Under the version of the Housing and Planning Act 2016 before the Court, could occupiers recover rent from a superior landlord who had not granted their tenancies? The Supreme Court held that the power to make a rent repayment order applied only to the landlord under the tenancy in question.
Rent repayment orders allow the First-tier Tribunal to require a landlord who has committed specified housing offences to repay rent paid by a tenant, or to pay a local housing authority a sum in respect of universal credit awarded for rent. They began under the Housing Act 2004 for unlicensed houses in multiple occupation. In England they are now governed by Chapter 4 of Part 2 of the Housing and Planning Act 2016, which covers a wider list of offences. This appeal asked whether the 2016 Act, unlike the 2004 Act, also allows an order against a superior landlord.
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Mr Rakusen let the property to a company which could sublet rooms. The company then granted the occupiers licences to live there. Under the Act a licence counted as a tenancy. The occupiers paid the company; the company paid rent under its own tenancy to Mr Rakusen.
The occupiers sought orders totalling £26,140, alleging that the house in multiple occupation had been operated without the necessary licence. The question came before the courts on an application to strike out the claim. Neither the commission of an offence nor the existence of a reasonable excuse had been finally determined.
The Upper Tribunal dismissed Mr Rakusen’s appeal. Martin Rodger QC thought that section 40(2)(a) at first suggested a direct landlord and tenant relationship, but held that this impression yielded to the risk that a short tenancy to an insubstantial company could be used to avoid the sanction. The Court of Appeal, Arnold, Andrews and Baker LJJ, allowed his appeal and restored that first impression.
The landlord under the tenancy
Lord Briggs and Lord Burrows, with whom Lord Lloyd-Jones, Lord Kitchin and Lord Richards agreed, treated the case as a short question of interpretation. Section 40(2) defines a rent repayment order as an order requiring “the landlord under a tenancy of housing in England” to repay rent paid by a tenant, or to pay a local housing authority a sum in respect of universal credit paid in respect of rent under the tenancy.
The words “landlord under a tenancy” pointed to the person who had granted that particular tenancy. If X lets to Y and Y sublets to Z, Y is the landlord under Z’s tenancy. The rent generated by that tenancy is paid by Z to Y. Reading the provision as an order for Y to repay that rent gave both “under a tenancy” and “repay” their ordinary meaning.
Why the wider arguments failed
The wider context supported, or at least fitted, that reading. Under the 2004 Act an order lay only against the “appropriate person”, the person entitled to receive the payments on his own account. It was common ground that this was the immediate landlord. The 2016 Act extended the offences, let tenants apply directly, and removed the need for a prior conviction if the Tribunal was satisfied beyond reasonable doubt that the offence had been committed. Neither the Act nor the consultation materials suggested that these changes also extended orders to superior landlords. The Government’s response referred to tenants applying where they had paid rent to the landlord.
The Court accepted that the orders are meant to sanction rogue landlords and encourage compliance or departure from the market, and that a superior landlord may commit the relevant offences. Even so, the statutory words do not reach superior landlords. Most of the offences can also be committed by property agents, against whom no such order can be made. The coherent policy is to target the person who directly receives the rent or associated universal credit.
The tenants, supported by Safer Renting, argued that the narrower reading is easy to avoid by letting to a company with few assets which then sub-lets. The Court recognised that its interpretation makes the orders less effective than they might be. Other sanctions remain, including prosecution, a financial penalty of up to £30,000, a banning order, the rogue-landlord database, and a possible risk of wrongful-trading liability for directors of a straw company. Extending the orders would undermine section 40(2) and would be for Parliament.
The wider reading would also create practical problems. Subtenants might claim more from a superior landlord than it had ever received. In a longer chain it would be unclear whose receipts determined the maximum repayment. Those difficulties supported the reading indicated by the statutory wording.
A point not decided
Counsel for Mr Rakusen argued that the relevant tenancy must always be the lowest, occupying tenancy, so that an intermediate tenant who had sub-let could not obtain an order even against its own immediate landlord. Nothing turned on that argument, and the Court had not heard full submissions on every possible arrangement, so it left the point open.
Verdict: The Supreme Court unanimously dismissed the occupiers’ appeal. On the legislation at issue, an order could not be made against Mr Rakusen as their superior landlord. The Court left open whether only the tenancy under which an applicant occupies the property can qualify. It did not decide whether an offence had been committed.
