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Published On: November 6, 2019 | Blog | 0 comments

Update on which ‘landlord’ a Rent Repayment Order can be made against

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”.

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 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 relation 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.

*Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*

Robin Stewart

Joint Manager of Private Sector Residential Landlord and Tenant

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3 thoughts on “Update on which ‘landlord’ a Rent Repayment Order can be made against

  1. The key to understanding this decision, and how it will work in practice, is to realise that these Rent-to-Rent arrangements are schemes that aim, at least in part, to provide a legislative shield for the landlords.

    Apart from that aspect, there is not a lot of difference to a traditional managing agency that is taking a %age cut on the rents.

    If a RRO would be awarded against a landlord using a commission based managing agency, that landlord would not have received all the rent paid by the tenants either, the agency having deducted their commission and any other costs before passing on the balance. No doubt the Respondent landlord in such a case would make an argument for an award reduction on that basis just as a landlord owner using a R2R agent might do.
    We are grateful for the suggestion that one might now bring a RRO against both: R2R agent and owner. We hadn’t thought of that! Expect to see another appeal from us on that at some future point!

    1. I think for landlords the attraction of rent to rent is often just the (false) promise of a steady guaranteed income
      and an easy hands-off money spinner, but no doubt sometimes it is a more cynical attempt to avoid regulation.

      I do think there are some important difference between a true agent and a ‘R2R agent’ – for example an ‘R2R agent’ is in complete control of the property, is collecting the rent on their own account, and is not under any duty to act in the best interests of the owner. So there will be some slightly different issues when establishing whether or not a criminal offence has been committed by the landlord.

      I am sure you are quite right about the deductions.

  2. Very interesting opinions there on different management arrangements but my team do RROs for tenants and most are dodgy R2R scams where truth about the nature of the business arrangement between owner and agent is always shrouded in lies and deceit, depending on whose finger is pointing at whom. So such arguments are rather academic when it comes to clearly identifying the right person to go for.

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