The Supreme Court has delivered a landmark ruling in the Rakusen vs Jepsen case, which means that a ‘superior landlord’ is not liable for a rent repayment order (RRO).
The case will have far-reaching consequences for rent-to-rent companies as they may now be liable for any RRO. RROs of up to 12 months’ rent can be granted by a Tribunal to tenants if a landlord or agent fails to licence a property.
In the case, the landlord, Mr Rakusen, agreed to let a property to a rent-to-rent company called Kensington Property Investment Group Ltd (KPIG). KPIG entered into separate agreements with three tenants, and each tenant was granted a right to occupy one room in the property. Under this arrangement the property required an HMO licence, but the company did not apply for one.
As the property was not correctly licenced, the former tenants claimed a RRO against Mr Rakusen rather than the rent-to-rent company – even though as superior landlord he had not received rent directly from the tenants.
At an initial tribunal it was ruled that the Rent Repayment Order could be applied against Rakusen. The Court of Appeal however later overturned the decision.
Now the Supreme Court has ruled that rent-to-rent companies that take over the running of a property, cannot avoid responsibility and leave the landlord to pay for their legal non-compliance.
NRLA chief executive Ben Beadle says: “This case has never been about whether legal obligations should be met, but about who should be responsible for them in rent-to-rent cases.”
“We therefore welcome today’s ruling which accepted many of the arguments made by the NRLA and provides important clarity for landlords and tenants alike.”
“The ruling makes clear that it is the responsibility of rent-to-rent companies acting as a landlord to ensure that relevant legal requirements are met, since it is they who receive tenants’ rent. It is simply not right that such companies can take money from people without any responsibility for the property they are running.”