HMO: a rent repayment order cannot be made against a superior landlord

The Supreme Court has determined definitively that a rent repayment order cannot be made against a superior landlord. In Rakusen v Jepsen and others [2023] UKSC 9; [2023] PLSCS 42 the respondent was the long leaseholder of a residential flat in London NW3. In 2016, he granted a company a contractual tenancy of the flat. The company subsequently sublet the flat to the individual appellants. The respondent became the appellants’ superior landlord. In 2018, the company became aware the flat was required to be licensed by the local housing authority because it was deemed to be a house in multiple occupation. The company failed to obtain a licence for the flat. The company’s contractual tenancy expired through the effluxion of time and was not renewed by the respondent. In September 2019, the appellants applied to the First-tier Tribunal for an RRO to be made against the respondent pursuant to section 41 of the Housing and Planning Act 2016. The appellants argued that the respondent, as the superior landlord, was guilty under section 72(1) of Housing Act 2004 of being in control of or managing an HMO that was required to be licensed under Part 2 of the 2004 Act, but was not so licensed. Both the FTT and Upper Tribunal (Lands Chamber) agreed with the appellants. On appeal to the Court of Appeal, the respondent was successful. The Supreme Court has upheld the decision of the Court of Appeal. In its reasoning, the Supreme Court applied what it termed as a “straightforward interpretation” of the words in section 40(2) of the 2016 Act. That provision defined an RRO as an order requiring the landlord under a tenancy of housing in England to “repay an amount of rent under a tenancy” or a pay a local housing authority an amount of a relevant award of universal credit paid (to any person) in respect of “rent under the tenancy”. The Supreme Court found that “rent paid by a tenant” or “rent payable under a tenancy” referred to the rent paid by a tenant under the “tenancy of housing in England”. Where a sub-tenancy existed it would be the rent paid to the intermediate landlord under the sub-tenancy. This straightforward interpretation linked “the landlord” with the tenancy that generated the rent. The Supreme Court held that to reach a different conclusion would be both artificial and unnatural. Interestingly, the Supreme Court acknowledged that its decision would permit rogue landlords who rendered themselves superior landlords by letting to potentially “straw” companies under a rent-to-rent scheme to avoid the sanction of an RRO, but that was a problem for parliament to resolve through legislative amendment. Elizabeth Dwomoh is a barrister at Lamb Chambers