New rules coming in under the Renters’ Rights Act mean rent repayment orders can be made against superior landlords, not just the immediate landlord, legal experts have warned.

This will be the case even where ownership structures place responsibility at arm’s length through intermediary companies, they claim.

The changes will bring freeholders, head lessees and other superior landlords directly into scope for licensing breaches from 1st May 2026, according to Anna Ralston-Crane (pictured right) and Sarah Collins (pictured left), Partners at international law firm CMS, which advises on real estate and housing law.

Until now, enforcement action for offences such as operating an unlicensed HMO has been limited to the immediate landlord – typically the party receiving rent from tenants. The precedent had been set by the Supreme Court in Rakusen v Jepsen that rent repayment orders could not be made against superior landlords further up the chain.

Well-known loophole

The changes in the Renters’ Rights Act will now close what had become a well-known loophole.

From May, liability will extend up the chain to any landlord holding a superior interest in a property that requires a licence but does not have one, regardless of whether they are involved in its day-to-day management.

Unlimited fines

Penalties include unlimited fines, civil penalties of up to £40,000 and rent repayment orders of up to two years’ rent, with councils expected to pursue the party best placed to pay.

Ralston-Crane and Collins say that while statutory defences are available, including where “all reasonably practicable steps” have been taken to ensure a property is licensed, it will not be enough to rely on tenancy agreements that seek to restrict how a property is occupied.