Supreme Court rules on landlord’s landmark rent repayment order case

Tenants in the Rakusen vs Jepson case have lost their appeal to the UK's highest court to settle their £26,000 argument with the landlord.

The Supreme Court has dismissed an appeal by three tenants in the long-running Rakusen vs Jepsen case, which means the ‘superior landlord’ is not liable for a rent repayment order (RRO).

It is a case that could have far-reaching consequences for rent-to-rent firms who may now be liable for any rent repayment claims.

RROs of up to 12 months’ rent can be granted by a Tribual to tenants if a landlord or agent fails to licence a property properly, which in London and other high-rent cities can reach £30,000 or more.

Summary of the case

The Respondent, Martin Rakusen, is the leaseholder of a flat in London. In May 2016 he granted a short residential tenancy of the flat to a company called Kensington Property Investment Group Ltd (KPIG).

KPIG subsequently entered into separate agreements with three tenants by which they were each granted a right to occupy one room in the flat in exchange for a fee.

As a result of this arrangement the flat was required to be licensed as an HMO under the Housing Act 2004. However, no licence was ever obtained.

In 2019 the Appellants applied for Rent Repayment Orders against Rakusen rather than KPIG, on the basis that he was said to have committed an offence of being in control or management of an unlicensed HMO contrary to section 72 of the Housing Act 2004.

The Court of Appeal had ruled that RROs only apply to the immediate landlord [KPIG], overturning a previous decision by the Upper Tribunal.

The ruling

“The Supreme Court unanimously dismisses the appeal. It holds that a Rent Repayment Order cannot be made against a superior landlord.” – The Supreme Court

Reaction

NRLA (National Residential Landlords Association) reacted to the judgement by saying “the Supreme Court has ruled that where rent-to-rent companies take over the running of a property, they cannot shirk responsibility and expect to leave the landlord to pay for their legal failings”.

Ben Beadle
Ben Beadle, CEO, NRLA

Ben Beadle, CEO at NRLA, says: “This case has never been about whether legal obligations should be met, but about who should be responsible for them in rent-to-rent cases.

“We therefore welcome today’s ruling which accepted many of the arguments made by the NRLA, and provides important clarity for landlords and tenants alike.

“The ruling makes clear that it is the responsibility of rent-to-rent companies acting as a landlord to ensure that relevant legal requirements are met, since it is they who receive tenants’ rent,” he says.

“It is simply not right that such companies can take money from people without any responsibility for the property they are running.”

Read the judgement here


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