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Landlord Guide: The new Rent Repayment Order rules

female lawyer writing next to a mallet in court for rent repayment order

This blog post explains Rent Repayment Orders, and how new provisions in the Renters Reform Bill will strengthen sanctions against criminal landlords, as well as superior landlords in rent-to-rent and other subletting arrangements.

What is a Rent Repayment Order (RRO)?

Currently, tenants and local authorities can make an application to the First-tier Tribunal for a Rent Repayment Order (RRO) if the immediate landlord commits at least one of seven offences. If the application is successful, the tribunal will order the landlord to repay a specified amount of rent.

The landlord will need to repay the rent, even if the offence was committed due to the negligence or breach by the letting agent. Also, the tribunal cannot make a RRO against a letting agent. This is an important example of why the buck always stops with landlords, who need to supervise their letting agents. It’s also an example of why rental income is not passive income.

RROs were originally introduced by the Housing Act 2004, and the regime was extended by Chapter 4 of Part 2 of the Housing and Planning Act 2016.

What are the purposes of Rent Repayment Orders?

According to government guidance, RROs have four purposes:

  • Punishment: RROs are intended to have “a real economic impact on the offender and demonstrate the consequences of not complying with their responsibilities”.
  • Deter repeat offences: RROs should deter the landlord from repeating the offence by setting the penalty at a sufficiently high amount.
  • Deter others from committing similar offences: RROs are made public in order to deter others.
  • Remove financial benefit to the landlord: As the landlord is forced to repay rent to the tenant, they will lose most if not all of the financial gain from their breach of the law.

What are the existing laws regarding Rent Repayment Orders?

Under Housing and Planning Act 2016, if the tenant or local authority proves beyond reasonable doubt that a landlord is guilty of one of 7 offences, the landlord may have to repay rent. The amount is capped at the lower of 12 months’ rent, or the money paid by the person who makes the application.

Following the Supreme Court ruling in Rakusen v Jepsen, a Rent Repayment Order can only be made against the immediate landlord, and not the superior landlord. As a result, if the owner of a house or flat (a superior landlord) leases a property to someone on a rent-to-rent basis (called a rent-to-renter) who then rents it to tenants, a RRO can only be made against the immediate landlord (the rent-to-renter) and not the superior landlord. This means that the superior landlord will not be liable for an RRO if the rent-to-renter operates the property as an unlicensed HMO.

>> Related Post: Landlord guide to rent to rent

Rakusen v Jepsen judgment from Supreme Court on ipad about rent to rent and rent repayment orders
The Supreme Court in Rakusen v Jepsen held that the superior landlord is not liable to pay RROs

Which 7 offences do Rent Repayment Orders currently apply to?

Here is the list of 7 offences where landlords may have Rent Repayment Orders imposed by the First-tier Tribunal under the Housing and Planning Act 2016.

Current offences that may lead to a Rent Repayment Order

How will Renters Reform Bill change Rent Repayment Orders?

Which new offences does the Renters Reform Bill add to the Rent Repayment Orders regime?

The Renters Reform Bill proposes adding the following three new offences to the list in Housing and Planning Act 2016:

New offences listed in the Renters Reform Bill that may lead to a Rent Repayment Order

How does the Renters Reform Bill change the cap on Rent Repayment Orders?

The Renters Reform Bill amends Sections 44 and 45 Housing and Planning Act 2016 to increase the maximum amount that a landlord may have to repay to a tenant or local authority from 12 months’ rent to 2 years’ rent.

This is in addition to any other penalty that the local authority or court levies on the landlord.

How s78 Renters Reform Bill changes Rent Repayment Orders for Rent to Rent and other subletting

Section 78(2)(1) of the Renters Reform Bill amends Chapter 4 of the Housing and Planning Act 2016 to enable the First-tier Tribunal to make an RRO against both the immediate landlord (the rent to renter or subletter) and/or any “superior” landlord.

The explanatory notes to the amendments refer to Jepsen v Rakusen, and says that the new wording will allow RROs to be made against superior landlords.

Under section 78(6), the First-tier Tribunal will also have the power to apportion liability between the immediate and superior landlord for the amount due under the RRO, or hold them jointly and severally liable.

As a result, tenants will be able to apply for a Rent Repayment Order to be made against both the immediate landlord or the superior landlord, once the Renters Reform Bill comes into effect. The tribunal can decide whether the immediate landlord or the superior should be liable for the whole rent repayment order, or whether it should be apportioned between the two as they think fit. As the landlords can be held jointly and severally liable, if (say) the immediate landlord is insolvent, the rent repayment order could be enforced against the superior landlord, if the tribunal so decides.

The superior landlord is also responsible for other breaches under the Renters Reform Bill, for instance, the new provisions prohibiting discrimination against families and persons who receive benefits.

Consequently, anyone who enters a lease agreement with a rent-to-renter or allows a tenant to sublet the property will need to monitor their activities, especially if the property may need an HMO licence. Rent-to-rent will not be a route to passive income for property investors, as the investor will remain liable for breaches by the rent-to-renter.

>> Related Post: A Landlord’s Guide to Rent-to-Rent

>> Related Post: Renters Reform Bill timetable: What happens when

how the renters reform bill will change rent repayment orders with female judge writing

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