The Supreme Court has ruled that Rent Repayment Orders (RROs) can’t be issued against superior landlords – causing concern among tenant activist groups and potentially leading to reform of how RROs work.
In the case of Rakusen v Jepsen and others, landlord Martin Rakusen had rented his London property to rent-to-rent company Kensington Property Investment Group (KPIG). KPIG then let the property to three unrelated tenants (including Mikkel Jepsen, the appellant) without first getting an HMO licence. In 2019, the tenants applied to the First Tier Tribunal for an RRO against Rakusen on the basis that he was running an unlicensed HMO, which they were granted, but the decision was overturned by the Court of Appeal.
This month, the Supreme Court backed up the Court of Appeal’s decision, saying that RROs can only be issued against the landlord who receives rent directly from the tenants – in this case KPIG. Lower courts had previously given tenants RROs against superior landlords, meaning that the Supreme Court’s decision will have a huge impact on such cases in the future.
Winners and losers
While the ruling has been welcomed by landlords, it also means that tenants will have no recourse if the rent-to-rent company they are renting from folds. Activist groups worry that landlords could now set up their own rent-to-rent companies with no assets to shield themselves from RROs. Legal experts have also predicted that MPs could change the law to let tenants seek RROs against superior landlords again, possibly in the upcoming Renters’ Reform Bill.
The case could also focus more attention on the growing rent-to-rent sector. Rent-to-rent arrangements offer landlords guaranteed rental income with no void periods and minimal work, but unlike traditional letting agents, the operators don’t have to belong to client money protection or redress schemes – putting landlords and tenants at more risk if anything goes wrong.
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