Rent Repayment Order Week: Who can a tenant bring a rent repayment order application against?

Introduction

A tenant can make an application to the First- tier Tribunal Property Chamber (Residential Property) (“the Tribunal”) for the repayment of rent. The order can be sought if the Property in relation to which the application relates was let to the tenant and an offence listed at section 40(3) of the Housing and Planning Act 2016 (“the Act”) has been committed. The tenant must make its application to the Tribunal within 12 months of the offence being committed. However, an increasingly troubling question with the variety of guaranteed rent schemes/ rent to rent arrangements available is who should the tenant bring the application against?

The Housing and Planning Act 2016

Under section 40(1) of the Act the Tribunal has the power to make a rent repayment order where a landlord has committed and offence to which Chapter 4 of Act applies. The Act does not define the term landlord but in any event, one would imagine that this is an easy question as you would simply need to look at the tenancy/license agreement to identify the landlord. However, the recent decision in the case of Goldsbrough v CA Property Management Ltd and others [2019] UKUT 311 (LC) has highlighted that this is no longer a simple question to answer.

The Tribunal decision in Goldsbrough

In Goldsbrough, the freeholders of the Property had entered a rent to rent type arrangement with CA Property Management Ltd (“the Company”). Under the terms of this arrangement, the freeholders had granted a lease for five years to the Company, but the freeholders remained responsible for several management tasks in relation to the Property such as insuring the Property, maintenance of the external and internal structure, and obtaining gas safety, electrical and EPC certificates. In return the Company was free to sublet the Property as residential accommodation.

The Property was a 2-bedroom flat that had been converted to 5 bedrooms. It was let under an assured shorthold tenancy to Mr Goldsbrough and Mr Swart (“the Tenants”). However, no licence for a house in multiple occupation (HMO) had been obtained in relation to the Property. Under section 72(1) of the Housing Act 2004 a person in control of or managing an unlicensed HMO commits a criminal offence. Section 40(3) of the Housing and Planning Act 2016 specifies that this is one of the offences which allows a tenant to make a rent repayment order application at the Tribunal.

The tenants in Goldsbrough brought an application at the Tribunal against both the Company and the freeholders. The application was brought against the freeholders as the landlord of the Tenants on the grounds of being in occupation and control of an unlicensed HMO. The application was made against the Company as the Agent based on grounds of harassment and illegal eviction.

The First-tier Tribunal held that the Respondent in both applications should be the Company as the immediate landlord and not the freeholders. However, the Tenants were not happy with this decision and appealed it to the Upper Tribunal Lands Chamber (“UT”).

The decision made by the UT in Goldsbrough

The UT considered the question of who the Respondent can be in rent repayment order applications. The UT did not consider the factor whether an offence had been committed in this case. The UT was merely concerned with the factor on who the Respondent can be in rent repayment order applications.

The UT held that the Act does not say that the person who committed the offence must be the immediate landlord of the occupier. The Act only states that a rent repayment order can be made against a landlord who has committed one of the offences under Chapter 4. Therefore, the landlord does not need to be the immediate landlord of the tenants and a freeholder/owner can be the landlord. In the case of Goldsbrough the UT held that both the Company and the freeholders were landlords and remitted the case back to the Tribunal for a decision on whether an offence had been committed.

Outcome of the decision

The UT decision in Goldsbrough has somewhat created a confusing situation where the applicant has more than one person against whom they can apply for an order. Tenants often list multiple Respondents as ‘the landlord’ in their application form and the Tribunal can make a rent repayment order against any landlord provided that they have committed the offence.

The UT did not give any instructions about whether to make the order against both landlords, or whether, and if so how, to choose between multiple landlords. In the recent First-tier Tribunal case of Sergei Liski v Smart Rent Limited & Amarjit Singh Gill more than one Respondent was listed but the applicants did not give any reasons for preferring one Respondent over another. Therefore, the Tribunal decided to make a rent repayment order against the First Respondent, the tenant’s immediate landlord, who it considered to be the appropriate person to make the order against.

Conclusion

Freehold owners of Properties should exercise care when entering rent to rent/guaranteed rent arrangements and be aware of the fact that they might find themselves directly liable to tenants for a rent repayment order.

* 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.*