Rent Repayment Battle Heads for Supreme Court

Update March 2023: the Supreme Court has now heard this Rakusen case and held that a Rent Repayment Order cannot be made against a superior landlord.

Judges involved in a long-running legal battle will have another go at ruling who tenants can take to court to settle a rent repayment order.

The Supreme Court will hear an appeal in the case of Rakusen v Jepsen later in 2022 or early in 2023.

The legal battle is over who is the immediate landlord of a tenant living in a sublet home.

Rent repayment order (RRO) legislation says tenants can sue the immediate landlord to repay up to a year’s rent if convicted of letting a substandard home. However, the legislation does not define this landlord's role when a home has a chain of owners and landlords.

The Rakusen case had simmered in the courts since December 2019, when the First-Tier Property Tribunal first heard the argument. Since then, the issue has been to the Upper Tribunal and the Court of Appeal last August.

Who is the landlord?

The Upper Tribunal decided that the law applied to superior and immediate landlords.

If a homeowner sublet a home to another landlord and the second landlord was convicted of a housing offence, the tenants could demand up to a year’s rent back from the owner.

The Court of Appeal overturned this decision to make the immediate landlord responsible for an RRO, and the immediate landlord holds the tenancy agreement with a renter.

The Rakuten case revolves around who the law regards as the immediate landlord.

Although tenants are most likely to have an agreement showing the name and address of their landlord, this is not always so.

Sometimes the right to collect rent may lie with a company or sell on by rent-to-rent operators. In a few cases, rogue landlords sign off with false names to avoid RROs.

Tenant groups and their lawyers like the current legal interpretation from the Appeal Court because the terms allow them to act against a traceable property owner and are more likely to pay up.

What is a rent repayment order?

Under an RRO, a landlord must repay up to a year’s rent or housing benefit costs paid by a tenant or council when the landlord is found guilty of a list of offences.

The relevant offences are:

• Using or threatening violence to enter a home
• Illegal eviction or harassment
• Failing to comply with an improvement notice
• Not complying with a prohibition order
• Breaking a banning order
• Letting an unlicensed home in an additional or selective licensed area
• Letting an unlicensed house in multiple occupation (HMO)

The RRO claim must start within 12 months of the application date.

Which ruling do landlords follow?

The latest ruling from the highest court determines which version of the law to follow.

In the Rakuten case, the Appeal Court decided that the immediate landlord was responsible for paying any RRO.

HMOs and Rent Repayment Orders

Rent repayment orders are a halfway house offering a compromise to HMO landlords found guilty of a housing offence, like running an unlicensed house share.

Instead of voiding tenancy agreements and evicting renters if the landlord is convicted of an offence, the contract continues. Still, the tenant can claim a rent repayment under the RRO.

Councils are more likely to pursue RRO because the tribunal process is more straightforward than criminal prosecution, and cases are brought to a close much more quicker.

However, these advantages are tempered by a strict burden of proof beyond a reasonable doubt, as in a criminal case.

Another issue is how tenants identify who is responsible if the landlord has paid a managing agent to let a property.

Rent Repayment Order legislation

In England, the First-Tier Tribunal can make a rent repayment order under Section 43(1) Housing and Planning Act 2016.

In Wales, the Renting Homes Act 2014 (Wales) Act 2014 introduced RROs.

Rent Repayment Order cases

Williams v Parmar [ 2021] UKUT 244 (LC) -  A tribunal does not have to award a tenant a full 12 months' rent but has the discretion to reduce the amount

Vadamalayan v Stewart and others (2020) UKUT 183 (LC) - The ruling allows landlords to deduct the cost of utility bills from RRO awards.

 Goldsbrough & Anor v CA Property Management Ltd & Ors - Held an RRO could be against immediate and superior landlords, but the Rakusen case superseded the ruling.