One of the most pernicious renting problems over the last 10 years has been the rise of the rent to rent scam which accounts for the Lion’s share of Safer Renting’s day to day casework.
This notion that is sweeping the private rented sector, in the feeding frenzy over rental income with so many ‘Property Gurus’ running weekend workshops in hotels or online training programmes extolling the virtues of “How to make money from property without owning property”. The very notion sounding too good to be true and in many cases it is.
In the past few weeks Rent to Rent guru John Ormandy has pleaded guilty to 11 counts of fraud (sentencing 20th May- mark your calendar) and Ben Brand, who landlord webservice Property Tribes referred to as “Rent to rent poster boy” has gone bankrupt owing £1.5 million. Both of these jokers running their ‘get rich quick without owning property’ bullshit.
Rent to rent isn’t illegal and is actually very common and been around probably as long as renting but the “Scam” element comes in where aliases and chain of companies performing different management services come in, leaving tenant and local authority enforcement services of all stripes, unable to wade through the plethora of identities to find the correct person or company to seek redress against.
The shiny new toy in tenant redress is (or are) Rent Repayment Orders. Not exactly new but with a much easier route since 2018. RROs allow a renter to apply to the first tier tribunal for repayment of a year’s worth of rent in a range of circumstances.
RROs work really well where the tenant is Mr Smith, the landlord Mr Jones AND Mr Jones is actually his real name AND you know where he lives AND he owns the subject property but in the world created by the R2R Guru/poster boy idiots such matters are like trying to pin the tail on a Hummingbird.
The mistake non housing people make is in presuming that a “Landlord” is always the owner of the property. Remember the wheels of the rent to rent business model turn on making money from property you don’t own.
Trouble is, in legal redress terms you have to have a person or company from whom you can actually gain redress. What happens when you cant identity that person or company to the court’s satisfaction? And what happens if you do manage to identify them, said person or company is legally no more substantial that candy floss in a force 8 gale?
Rent to Rent scamming ladies and gents.
When applying for an RRO you have to have a named respondent(s) There have been legal wobbles over the last few years over the wording in RRO legislation, principally whether the respondent could be “A landlord”, allowing the claimant to cast their net wider, or only “The immediate landlord”, which narrows the field considerably.
The case of Rakusen v. Jepson went through the tribunal in 2020 on this point, where the tenants were successfully awarded an RRO with the wider notion of “A landlord” being the required respondent. The named respondents appealed to the Upper Tribunal, who upheld the first tier tribunal’s decision that an RRO could be made against “A landlord”, who didn’t have to be the tenant’s immediate landlord. Judge Cooke in the upper tribunal very astutely commenting:-
“if only the immediate landlord may be the subject of an order, the grant of a short-term tenancy to an insubstantial intermediary through which the premises would then be sublet would remain a route for avoidance of the enforcement of rent repayment orders. A company with no assets other than a short-term lease, which may be not much longer than that granted to the occupational sub-tenants, is not likely to be a promising target for enforcement of a substantial rent repayment order”.
That is exactly how the rent to rent scam market operates but the case was then appealed to the court of Appeal in Late July 2021, with Safer Renting intervening with a statement further explaining to the CA how fraudulent operators ply their trade and why upholding the appeal would open the flood gates for more scammers evading penalties.
Despite this the court of appeal went with the argument and now, an RRO can only be made against the renter’s “Immediate landlord”, even if that person or company are, as Judge Cooke commented, “not likely to be a promising target for enforcement of a substantial rent repayment order”.”
It is Safer Renting’s business model to only really deal with the worst landlords and agents out there. When it comes to RROs we are consistently presented with these sorts of respondents. People who are a poor choice from the off. We generally don’t get Mr Smith v. Mr Jones referred to us.
As a clear case in point, I have just gone through Safer Renting’s excel spreadsheet of RROs and identified that in the past couple of years we have won RROs for our client’s to the tune of £124,851 but actually received just £5,335, from one landlord and we had to go all the way to freeze her bank account just to get that.
This is the true day to day cost of only being allowed to pursue an RRO against the immediate landlord in rent to rent scam situations, which as I said earlier, make up the most common business model in the shadow private rented sector. These companies either don’t really exist in the first place or if they are pinned by an award, simply dissolve without paying, hiding behind limited liability status.
The Court of Appeal in July refused permission to appeal, so a request was put in to the Supreme Court for an appeal there. We heard yesterday that they had approved it, so now we move forward with a further challenge to protect renters from criminal operators and try to make RROs a more reliable form of redress.
If the decision isn’t favourable then you might as well just rule out RROs as a source of redress for the most desperate tenants in the poorest properties living under the worst landlords and agents. Having “A landlord” as the sole named respondent is effectively akin to opening the door to the getaway car, whilst saluting smartly.
Right now we are really optimistic and pleased that the Supreme Court consider this tiny yet crucial legal point to be important enough to grant permission for a further appeal. Probably late this year or early next.
By Ben Reeve Lewis
