It’s difficult to emphasise how important this appeal decision is for Rent Repayment Order (RRO) applications: https://www.bailii.org/cgi-bin/format.cgi?doc=/uk/cases/UKUT/LC/2019/311.html
Many Applicants are confused about who should be the Respondent (R), as tenancy agreements (if available) often don’t have the landlord details or the agreement names the agency as the landlord or, often, it is simply ambiguous who the landlord is.
This is especially the case for Rent-to-Rent (R2R) situations, where an agent has made an agreement with a property owner to pay them a guaranteed rent in return for the agency being able to assign tenancies directly in the property. Usually, the agency makes some kind of tenancy agreement with the owner so that they can have a claim to be the landlord. There are then two landlords: the owner and the agency.
Normally, we advise Applicants to target the property owner as the R: we know of several cases where agencies have liquidated their Ltd. company after a RRO award, so frustrating justice. Applicants who have paid £300 in fees, gone through months of evidence preparation, have run the gauntlet of the hearing and come out the other side with an award, are left with nothing. In the meantime, a new R2R company has been formed and the agency carries on with impunity.
Sometimes the R2R agency, however, may be the more legitimate R, depending on the circumstances. For example, they may have a genuine commercial lease with real responsibilities for the property.
Up to now, the Tribunal assessed the choice of R on application and could direct that a different R be assigned. Often this has been based on simply who is named as the “landlord” in any tenancy agreement. This is what happened in this case and it was this decision, at this stage of the process, which we challenged. This led to a preliminary hearing in May this year to decide who the R should be. The Decision of this preliminary hearing (to maintain the Tribunal’s choice) was the subject of our appeal.
The Housing and Planning Act 2016 (HaPA), under which RRO applications are now brought, does not define who can be prosecuted for a RRO any further than the word “landlord”.
The elegant and imaginative aspect of the UT decision in this appeal is that it accepts the use of the term landlord, does not define it but simply allows the A to decide who their real landlord is and who the R should be. Any arguments regarding whether the chosen R is the “appropriate person” are then left to be made at the hearing in First-tier Tribunal (FtT). Of course, the A needs to choose their R carefully to ensure that they can make the case that they are the most “appropriate person” according to the Housing Act 2004 (HA) s73(10).
This UT decision effectively deprives the FtT of the power to intervene in the choice of “landlord” by the A at the application stage and, in so doing, drives a coach and horses through the R2R scheme shams that attempt to protect the real landlord from RRO legislation.
For the FtT, the decision may well be welcome: it relieves them of the need to decide who is the “appropriate person” to be a R before any hearing and will remove the need for preliminary Case Management Conferences in many cases.
We will be writing soon to the FtT to ensure that procedural judges are made aware of this judgment and that As be allowed to decide who is the landlord for their application. We will also be updating our website with a guide for As to help them decide who is the Respondent landlord.
This is fantastic work! Congratulations to the Applicants at FLat Justice for your tremendous work here.
The reality of the situation for many tenants renting a room is exactly as you have said in your appeal. That situation is a property owner who knows the property will be sublet but believes they are immune from prosecution or other action because they’ve signed an agreement with the Rent2Rent company and their name will not appear on any tenancy agreements.
This is indeed an extremely important decision in the battle for justice for tenants who are victims of Rent2Rent phoenix agencies. By taking action against the enablers of the R2R companies unlawful activities it can break the business model and squeeze the supply of properties for these R2R companies.
The alternative is, as you have said, lots of work for a decision that is in theory worth a large amount of money, but because it’s against a dodgy Rent2Rent company, is actually a worthless piece of paper.
I always make the argument that the property owners can seek redress against the R2R company if they believe the R2R company are responsible for an RRO occurring against them. The beneficial owners can spend money litigating against a company that simply will never pay the debts it owes rather than the sub-tenants who have the least money and have been victimised the most.
This causes problems for Landlords who have let properties on AST’s say for 12 months and their tenant has without permission or the knowledge of the landlord, gone ahead and sublet.
Could the landlord be subject to an RRO under these circumstances? That seems mad.
If the Applicant for a RRO cannot show that the head landlord had any knowledge of the Applicants occupancy then he/she will have a reasonable excuse and the RRO application will likely fail. Nothing mad there.
With new power comes new responsibility: Applicants must be sure that the Respondent/s they select:
1. Do not have a reasonable excuse, i.e. were fully aware
2. Are persons that could be reasonably assumed to be the holders of the licence for the property (in a licensing offence). A tenant with an AST that then sublets could not hold a HMO licence: they do not exercise sufficient control of the property
In circumstances where AST granted and tenant sublets without permission, who could the applicant (sub-tenants) then bring the application against?.
Based on your comment above, if the tenant cannot hold a HMO licence on the basis that he does not exercise sufficient control of the property AND the owner who granted the AST in the first instance had no idea his property had been sublet, has the applicant struck a dead end?
In RRO terms this would not be a case with good prospects of success. Fortunately, the mid-lease holder is often more than forthcoming in supplying sufficient evidence to show that the owner was aware. Best to name both R2R and owner as Respondents as they have both had at least some of the rent applied for and both knew the occupancy in such a case, so both complicit
Freehold Owner (who lives 4 hour drive away) had no clue his property had been sublet. Only came into his attention when the LA wrote to him recently. He’s been hoodwinked and has ended up facing an application for an RRO. No evidence whatsoever that he had any knowledge.
Thank you for your replies.