Supreme Court to consider regulation of the private rented sector and rogue landlords

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On 26 January 2023, the Supreme Court will hear the case of Jepsen & Ors v Rakusen UKSC 2021/188.

In the Housing Act 2004, Parliament created the rent repayment order (“RRO”). This was an additional remedy for tenants (to recover rent) and local authorities (to recover housing benefit) available in particular circumstances against landlords who had been convicted of certain housing licensing law offences.

In England, the RRO regime was significantly expanded by the Housing and Planning Act 2016. The range of offences to which it applied was increased and the need for a prior conviction was replaced so that an RRO could be obtained if the First-tier Tribunal was satisfied that the offence had been committed, even though there had not been any criminal proceedings.

RROs have proved very popular with both tenants and local authorities, with several hundred applications now considered by the FTT and awards totalling millions of pounds made each year.

This appeal turns on who can be the subject of an RRO application in the context of the recent growth in the “rent to rent” sector.  In outline, the landlord (Mr Rakusen) granted a short lease to a company and that company then underlet the property to the ultimate occupiers. The occupiers contend that the property was an HMO to which Part 2, Housing Act 2004 applied; that meant that the property should have been – but was not – licenced with the local authority; and, an RRO should be made. Importantly, the occupiers sought the RRO against a superior landlord rather than against the company as their immediate landlord.

In the FTT, the landlord applied to strike out the application, arguing that an RRO could not be made against a head landlord and could only be made against an immediate landlord. The FTT dismissed the strike out application, holding that an RRO could be made against a superior landlord.

The Upper Tribunal dismissed an appeal by the landlord. The Deputy President, Martin Roger QC, held that there was no reason why a superior landlord was not within the scope of the RRO regime and that there were strong policy reasons for superior landlords to be within the regime, otherwise an unscrupulous rogue landlord could establish a wholly owned company, grant it a short lease and then allow it to sub-let the property, the effect of which would be to insulate the ultimate landlord against the RRO regime.

The Court of Appeal, however, allowed the landlord’s second appeal, finding that the language of the Housing and Planning Act 2016 did not allow an RRO to be made against a superior landlord and that the this was consistent with the policy underlying the Act.  Alternatively, Lord Justice Arnold held that since the RRO regime was penal in nature, the principle against doubtful penalisation would require any ambiguity in the statutory language to be resolved in the landlord’s favour.

The occupiers subsequently appealed to the Supreme Court, which will hear the appeal on Thursday 26 January 2023.

Tom Morris (instructed by Winckworth Sherwood LLP) appears for the landlord, as he did in the FTT, UT and CA.

Justin Bates and Charles Bishop (instructed by Anthony Gold solicitors) have made written submissions for the intervenor, Safer Renting, a charity which works with local authorities to raise standards in the private rented sector. They also acted for the intervenor in the Court of Appeal.

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