd in 2016, for KPG to sub-let (a ‘rent to rent’ set up, sadly not uncommon these days).
Later in 2016, and at different times, KPIG entered into separate written agreements with the three respondents, each of whom was granted the right to occupy one room in the flat. The documents were described as licence agreements and made provision for the payment of a licence fee. The aggregate sum paid by the three respondents was £2,297 per month.
This was a licensable HMO. No license was obtained by KPG. In May 2019, KPG’s tenancy ended. In September 2019, three tenants of the flat applied for an Rent Repayment Order against Mr R for totalling £26,140 on the basis of him being in control or management of an unlicensed HMO. Mr R asked the FTT to strike out the application on the basis that there was no reasonable prospect of it succeeding, and that an RRO could only be made against the immediate landlord, and that alternatively, he had a reasonable excuse defence. The FTT decided to take the ‘immediate landlord’ point as a preliminary issue. Before that was heard, the decision in Goldsborough was made. The FTT therefore found against Mr R on the ‘immediate landlord’ issue, but granted permission to appeal.
The Upper Tribunal confirmed Goldsborough.
The language of Section 40 Housing and Planning Act 2016 did not limit an RRO to the immediate landlord. The reference was to ‘a landlord’ and ‘a tenant’, not the landlord and the tenant. While s.40(2) referred to the tenant being ‘repaid’, this did not restrict it to persons who had received rent directly from the tenant.
As a matter of language there is nothing incongruous in referring to a sum being “repaid” by a person who was not the original payee. The essence of a repayment is that it is a sum paid back to the person who originally made the payment. I do not regard it as indispensable that the person making the repayment should be the same person as received the original payment, or that only two parties should be involved, although both may often be the case.
All of the offences under s.40(3) were capable of being committed by a superior landlord, not just the immediate landlord.
This included ‘being in control’ of an unlicensed HMO as s.263(1) Housing Act 2004 set out that a person in control of the premises was a person who received the rack rent for the property. In Urban Lettings (London) Ltd v LB Haringey (2015) UKUT 104 (LC), it was accepted that more than one landlord could be in receipt of rack rent at the same time. As per Lord Reid in London Corporation v Cusack-Smith [1955] AC 337:
“A, the freeholder, may let to B for a rent of £100 which is a rack-rent at the date of B’s lease, and later B may sublet to C for a rent of £200 which is a rack-rent at the date of C’s lease. It appears to me that then both A and B are entitled to receive a rack-rent of the land. … I am therefore of opinion that there can be more than one “owner” under the first limb of the definition, and that if the freeholder lets at a rack-rent he is and remains an “owner” no matter what his tenant may do.”
So, the superior landlord, as someone receiving a rack rent for the property from the immediate landlord, was a person in control for the purposes of s.263(1).
Therefore, overall
The conclusion I have reached, therefore, is that the FTT does have jurisdiction to make a rent repayment order against any landlord who has committed an offence to which Chapter 4 applies, including a superior landlord. There is no additional requirement that the landlord be the immediate landlord of the tenant in whose favour the order is sought. That appears to me to be the natural meaning of the statute and is consistent with its legislative purpose. The only jurisdictional filter is that the landlord in question must have committed one of the relevant offences, and before an order may be made the FTT must be satisfied to the criminal standard of proof that that is the case.
The matter was remitted to the FTT to deal with the ‘reasonable excuse’ defence.
Comment
It is good to have this clearly and firmly confirmed. It hopefully narrows the options for a certain group of very iffy landlords who try to hide from both criminal liability and rent repayment orders by inserting dodgy companies as intermediate landlords, which company of course, folds up its tent and vanishes when faced with any trouble or demands. As the UT noted
if only the immediate landlord may be the subject of an order, the grant of a short-term tenancy to an insubstantial intermediary through which the premises would then be sublet would remain a route for avoidance of the enforcement of rent repayment orders. A company with no assets other than a short-term lease, which may be not much longer than that granted to the occupational sub-tenants, is not likely to be a promising target for enforcement of a substantial rent repayment order.
And of course, it simply confirms once again that ‘rent to rent’ is a recipe for disaster for sub-tenants and often superior landlords, and the area has a large population of incompetents, shysters and greedy ignoramuses. (Note KPG a) not getting an HMO licence, and b) giving the tenants ‘licences’.)