From Robin Stewart of Anthony Gold solicitors
I wrote in an earlier blog post about some of the complications faced by tenants and by the First-tier Tribunal (“FTT”) when trying to identify who can be the subject of a rent repayment order (“RRO”).
In that post, I mentioned a pending appeal which would consider whether an RRO can be made against a property owner who was not the direct landlord of the applicant.
The Upper Tribunal’s decision in that appeal, Goldsbrough v CA Property Management Ltd and others [2019] UKUT 311 (LC) has now been published, and the result was not the one I predicted.
Goldsbrough v CA Property Management Ltd
Mr and Mrs Gardner, the owners of the property in question, had granted a lease for five years to CA Property Management Ltd. CA Property Management Ltd then sublet individual rooms to tenants in an arrangement which is sometimes called ‘rent to rent’.
Two of those tenants applied for rent repayments orders against Mr and Mrs Gardner, alleging that the property was an unlicensed HMO. One of the tenants also made an application against CA Property Management Ltd alleging harassment. No findings have yet been made about these allegations because the FTT had first considered whether the claims could proceed against Mr and Mrs Gardner at all.
The FTT made a finding that CA Property Management Ltd was not merely an agent acting for the owners, but was, in fact, the applicants’ landlord. This meant, according to the FTT, that the cases could only proceed against CA Property Management Ltd, since a rent repayment order can only be made against the landlord.
The tenant challenged this decision by appealing to the Upper Tribunal, assisted by Flat Justice who have written about the case here. On appeal, the tenants’ argument that CA Property Management Ltd was merely an agent for Mr and Mrs Gardner was rejected.
However, the Upper Tribunal ruled that Mr and Mrs Gardner could face an RRO because the Housing and Planning Act 2016 states that a rent repayment order can be made against “a landlord” and never specifies that it must be the direct landlord of the applicant.
Mr and Mrs Gardner are the landlords of CA Property Management Ltd in respect of the same property, and this was sufficient to make them “a landlord”.
The Effect of this decision
This decision will help tenants wishing to apply for a rent repayment order if their immediate landlord is not the owner of the property.
Tenants generally would prefer to make a claim against the property owner because it is much easier to enforce an RRO against a property owner than a ‘middle man’ who could be a person using a false identity or a limited company with no assets. If such a company is dissolved, there is effectively nothing that the tenant can do to recover the money owed to them.
Property owners considering whether to become involved in ‘rent to rent’ schemes now have another reason to be wary of these arrangements.
The Upper Tribunal’s interpretation of the law will be binding on judges in the First-tier Tribunal, but I expect that there will be further appeals on this issue at some stage. It is certainly correct that ‘landlord’ is not defined in Part 2 of the Housing and Planning Act 2016 and a ‘superior landlord’ is a landlord, but ‘rent repayment order’ is defined at s40(2) of the Act [for applications made by tenants] as an order for the landlord under a tenancy of housing in England to repay an amount of rent paid by a tenant.
It is a surprising result that a property owner can be ordered to ‘repay’ rent paid by a tenant to a different landlord under a tenancy which they are not a party to. That does not appear to me to be an entirely literal interpretation of ‘repay’.
Knock on effects of this decision
Although Upper Tribunal stated at paragraph 32 of the judgement that “the landlord” must be a landlord of the property where the tenant lived, that is not expressly stated in the Act.
The clearest requirement for a link between the landlord and the tenant’s property is that the offence committed by the landlord must relate to housing that, at the time of the offence, was let to the tenant [s41(2)(a)]. The effect of that is, perhaps, that a tenant could obtain an RRO against an agent who commits an offence related to property rented by the tenant, provided that the agent is also a landlord of a tenancy of housing (somewhere else) in England.
This argument might be characterised as rather adventurous and might stretch the legislation further than the Upper Tribunal would allow, but I would suggest that rebutting this argument relies on applying a non-literal reading of s40 akin to the one disavowed by the Upper Tribunal in Goldsbrough.
The First-tier Tribunal will now have to consider how it applies Part 2 of the Housing and Planning Act 2016 in cases where there are two landlords.
The legislation does not specifically rule out RROs being made against both landlords, and while the amount a tenant can recover under any RRO is capped at the rent paid in the relevant twelve-month period, a tenant could argue that the legislation does not rule out two landlords both being ordered to pay the maximum amount.
The FTT might wish to make an order against both landlords jointly (so that the tenant can enforce the award against either one) but it is not clear that Housing and Planning Act 2016 permits this – if the tenant is entitled to an RRO against each landlord, then this would be two separate orders and the tenant would presumably be entitled to enforce both.
This article first appeared on the Anthony Gold blog here.
Where does this leave freehlolders where the leaseholder let’s the property and commits an offence to which the RRO applies? Or a landlord who’s tenant sublet without their knowledge or permission?
Right up the creek without a paddle.
(I’d also add to your list the private landlords who sublet with “guaranteed rent” to social housing landlords)
The freeholder would still have to commit the offence themselves to be liable to face their own RRO.
It’s possible that the freeholder will have a defence of ‘reasonable excuse’ if the tenant really did sublet without their knowledge and permission – but this can be quite subjective, and if the freeholder has turned a blind eye or not made any effort to supervise what is going on at the property, it is less likely that the freeholder would have a reasonable excuse.
There’s another element to the offence of failing to hold a licence – a landlord can only commit the offence if they are a ‘person managing’ or ‘person having control’. These are technical legal designations and in some circumstances the freeholder would be able to argue that they do not fit the criteria for either one.