Home News Commercial Property Superior Landlords Not Liable to Rent Repayment Orders – Landmark Ruling

Superior Landlords Not Liable to Rent Repayment Orders – Landmark Ruling

Where a house in multiple occupation (HMO) is let to tenants without a required licence, can a rent repayment order (RRO) be made against a superior landlord as well as an immediate landlord? The Court of Appeal has answered that critically important question with a resounding ‘no’.

The long leaseholder of a flat sublet it to a property investment company that, in turn, sublet it to tenants. The long leaseholder acknowledged that the flat appeared for a time to have been occupied by more than three people forming two or more households. On that basis, he accepted that the flat was an HMO for which a licence should have been obtained under the Housing Act 2004.

No such licence having been obtained, three tenants applied under Section 40(2)(a) of the Housing and Planning Act 2016 for an RRO against the long leaseholder. His application to strike out their claim on the basis that it had no reasonable prospect of success was rejected by the First-tier and Upper Tribunals.

Upholding the long leaseholder’s appeal against that outcome, the Court ruled that, on a natural interpretation of the unambiguous terms of Section 40(2)(a), an RRO can only be made against a landlord who is in a direct or immediate relationship with relevant tenants. The long leaseholder was a superior landlord who did not fall into that category and the tenants’ claim against him therefore stood to be struck out.

The Court acknowledged that the HMO licensing regime is designed to combat overcrowding and other social evils. So called ‘rent to rent’ arrangements, under which superior landlords grant leases to companies that rent out premises as HMOs, were prevalent. Such companies may have no assets against which an RRO can be enforced.

The Court, however, observed that in the event that the regime was rendered less effective by its ruling, the question of whether Section 40(2)(a) should be amended was a matter for Parliament. The Court’s role was to interpret the provision as it currently stands.

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Published
3 August 2021
Last Updated
17 September 2021