Rakusen v Jepsen & Ors [2023] UKSC 9

Tenants in an unlicensed HMO sought a Rent Repayment Order against the superior landlord rather than their immediate landlord. The Supreme Court held that RROs under the Housing and Planning Act 2016 can only be made against the immediate landlord under the tenancy generating the relevant rent, not superior landlords.

Facts

The respondent, Martin Rakusen, was the superior landlord of Flat 9, Mandeville Court, London. In 2016, he granted a tenancy to Kensington Property Investment Group Ltd (KPIG), which then sub-let individual rooms to the appellants (Jepsen, Murphy and McArthur) under licence agreements. The flat constituted a House in Multiple Occupation (HMO) requiring licensing under the Housing Act 2004, but no licence was ever granted.

The appellants applied to the First-tier Tribunal for Rent Repayment Orders (RROs) under section 41 of the Housing and Planning Act 2016 against Mr Rakusen as the superior landlord, on grounds of control or management of an unlicensed HMO.

Issues

The central issue was whether, under the Housing and Planning Act 2016, an RRO can be made against a superior landlord (one higher in the chain of tenancies) or only against the immediate landlord of the tenant who paid the rent.

Judgment

The Supreme Court unanimously dismissed the appeal, holding that RROs can only be made against the immediate landlord under the tenancy which generates the relevant rent, not against superior landlords.

Statutory Interpretation

Lord Briggs and Lord Burrows delivered the joint judgment, focusing on the interpretation of section 40(2) of the 2016 Act:

The opening words of section 40(2)… identify as a person against whom an RRO can be made ‘the landlord under a tenancy of housing in England’. A tenancy of housing consists of the grant by one person… to another person… of the right to occupy residential accommodation…

The Court found that the natural meaning of ‘landlord under a tenancy’ refers to the grantor under that specific tenancy, not superior landlords in the chain:

Y is the landlord under the sub-tenancy to Z. X is the superior landlord in respect of the sub-tenancy to Z but X is not the landlord under that sub-tenancy.

Supporting Factors

The Court examined additional interpretative factors including:

• The previous law under the Housing Act 2004 only permitted RROs against immediate landlords
• The purpose of RROs is directed at those who directly benefit from rent payments
• Practical complexities that would arise from extending RROs to superior landlords in chains of tenancies
• Pre-legislative materials showed no intention to extend RROs to superior landlords
• The principle against doubtful penalisation

Implications

This decision clarifies that tenants seeking RROs must pursue their immediate landlord rather than any superior landlord in the chain. While acknowledging this may create opportunities for avoidance through ‘rent-to-rent’ schemes, the Court noted that other sanctions remain available against rogue landlords, including criminal prosecution, civil penalties, and banning orders. Any reform to extend RROs to superior landlords would require Parliamentary action.

Verdict: Appeal dismissed. A Rent Repayment Order under the Housing and Planning Act 2016 cannot be made against a superior landlord; it can only be made against the immediate landlord under the tenancy which generates the relevant rent.

Source: Rakusen v Jepsen & Ors [2023] UKSC 9