There are various reasons that a tenant or a group of tenants may want to pursue a rent repayment order (RRO). One of the more common complaints leading to an RRO is where a landlord is renting out an unlicensed House in Multiple Occupation (HMO), but claims can also be made for the following offences:
- Breaches of improvement orders and prohibition notices and of licensing requirements under the Housing Act 2004.
- Violent entry under the Criminal Law Act 1977.
- Unlawful eviction under the Protection from Eviction Act 1977.
- Breach of Banning Orders.
The central target of an RRO is usually the direct landlord of the disgruntled tenants, as they are the ones who have taken the money from them which they wish to claim back. This blog will look into a case in which the appellants pursued an RRO from a director of a commercial landlord company, who himself was not the actual landlord but rather a figurehead of the wider firm. Looking into this interesting case helps us delve further into the nature of HMO’s and learn a valuable lesson on how to increase the chance of such orders being successful.
Let’s look at the case: Kaszowska & Ors v White
A group of ten appellants previously lived in Croydon, in a building that used to be a children’s home. They occupied this building under agreements with Camelot Guardian Management Ltd. Camelot had agreed to provide property guardianship services to the owner of the building, the local authority (LBC), whereby an agreement had been reached regarding tenancy of the building.
While the ten appellants lived in this property, it was technically a HMO, yet it did not have the required HMO license. Camelot was informed by LBC that no such license was required.
Camelot went into voluntary liquidation in 2019, with its same directors opening a new landlord business called Watchtower. It was not until June 2020 that the appellants pursued a RRO against Mr White, a previous director of Camelot, for reasons of running a HMO with no license.
They felt that their case should be fought on two fronts. The first being that whether an offence had been committed by the company Camelot; and secondly, if this was confirmed, it should be considered whether that offence had been committed with the consent of a director, or as a result of the directors negligent behaviour.
Their RRO was not issued, as the First Tier Tribunal clarified that Mr White was not actually the direct landlord, and so cannot pay an RRO, which meant that it had no jurisdiction onver this issue. Furthermore, the fact that Camelot was given incorrect information by LBC regarding the need for a HMO license also left the landlord group in a favourable position, despite the tribunal agreeing with the appellants that a valid HMO licence should have been in place initially.
The case was appealed and taken to the Upper Tribunal, where the following decisions were made:
In its judgment, the Upper Tribunal referred to the case Rakusen v Jepson. In this case it was decided that an RRO could only be made against the immediate landlord of the tenant who had made the application and to whom the rent was paid directly, and therefore it could aptly be applied to Kaszowska & Ors v White.
With this decision in mind, and looking at the facts of the current case, the UT decided that:
1) RROs could only be made against the immediate landlord, not a director of a commercial landlord firm (if that director did not themselves take the rental payments). This is in line with Section 40(2) of the Housing and Planning Act 2016.
2) Repayment by someone who was not the landlord who had actually received the rent from the appellants could not reasonably be contemplated.
Subsequently, the Appellant tenants’ application for an RRO against the Respondent director was dismissed.
Our thoughts
This case demonstrates that in a situation such as this, the most likely way an appellant can claim money back will be to sue the company as opposed to going after one specific director. If the company is struck off, it would be appropriate to apply for it to be re-instated and then sue it. If the company is in financial difficulty, an alternative route would be to apply for it to be liquidated. A director’s conduct will then be under the liquidator’s scrutiny in such circumstances.
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