Private sector landlords of residential blocks are inadvertently finding themselves caught in the cross hairs of housing legislation originally intended to tackle problems more typically associated with overcrowded, unsafe, and poorly maintained houses in multiple occupation.

Housing Management & Litigation specialists Karl Anders and Jordon Kellett provide an essential update on the latest Rent Repayment Order case law and practice relating to mandatory, additional, and selective licensing, and explain how Walker Morris can offer legal and practical solutions for responsible residential landlords in the private sector.

Rent Repayment Orders: 2024 update

A Rent Repayment Order (RRO) allows a tenant to reclaim up to 12 months’ rent if its landlord or letting agent has committed one of a range of specified offences under the Housing and Planning Act 2016 (the Act), including letting or managing a property or a house in multiple occupation (HMO) without a licence.

In 2022 we published Rent repayment orders: A gathering storm, in which we highlighted the growing trend for RRO claims in respect of licensing breaches by landlords under the Act. That trend has continued to gather momentum.

One reason is responsible landlords are inadvertently caught by Local Authority licensing processes which were introduced by the Act with the intention of targeting rogue landlords of overcrowded, unsafe and poorly maintained HMOs.

Another is the application of licensing requirements to large purpose-built or converted blocks makes them particularly attractive for unregulated claims management companies to make multiple Tribunal applications and obtain a substantial share of the RRO awards.

What private sector residential landlords need to know

In our earlier article, we set out the approach [1] a Tribunal is required to adopt when determining the amount of any RRO.

A very recent case, Shah v McLaughlin [2], confirmed that approach and also highlighted the following key points:

• Tribunals have significant latitude when assessing the quantum of RROs because, unlike other ‘damages’ assessments under English law, they are not based on compensation for loss. By contrast, the premise for a RRO award is punitive, as the intention is to act as a deterrent to errant landlords. In the Shah case, the First-tier Tribunal (FtT) considered the conduct of the parties, including the fact there had been a series of complaints about blocked toilets, overflowing drains, fire alarms not functioning and failure to supply gas and electricity statements. It made a RRO at 70%.
• A narrow approach might well be adopted by the Upper Tribunal (UT) in the event of an appeal. In Shah, the UT rejected the landlord’s appeal, commenting that the FtT had formed its view having heard all the evidence (which the UT could not do as part of its conduct of the appeal process).
• The Act allows a Tribunal to make a RRO against the true landlord. In Shah, the landlord attempted to argue that the FtT had been wrong to make an RRO against him because rent had been paid to a company. The FtT considered: the names entered on the tenancy agreement documentation; the entity to which rent was paid; and the actual ownership of that entity. It concluded that Mr Shah was the true landlord. The UT added that an appellant has a heavy burden to discharge when challenging a FtT’s considered conclusion as to the true identity of a landlord.
• A landlord may be able to defend a licensing offence if it can establish that there was a reasonable excuse for its failure to obtain the requisite HMO licence. In every case, this will be a question of fact and will ultimately turn on the evidence presented.

Rent repayment orders: How we can support you

Walker Morris’ Housing Management & Litigation specialists in this area and regularly represent landlords faced with RRO claims and Tribunal applications. Our extensive experience, in both the FT and the UT, means we can assist clients in responding to these challenges and obtain the best outcomes.

For tailored, expert advice, whether from a compliance/risk management or dispute resolution perspective, please contact Karl Anders or Jordon Kellett.