Case preview: Rakusen v Jepson – Rent Repayment Orders (RROs) and superior landlords in the Court of Appeal
Next month the Court of Appeal will hear an appeal from a landlord in a rent repayment order case, Rakusen v Jepson.
The issue which the Court of Appeal will decide is whether or not tenants can obtain a rent repayment order against a superior landlord.
Some history of the case
The current law is established by two Upper Tribunal decisions:
- Goldsbrough v CA Property Management Limited [2019] UKUT 311 (LC) and
- Rakusen v Jepson [2020] UKUT 298 (LC).
In both cases, the Upper Tribunal found that superior landlords could be the subject of a rent repayment order.
The Housing and Planning Act 2016 specifies that an RRO can be made against ‘a landlord’ without any further definition of landlord. In those two cases, the Upper Tribunal held that the word ‘landlord’ was not limited to the immediate landlord.
The judge in Rakusen, Deputy President of the Lands Chamber Martin Rodger QC, rejected the landlord’s argument that the repayment of rent could only be required from the landlord who was the direct recipient of rent from the tenant making the application [30]:
“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 The essence of a repayment is that it is a sum paid back to the person who originally made the payment.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.”
As such, the current position is that a tenant may apply for a rent repayment order against a superior landlord.
Campaigners
This interpretation has been welcomed by tenants’ rights campaigners, who note that while the tenant’s direct landlord might not be someone worth suing (such as a limited company with no assets), a superior landlord who owns the property is likely to be a viable target for a claim.
Allowing RROs to be made against superior landlord gives tenants more options and a better chance of actually receiving their rent back.
The Appeal to the Court of Appeal
The landlord’s appeal to the Court of Appeal is due to be heard on either 21 or 22 July 2021. Judgment might be given straight away on the day of the hearing, or there might be a short wait while the court considers the decision further.
The appeal will feature contributions from some characters who will be familiar to readers of the Landlord Law Blog. In addition to hearing from the landlord and tenant’s representatives, the court has agreed to receive written submissions from Safer Renting, an independent tenants’ rights advice and advocacy service, which was co-founded by Landlord Law Blog contributor Ben Reeve-Lewis.
Ben has written a lot, including on this blog, about the problems of ‘rent to rent’ arrangements in the private rented sector, and the difficulties faced by tenants and local authorities when trying to take any sort of legal action against ‘rent to rent’ businesses which are sometimes run through a complex web of limited companies – companies which can simply be dissolved rather than pay any fines or RROs.
Safer Renting are represented by Justin Bates (who acted for the successful landlord in Trecarrell House Ltd v Rouncefield in the Court of Appeal and discussed that case with Tessa in a Legal Cases webinar) and my colleague at Anthony Gold Solicitors, Giles Peaker.
This is a significant case
This is an interesting and important case for housing lawyers – rent repayment orders have never been directly considered by the Court of Appeal before as far as I am aware.
The court’s decision will have important consequences for tenants who want to make applications for RROs, and superior landlords who might prefer not to have to defend one.
Regardless of the outcome in Rakusen v Jepson, landlords should be wary of the ‘rent to rent’ business model. Even where someone is offering to take over a property, pay guaranteed rent, and look after all the management, landlords should be careful to ensure that any property licence which is required has been applied for promptly.
Where landlords do find themselves facing a rent repayment order application, it is important to take early legal advice. There is no ‘duty solicitor’ service provided to landlords in this position, but to meet that need Landlord Law and Anthony Gold Solicitors offer a Rent Repayment Order hotline, which allows landlords to take initial advice in a half-hour phone call for a fixed fee. You can find further details on the Landlord Law website.
This article was written by Robin Stewart, a Senior Associate Solicitor of Anthony Gold Solicitors.
Further information
- Landlords seriously considering the ‘rent to rent’ model should take training first – read about Landlord Law’s training course here.
- Find out more about Anthony Gold’s Rent to Rent Hotline here.
The RRO ambulance chasers won’t be happy with this one;
https://assets.publishing.service.gov.uk/media/60673dc5e90e074e4ae8bc7f/Semilong_NN2_6AF.pdf
“51. As a result of this failure, the applicant has been put to considerable expense in preparing his appeal. He may wish to make a claim for costs under Rule 13(1) of the Tribunal Procedure (First-tier Tribunal)(Property Chamber) Rules 2013. This jurisdiction is limited to wasted costs or costs incurred as a result of unreasonable conduct in defending the tribunal proceedings and must be made within 28 days of the date this decision is sent to the applicant.
52. In addition, Rule 13(2) provides the tribunal with discretion to make an order requiring a party to reimburse any other party the whole or part of the tribunal fees. In the circumstances the tribunal orders that the respondent must repay the applicant’s fees of £800 within 14 days.”
That doesn’t really make much sense I’m afraid. 1) It’s not an RRO 2) It’s hardly objectionable for the winning side to claim their court fees back.
If you want a good rule 13 case see this one:
https://assets.publishing.service.gov.uk/media/6093affdd3bf7f01343a0848/Final_Decision_North_Holmes_Road.pdf
In which the landlord was ordered to pay £22k in costs following a shambolic and deceitful defence.
If you are aware of a single case in which a costs order was made against an RRO applicant I would be interested to see it.
https://www.bailii.org/uk/cases/UKUT/LC/2021/144.html
Another one in the eye for the ambulance chasers.
Two years ago Safer Renting had not done a single RRO claim, since that time they have become a major part of our work. As you know we only operate in the criminal end of the market, where rogues play fast and loose with identities, using aliases and chains of companies, some legit, some dissolved, which creates smokescreens, hiding identities and responsibilities.
The Upper Tribunal noted in the first Rakusen appeal:-
“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.”
This sums up the situation exactly. If the appeal on 21st July is upheld, then we are just giving the keys of the sweetshop to criminal operators, to create fake companies, as they do now, and never have to pay a penny. If the result goes the way of multiple respondents then this should be a wake up call for property owners to exercise due diligence, in an increasingly arrogant guaranteed rent/ Rent to Rent market, whose business model is based on ripping off renters and owners alike.
It would help tenants a lot if RROs could also discharge liability for rent rather than simply repaying rent already paid. I can think of many situations where a tenant concerned about losing his unprotected deposit and realising that a penalty claim is unlikely to be enforced against a defunct company might instead choose to go into “strategic arrears” for as many months as he could get away with, which could then lead to illegal eviction and an RRO claim. It would make no sense to be awarded only the rent actually paid as the arrears would still be owed to the rogue landlord and would net off against the amount awarded. Far better to award the full amount, with credit given for the months withheld as effectively having been already self-awarded in anticipation of winning the case.
On a separate point, if an RRO can be sought from a superior landlord, say for harassment or illegal eviction by the middleman, this surely implies liability for the actions of the middleman (even though he is NOT engaged simply as an agent).. This would arguably leave the superior landlord also open to criminal prosecution?
Interestingly, the Protection from Eviction Act 1977 already defines a “landlord” under section 3C as “the person who…….[but for the tenant]……would be entitled to occupation of the premises and any superior landlord under whom that person derives title.”
Appeal upheld, claim struck out;
https://www.bailii.org/ew/cases/EWCA/Civ/2021/1150.html
Legislation aimed against rogue landlords only not against the easiest target.
Of additional note;
“the principle of statutory interpretation that a person should not be penalised except under clear law”