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Who can a Rent Repayment Order be made against? Who is the landlord?

October 16, 2019 by Tessa Shepperson

housesThis article is by Robin Stewart of Anthony Gold and first appeared on the Anthony Gold website.

One of the first decisions faced by a tenant applying for a Rent Repayment Order is who to make the claim against. The Housing and Planning Act 2016 is clear that Rent Repayment Orders are orders made against a landlord, but no definition of landlord is given.

Who is the landlord?

In most cases, it is not difficult to work out who the landlord is. A property owner who grants a tenancy and is named in a tenancy agreement as the landlord clearly is the landlord.

However, many tenancies are granted by someone who is not the ultimate owner of the property.

If a flat is let to a tenant, the landlord is usually going to be a leaseholder, who holds the property under a long lease and has their own landlord, the freeholder. And sometimes there will be an additional layer, if, for example, the owner has granted a 3-year lease to a ‘rent to rent’ company, who then sublets to the actual occupier.

There are other entirely legitimate reasons why the identity of the landlord on a tenancy agreement might not match the registered owner of the property – one of two joint owners might grant tenancies for example. Sometimes the landlord might use a more complex structure for perceived tax benefits, and sometimes a confusing structure can be used as a means to thwart law enforcement.

‘Landlord’ is not simply another way of describing the owner of the property – it is term that is best understood as relational: a landlord is always landlord to another person.

Claims against letting agents

At first, it might appear obvious that an agent is not the landlord.

This has not prevented applications being made against agents in the past although none successful as far as I am aware.

A landlord might blame their agent, and sometimes they might even be able to recoup the amount they pay to the tenant under aRent Repayment Order from their agent through a negligence claim, but this does not make the agent directly liable under a Rent Repayment Order.

However, sometimes the person who refers to themselves as an agent is not in law an agent (someone who acts on behalf of the landlord), but is, in fact, the landlord themselves.

This is most commonly seen when established letting agents expand into ‘rent to rent’ arrangements where they take a lease but continue to refer to themselves as ‘agent’.

Difficult cases involving agents

A typical letting agency contract entitles the agent to take a percentage of the rent as commission, with the balance paid to the landlord.  Whereas a typical ‘rent to rent’ contract gives the property owner a fixed rent. In such cases, it is reasonably simple to work out who is the landlord, provided you have the information.

But more complex arrangements exist, and it is entirely possible for an agency contract to be set up with a ‘guaranteed’ fixed payment or ‘minimum rent’ paid to the landlord. This is still a form of agency contract, called del credere agency, and this would not change the identity of the landlord.

Is the person described as ‘landlord’ in the tenancy agreement always the landlord?

The easiest thing for a tenant to do will be to name the person identified as ‘landlord’ in their tenancy agreement as ‘landlord’ in the respondent to their application for a Rent Repayment Order – but unfortunately, this is not guaranteed to work.

Earlier this year I acted for a property owner who had let their property to a company. That company sublet the property room by room to individuals, without permission from my client, and the property was an unlicensed HMO.

My client was very surprised to discover that they were named as the landlord in the tenancy agreements provided to the occupants: did this make them the landlord?

The owner argued that they had not authorised the tenancies and were not the landlord. The tribunal accepted that my client was not capable of being the landlord because she had divested herself of her interest in the property by granting the tenancy to the company, and the true landlord was the person who granted these unauthorised sub-tenancies.

A recent case was examined rather differently by the tribunal.

A tenancy was granted by a limited company, but the tenants argued that their landlord was really the director of that company, who was one of the joint owners of the property. They suggested that the director might be using the company as a device to avoid paying any award.

The tribunal was greatly influenced by their view that there was no evidence before them that the registered owners (a couple) had granted any interest in the property to the company such that it would be capable of granting a tenancy.

The tribunal’s conclusion was of real assistance to the tenants in this case, who have a much better chance of actually enforcing their Rent Repayment Order against an individual than against a limited company.

However, as a housing lawyer, I am unconvinced by some elements of this decision. The tribunal asserted that, in the absence of evidence that the company had sufficient authority interest, the company could not be the landlord.

This is certainly open to question: the authoritative practitioner textbook Hill and Redmond Law of Landlord and Tenant explains at Chapter 1 A 4

a person who has no legal estate in the land may nevertheless purport to grant a lease of that land; in that event, there is created between him and his purported tenant a tenancy by estoppel which binds them and their respective successors in title just as if the landlord had a sufficient interest to grant the lease.

