Rent Repayment Order History
Rent Repayment Orders (RROs) were essentially a bit of an afterthought in the bill leading up to the Housing Act of 2004. The 2004 Act made the letting of Houses of Multiple Occupation illegal without a licence. However, rather late in the bill, it was realised that if the letting of an unlicensed HMO were illegal then tenants of such properties could argue that their contracts were illegal and withold their rent...
In order to avoid this potentially chaotic situation, the RRO was invented as a classic British compromise: the 2004 Act specifies that tenants' contracts of unlicensed HMOs must continue to operate and that tenants must continue to pay rent...but they could have the chance to re-claim their rent if the landlord was successfully prosecuted by the Local Authority (LA) for operating an HMO without a licence.
Of course, in practice, not many tenants could Get their Rent Back as not many landlords were prosecuted by the LA's. The 2004 Act did not allow direct claims by the tenants without a prior conviction of the landlord.
The Housing and Planning Act (2016) tried to get tough on 'rogue landlords' and recognised some of the shortcomings of the 2004 Act. For example, LAs have generally not prosecuted many landlords for operating unlicensed HMOs: on average 1 per year!
In effect, the 2016 Act hands over some of the policing of the legislation to the tenants: by allowing tenants to initiate a claim against a landlord without having to wait for the LA to act first.
The 2016 Act also brings in other landlord offences for which a RRO may be claimed: violent entry, harassment, failure to comply with improvement or prohibition notices and a breach of a banning order.
So the RRO has become much more under the 2016 Act than it was under the 2004 Act. It is more of a punishment of the landlord than just a repayment of rent.
This has important implications for the judgment of RRO cases. So far, as far as we are aware, there haven't been any Upper Tribunal decisions (so decisions on cases that have gone to appeal) on RRO applications made under the 2016 Act. So there is little guidance out there for judges sitting in the First-tier Tribunals as to how much rent should be repaid. It seems that they have mostly been following guidance from appeal decisions made under the 2004 Act. See our discussion of this here.
We strongly believe this is wrong.
We believe that 100% of rent should be repaid under the 2016 Act and that landlords should not be allowed to make deductions from that rent for ancilliary costs such as mortgage payments, utilities etc.
Previously these were allowed due to the wording of the 2004 Act and subsequent appeal decisions based substantially on this wording. Specifically, in the appeal case Parker v Waller (2012), the judgment relied heavily on the wording in Section 74(5) which provides that the amount to be paid to an occupier by virtue of such an order (ie a RRO) is to be "such amount as the tribunal considers reasonable in the circumstances".
The 2016 Act makes no mention of such a test of "reasonableness" and so current reliance on guidance from the 2004 Act appeals is likely erroneous.
We have seen in recent hearings at First-tier Property Tribunals, in what immense detail, landlords' expenses are sometimes considered in RRO cases under the 2016 Act. This consideration is a waste of expensive judicial time: an unlicensed landlord is a ROGUE landlord and should be punished. Not rewarded for having his tenants pay his mortgage while he gets the capital appreciation; not rewarded for his tenants keeping the house warm and aired by deducting utility bills from their RRO; not rewarded for allowing capital expenses against the RRO on the illegally let property!
Flat Justice is looking for a test case to help set the guidance for the new legislation....volunteers?