Court finds in landlord's favour in landmark right to rent ruling

The Supreme Court has delivered a landmark ruling – that where rent-to-rent companies take over the running of a property, they cannot pass their legal liabilities onto the landlord.

Proceedings in the Rakusen v Jepson case centred around an argument over who was responsible for the licensing of a London flat rented out via a rent-to-rent arrangement, the landlord who owned it or the rent-to-rent company managing the let?

The judges’ decision that the landlord should not be held responsible in this instance has been welcomed by the NRLA, which intervened and gave evidence in the case. The association said the decision will give much needed clarity for landlords and will set a precedent for future cases.

The background

Rent-to-rent companies let properties from landlords on the basis they have permission to sublet them, taking on all management responsibilities in the process. This often involves splitting single-lets into multiple units to maximise profits.

Rent from the tenants who live there is then paid to the rent-to-rent firm.

The facts of the case - and subsequent appeals - centred around a landlord, Mr Rakusen, who agreed to let a flat to a rent-to-rent company.

It this instance once sub-let and split into units the rental property required a HMO licence. However no licence was applied for.

As a result of this the former tenants sought a Rent Repayment Order against Mr Rakusen, as the property owner and ‘superior landlord’, who they said was running an unlicensed HMO.

An initial tribunal ruled that the Rent Repayment Order could be applied for against Mr Rakusen.

The Court of Appeal however later overturned the decision and ruled in Mr Rakusen’s favour.

Today, the Supreme Court upheld this decision – and said that where rent-to-rent companies take over the running of a property, they cannot shirk responsibility and expect the landlord to pay for their legal failings.

It made the judgement on the basis of wording in the Housing and Planning Act 2016, that a Rent Repayment Order cannot be made against a superior landlord, and can only be made against the immediate landlord of the tenancy that generates the relevant rent – in this case the rent-to-rent firm.

What does the NRLA think?

Ben Beadle, Chief Executive of the National Residential Landlords Association believes the decision was an important one. He said: “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.”

More information

You can find out more about the debates around rent-to-rent in the latest episode NRLA podcast Listen Up Landlords here.