Last Thursday a court of appeal hearing went ahead in the case of Rakusen v. Jepson, over whether a Rent Repayment Order can be made against only the “Immediate landlord” in a contractual relationship, or more than one landlord in breach, particularly the Superior landlord, usually the property owner.
I will leave the hardcore legal explanations to the Nearly Legal blog but to very briefly explain the importance of this case. Prior to the decision in Goldsbrough v. CA Management Ltd , RROs were assessed on the wording in the Housing Act 2004, which allows the claimant to apply for an RRO only against “The landlord”, after Goldsbrough and including the Upper Tribunal decision in Rakusen mentioned above, RROs could be made against “A landlord”, which is how the wording appears in the Housing And Planning Act 2016.
This legal argument over just one, single word, “A” or “The” might look daft but the significance is tremendously important.
Many RROs are straightforward enough. The landlord is Mr Brown of 24 Denham Ave and the tenant is Mr Smith of 16 Willow St., but in shadow PRS, which is huge and is where the criminal rent to rent fraternity ply their trade, things are rarely so simple.
For starters, renters are often given no written contracts at all, so don’t always know exactly who their landlord is and are often further confused to find different companies performing different tasks, one agency to sign up the tenant, one they pay their rent to, another who is responsible for repairs. Plus the landlord of any sub tenants could merely be a tenant themselves and using an alias.
Last Friday I was asked to help an EHO untangle lines of responsibility between 4 separate rent to rent companies, all involved in running the same property.
Whilst you can trace the owner through land registry you have no idea what business arrangements they have with any of the intermediaries, so this is just the number one task ahead of anyone looking at the feasibility of doing a RRO in the first place.
Who the hell is the landlord? If you want to pickle your brain over what should be a simple enough subject, then Robin Stewart has written about the madness on the Anthony Gold blog here.
If you can get a clear picture of who the landlord, in legal terms, might actually be, then you at least have a suitable respondent to go against in the RRO but suppose that landlord is a limited company with no assets? Perhaps even formed as a “Shell company” to act as a bullet proof vest?
The tribunal might accept that this company is the suitable respondent but say you actually win the award of £30,000, perfectly possible in large HMOs, will the tenants ever see the money?
Of course not, because the insubstantial company will simply dissolve. Their limited liability status protecting them from ever having to pay out.
The NRLA would have you believe that these kinds of activities are the preserve of a few rotten apples but trust me, it isn’t. Deliberate fraudulent activities are commonplace and widespread. The Shadow PRS that we reported on last year is well embedded and an equally well established part of the PRS Landscape, where the loopholes and scams are well known and utilised.
Goldsbrough and Rakusen gave us a glimmer of hope that you could bypass dodgy dealers, stop crooks hiding behind limited liability status and take action against a superior landlord with a chance of success.
You have to bear in mind that about 80% of Safer Renting’s 200+ case load each year is taken up with rent to rent scams and in subsequent investigations it usually becomes evident that, despite protestations of innocence, the owner is in on the scam, although they are not named as the landlord, in fact I can recall only 3 cases in over 5 years where evidence was clear that the superior landlord was genuinely ignorant of the arrangements.
In last week’s court of appeal hearing A landlord or The landlord was the big question on the table. Safer Renting entered an intervention statement in the appeal, explaining to the court how this criminal market works and the dangers of upholding the appeal, supported by Giles Peaker of Anthony Gold Solicitors and Nearly Legal fame and Justin Bates, barrister from Landmark Chambers.
I am depressed to report that the Court of Appeal decided that the correct interpretation should be the immediate landlord, so no more multiple respondents and the crooks can now operate impervious to any sanction.
As predicted by the judge in the Upper Tribunal on the first Rakusen appeal, you just form a limited company for £12, name yourself as landlord and then if anyone gets you in the tribunal, fold up without paying. These shell companies don’t even have to evade detection or lie about it if caught out. They can afford to say “Yep, we’re in breach. We put our hands up, bang to rights guvnor” but never have to pay out a single penny.
I am angry and depressed about this in equal measure but having sat through the mind-numbingly tedious 3 hour hearing and listening to the various arguments and comments, it was clear that the real issue is in the wording of the primary legislation and it isn’t the role of the court of appeal to re-write the law, merely to interpret it in relation to the case before it.
The Court of Appeal even acknowledged the problem, whilst simultaneously acknowledging their limited role:-
“Safer Renting and the Respondents argue that the regime contained in Chapter 4 of the 2016 Act would rendered be less effective if Mr Rakusen’s interpretation of section 40(2)(a) were upheld, because of the prevalence of so called “rent-to-rent” arrangements under which a superior landlord grants a lease to a company that rents out the property as an HMO. Such companies may fail to comply with the applicable statutory conditions, but have no assets against which an RRO can be enforced. If this concern proves well-founded, then Parliament may be moved to amend section 40(2)(a), but we have to interpret the provision as it presently stands.”
The trouble is, lobbying parliament to amend a law is no easy task and takes forever. Look at the abolition of s21 for a typical case in point. Its getting on for two and a half years since government announced that they would do it but we haven’t even had a consultation study on it yet.
So we have the fabled RRO, the new kid on the block of social justice, that has essentially been neutered in the fight against rogue and criminal operators.
Not to put too fine a point on it, this decision allows the criminals to laugh all the way to the bank. The vast majority of RROs that are referred to Safer Renting will not be worth pursuing, given they take on average 27-30 hours, not including chasing awards through third party debt orders.
We have several in the pipeline with hearings coming up and we have to go back over them to see if they are worth carrying on with.
Being able to proceed only against “The immediate landlord” will mean that most cases wont get past our initial assessment stage. Only a fool would spend money and hours of their time chasing a financial award that they will never actually see realised.
RROs wont go away. They will still work in cases where there are no shenanigans, all parties are clearly identified and the respondent has assets enough to pay but in the criminal rent to rent scammer end of the market, where arguably the RRO is of the most use, the crooks have just been gifted immunity to continue exploiting renters as they wish.
It’s a sad day for tenant’s rights.
By Ben Reeve Lewis