It is therefore entirely possible for a tenancy to arise despite the landlord not truly having an interest in the property – although there is perhaps some room to argue about the effect of a ‘tenancy by estoppel’ in the context of a rent repayment order application, and which parties the tribunal is entitled to apply the designation ‘landlord’ to.

The tribunal’s decision also does not address the principle that a tenant is prevented or ‘estopped’ from denying the right of their landlord to grant a lease. If the tenants were to argue that in fact, their landlord was someone other than the person identified in their tenancy agreement, that principle is not engaged, but there would need to be some evidence to support that proposition.

If the tenants simply attack the entitlement of their landlord to grant their lease, without demonstrating that another person is the landlord, this principle might perhaps be violated.

What this means for tenants making applications for Rent Repayment Orders

Understandably some are arguing that tenants should always be entitled to obtain a Rent Repayment Order against the registered owner of the property and I understand that this the subject of a pending appeal to the Upper Tribunal.

I am doubtful that the Upper Tribunal will be particularly receptive to the tenant’s arguments in this case – it is not really the role of the tribunals to close perceived loopholes in legislation – but this area of law is going to be problematic for the tribunal, tenants and their advisers. Guidance from the Upper Tribunal about when it is legitimate to look behind the names of the parties as identified in the tenancy agreement would be of real assistance.

Litigators have been wrestling for centuries over issues such as the identities of parties to contracts and the circumstances where agents assume personal responsibility for liabilities under a contract they entered into on behalf of their principal.

From a contract law point of view this is already fiendishly complicated even before getting into matters such as ‘tenancies by estoppel’.

Efforts to expand the scope of Rent Repayment Orders are well-intentioned but the law in this area is not simple. It is unfortunate that the tribunal will have to determine many of these issues without the benefit of hearing from specialist lawyers to make the arguments on behalf of each party.

From the point of view of tenants, there will be a real incentive to name every plausible candidate for the landlord as a respondent when starting the claim.

To date the Tribunal has demonstrated a willingness to substitute a different respondent when part-way through a claim it appears the incorrect respondent to the application has been named.

However, tenants should take care here as in the civil courts, in general, a new defendant cannot be substituted into a claim if the limitation date has passed – that principle might also apply in Tribunal proceedings, so it is important to identify the correct target for a rent repayment order application as early as possible.

This article first appeared on the Antony Gold website.

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Filed Under: Analysis Tagged With: Rent Repayment Orders

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About Tessa Shepperson

Tessa is a specialist landlord & tenant solicitor and the creator of this site! She is a director of Landlord Law Services which now hosts Landlord Law and other services for landlords and property professionals.

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Comments

  1. Ben Reeve-Lewis says

    October 16, 2019 at 9:55 AM

    Safer Renting have been doing more and more RROs and I read this article a couple of weeks ago on the Anthony Gold blog. It made my blood boil. Not because of Robin’s writing but it hits the nail on the head of one of the loopholes being exploited by shysters, the constant “Not me guvnor” shenangians played out by the rogues.

    RROs were meant to be a relatively easy route to recompense for the tenant and punishment for the recalcitrant landlord. The fact that they are heard in tribunal without need for a lawyer is an indicator of government’s intentions of a user friendly legal route but as usual the endless nuances of housing law leave rogue landlords driving a coach and horses through the legislation and the RRO system in danger of so often being a chocolate teapot.

    In all but one case we’ve dealt with, the defence has been this game of “Who is the landlord”. IN cases we deal with in Westminster, have the time the owners are offshore companies with dubious provenance, where, even if you could satisfy the FTT about the landlord’s identity you are never going to get the money anyway.

    Until the UT start ironing out these kinks RROs are going to be a lottery

    • Robin Stewart says

      October 21, 2019 at 12:08 PM

      I think this is a fair comment Ben. One reason that tenancy deposit protection penalties work better is that the claims can be made against landlord or agent – but it took a couple of rounds of amendments to remove some big loopholes from the deposit legislation. The same might well be needed with RROs.

      There is definitely scope to make RROs more effective, but I can’t see a way to solve some of the unintended legal complexity without amendments to the Housing and Planning Act.

    • Elliot Kent says

      October 31, 2019 at 7:59 AM

      The Upper Tribunal appeal referred to in the article has now been decided : https://www.bailii.org./uk/cases/UKUT/LC/2019/311.html

      Judge Cooke has reached a very neat solution for the rent to rent cases.

