In this post, Luke Arnold, Associate in the Real Estate team at CMS, previews the case of Rakusen v Jepson and Ors, which is due to be heard by the UK Supreme Court on 26 January 2023.

Factual Background

The respondent in this appeal, Mr Rakusen, is the leasehold owner of a flat in North London. In 2016, he granted a tenancy of the flat to Kensington Property Investment Group (“Kensington”) which permitted the subletting of individual rooms in the flat. Kensington later entered into separate agreements with the Appellants (Jepson and Ors) granting them each possession of one room.

Both parties accept that by November 2018 the flat was occupied by more than three people forming two or more households and, therefore, constituted a house in multiple occupation which required a licence under the Housing Act 2004. However, neither the respondent nor Kensington applied for a licence in breach of this Act.

The Housing and Planning Act 2016, s 40(1) (“the 2016 Act”) confers power on the First-tier Tribunal to make a rent repayment order (“RRO”) where a landlord has committed specific housing offences, which include the “control or management of unlicenced HMO”. The 2016 Act does not however define ‘landlord’, which leaves some ambiguity as to whether a tenant can only apply for a RRO against its immediate landlord or, alternatively, against a superior landlord which may be a more financially viable target.

Appellate History

In September 2019 the Appellants applied to the First-tier Tribunal (Property Chamber) under s 41 of the 2016 Act for a RRO totalling £26,140 against the Respondent and his partner, who is a joint leasehold owner of the flat. As detailed above, the Respondent is the Appellants’ superior landlord.

The respondent and his partner invited the First-tier Tribunal to strike out the whole of the application on the basis that a RRO could only be made against Kensington, i.e. the Appellants’ immediate landlord, and therefore there was no reasonable prospect of the application succeeding.

While the Tribunal agreed to strike out the claim against the Respondent’s partner (on the basis she was not a named party to the tenancy agreement with Kensington), it refused to do so against the Respondent. It considered it was bound by the earlier decision of the Upper Tribunal in Goldsbrough v CA Property Management Ltd [2019] UKUT 311 (LC) in which it was held that a RRO could be made against a superior landlord. It considered that the Respondent was ‘a’ landlord of the flat, even if he was not ‘the’ landlord of the Appellants and therefore was subject to s 41 of the 2016 Act.

The Respondent appealed to the Upper Tribunal (Lands Chamber) ([2020] UKUT 298 (LC)) which analysed the construction of the 2016 Act and upheld both Goldsbrough and the first instance decision. It concluded that the First-tier Tribunal has jurisdiction to make a RRO against any landlord who has committed a housing offence, including superior landlords.

The Respondent appealed to the Court of Appeal ([2021] EWCA Civ 1150) which allowed the appeal. The court disagreed with the statutory interpretation carried out by the Upper Tribunal and considered it departed from the natural meaning of the legislation, especially as the outcome would otherwise be that a superior landlord could be ordered to ‘repay’ tenants sums of money which they never received in the first place.

The Appellants now appeal to the Supreme Court.

Comment

The Supreme Court decision will have a significant impact on the scope and effectiveness of RROs and, by extension, a tenant’s ability to take action against landlords. This case is particularly timely as the increasing number of financially unsound ‘rent to rent’ companies has created difficulties for tenants and local authorities when trying to take legal action to recover unlawfully demanded rent. However, while the very purpose of the 2016 Act is to protect tenants, the Court of Appeal was keen to emphasise that the court must interpret the statute as it presently stands and should leave it to Parliament to further legislate if appropriate to combat the ‘significant social evil’ of rogue landlords.

Clarification on this issue will be eagerly awaited by tenants and, perhaps, with some trepidation by landlords. Either way, this decision is likely to have wide-reaching and significant consequences for landlords and tenants across the country.