RRO Reforms under the new Renters’ Rights Bill

The Government has proposed significant changes to the housing sector under the new Renters’ Rights bill, including an overhaul on claims for Rent Repayment Orders (“RRO”). This blog discusses the proposed changes to RRO claims under the Renters Right Bill.

What is changing?

In summary, the Bill seeks to make changes to:

• The categories of people an RRO claim can be brought against;
• The amount that can be reclaimed under the RRO; and
• Widening the offences that an Applicant can commence RRO proceedings for.

Who can Applicants claim against under the Bill?

1. Superior Landlords

Presently,  RROs can only be made against an immediate landlord and cannot be made against company directors, letting or managing agencies even if they are to blame for the alleged offence which caused a landlord liable for the RRO.

This was confirmed in the case of Rakusen -v- Jepsen, in which the Supreme Court held that Applicants can only bring RRO claims against an immediate landlord, that is the person or company which received the rent from the occupiers, and not a superior landlord.

The Renters Right Bill (“the Bill”) extends the category of people against whom a claim can be brought, to include superior landlords, so an award can be made against more than one landlord where each landlord will be required to be “jointly and severally liable” for the amount due under the RRO. This may be the case where a property is sub-let by a freeholder under a rent-to-rent agreement or guaranteed rent scheme. That means that both an immediate and superior landlords could be equally liable to pay the RRO and one party will have to carry the burden of paying the whole RRO if the other has no means to pay.

2. Company directors

Furthermore, the Bill also allows Applicants to bring a claim against company directors in their personal capacities, where the company committed an offence with the director’s “consent or connivance” or the offence was “attributable to any neglect on the part of such a person”. That means that even if a Respondent company was wound up, a director of the company could be personally liable to pay the RRO instead.

Historically, courts have held that a private company benefits from having its own legal identity separate to its directors and therefore assumes its own debts and liabilities rather than the directors being personally responsible. While the Bill is still in draft form and not yet in force, it is not clear how the FtT will try to pierce the corporate veil and this may need to be examined carefully before coming into force.

New Grounds

At the moment, applications can only be brought against landlords in relation to one or more of the housing related offences listed in the table listed under section 40 of the Housing and Planning Act 2016.

The following additional grounds for RRO claims have now been proposed :

• Landlords misusing a possession ground;
• Breach of a restriction on letting or marketing a property;
• Continued tenancy reform breach after imposition of a financial penalty;
• Continued breach of landlord redress scheme regulation;
• Provision of false information to the PRS database ;
• Failure to comply with improvement notices, control or management of an unlicensed HMO and breach of banning order

Amount that can be claimed

Currently, an Applicant can only claim back a maximum amount of 12 months’ rent if the Tribunal is satisfied that the landlord has committed a relevant offence. However, the Government is looking to increase it from 12 to 24 months’ rent and requiring landlords who have been previously subject to enforcement action and repeat offenders to pay back a maximum rent of 24 months’ rent.

What does this mean for landlords?

The Government has sought to introduce these wider measures to cover discrepancies that have come about since the existing regime was introduced under the Housing and Planning Act 2016. While the changes provide tenants with greater security and choice of whom to bring a claim against, claim back for a longer period and in relation to a wider range of offences, it does mean that many landlords will be left vulnerable and exposed to RRO claims even if they were not liable for the offence.

There is also an added risk of claims being brought even if a tenant suffered no immediate or actual harm. The new changes are obviously quite problematic for landlords and it is likely that there will be a few teething issues during its early days. It is yet to be seen how the new rules will be implemented in RRO cases and how liability of landlords will be dealt with fairly and justly by a Tribunal, particularly, where there are multiple Respondents or company directors involved.