      The Act does not say that the application is against “the landlord”. It says that the application is to be made against “a landlord”. In a rent to rent arrangement, the tenant’s immediate landlord is “a landlord” but the freeholder is also “a landlord”. So, per Judge Cooke, it then follows that an application can be made against either. (It would then be necessary to prove the actual respondent committed the offence : which in a licensing case would mean proving management or control).

      So perhaps that might make your life easier Ben.

  2. Alasdair Mcclenahan - Justice For Tenants says

    October 21, 2019 at 9:54 AM

    I was the representative (Alasdair Mcclenahan of Justice For Tenants) that successfully argued the RRO application referred to in Robin Stewart’s article above.

    There is a gap between how legislation is written and it’s purposes. The Housing And Planning Act 2016 and Rent Repayment Orders have the aim of breaking a business model where it is more financially efficient to break the law and use obfuscation to prevent legal redress, as opposed to renting accommodation in compliance with legislation.

    HAPA 2016 is a recognition that a moral imperative is no longer (and possibly never was – Ben would know better than I) the general guiding principle for those providing rental accommodation, therefore it has to be made financially unviable to operate outside the law. The lack of resourcing of Private Sector Housing Enforcement Teams has previously meant this aim was very hard to achieve.

    However, these legislative aims do not mean that it is legal to hold someone as the responsible party who is not the responsible party. Through various cross-council stakeholder meetings regarding well-known Rogue Agents and landlords who have caused untold misery for hundreds of vulnerable tenants (attended by Housing Law Centres, London universities, Trading Standards and Tenants Rights organisations) it has become clear that the confusing arrangements referred to in this article are broadly effective and preventing enforcement under legislation other than HAPA 2016 (largely due to a lack of resources and cross-council collaboration in local authorities).

    Justice For Tenants has been taking the approach of attempting to hold the enablers of these practices liable, as they have an asset (a property) that allow for enforcement to be effective.

    So many tenants have contacted Justice For Tenants after a “successful” RRO only for JFT to break the news that the decision from the Tribunal is practically a valueless piece of paper as there is no realistic prospect of enforcing the award against the Rent-2-Rent agency listed as the Respondent and named as the landlord on the Tenancy Agreement.

    Many landlords who engage these rogue agencies are aware that their property will be split into more rooms and rented out in breach of overcrowding laws but are ok with it as they believe:
    1) They will receive higher-than-market rent guaranteed every month
    2) They are informed that they will not appear on the tenancy agreement, therefore, they will be immune to prosecution.

    I for one will be watching developments from the UTT with respect to whether the beneficial owners of rented property will be immune from redress simply because they do not appear on a tenancy agreement. If they are found to not be liable, it will blunt the powers of local authorities to efficiently police substandard overcrowded rental stock managed by Rent-2-Rent organisations. Although HAPA 2016 does provide for greater action by tenants (by expanding the powers of Rent Repayment Orders), the most groundbreaking element of the legislation was allowing Housing Officers to issue Civil Financial Penalties (CFPs) and handle any appeals from the Recipient of these CFPs themselves in Tribunal. A significantly more effective method than the spending hundreds of thousands of pounds and a few years on a prosecution that may net a £10,000 fine and £20,000 in costs against a company or individuals who will likely never pay.

    However, these wishes and aims do not change the main thrust of Mr Stewart’s article. If it were to be the case that a Land Registry owner of the property would always be able to be held liable for breaches of law occurring in their property, that should have been clearly written into the legislation. It is for representatives of both Tenants and Landlords to argue this point, referencing chiefly the primary legislation but also the government guidelines published alongside the legislation. It is for the Tribunal (specifically the Upper-tier Tribunal) to decide on this matter.

    Having assisted and/or represented over 500 tenants with RROs, the variation of results currently can be a bit frustrating, but I have been generally impressed at how often the Tribunal tends to come to a decision and award that seems reasonable considering the circumstances. The worst practitioners tend to be punished the most severely and the landlords who simply lack a bit of professionalism and are ignorant of the law without malice or intent tend to receive a much lower award against them.

    The way the legislation operates is tricky enough that Justice For Tenants run a free resource centre and free training sessions for local authority EHOs so they can contact us to discuss and receive guidance on how to generally approach RROs and CFPs, as well as pose specific questions regarding particular cases they are unsure to proceed with.

    Al Mcclenahan
    Justice For Tenants

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