Supreme Court to Consider Rent-to-Rent
Love it or loathe it, rent-to-rent remains as divisive as ever
Rent-to-rent divides opinion like few other issues in private renting. It is viewed by many as little more than a scam, or a shady business model used by those looking to make money out of letting without raising the capital needed to invest in property. And in some cases, I have to agree.
However, we shouldn’t be too quick to tar all rent-to-rent businesses with the same brush. There are many well run, transparent, and honest individuals and businesses who rent property in order to sub-let.
These enterprises take over the majority of management responsibility from landlords who prefer to be hands-off and can provide a steady income with a fraction of the hassle usually associated with running rental property.
Provided all parties understand their obligations and what sort of agreement they are entering into, a well-run rent to rent agreement can be beneficial to everyone.
However, all too often, the superior landlord may be surprised to find that the rent-to-rent company has failed to meet one or more of their legal responsibilities. In some cases, they may even be surprised to discover their tenant is subletting at all. In both cases, this failure on the part of the rent-to-rent company can be a source of great frustration for both tenants and landlords alike.
Of late, it has been the matter of responsibilities that has created so much concern for private landlords engaged with rent-to-rent companies. It is also the vexed issue of responsibility that has seen the NRLA become involved in one high profile case, currently being appealed to the Supreme Court.
Rent-to-rent before the Supreme Court
The NRLA has applied to intervene in the Rakusen v Jepsen Supreme Court appeal. This does not mean that we are directly supporting either litigant or have become party to the case. Rather that we believe that the outcome of the case may affect other landlords whose interests should be heard and whom we wish to represent.
The case itself is complicated, and those interested in understanding all of the minutiae may read the Appeal Court judgment here: https://www.judiciary.uk/wp-content/uploads/2021/07/Rakusen-v-Jepsen-judgment.pdf but in short:
- The landlord agreed to let their property to a rent-to-rent company
- The property was deemed licensable
- No licence was applied for
- The former tenants sought a rent repayment order (RRO) against the superior landlord (not the rent-to-rent company)
The Upper Tribunal held that a rent repayment order could be applied for against the superior landlord, however the Court of Appeal (above) found in the landlord’s favour.
Subsequently, permission has been granted for an appeal to the Supreme Court.
UPDATE: The date for the appeal hearing has been set for 26 January 2023 and a judgment is expected later that year.
Why all the confusion?
Ultimately, a property which required a licence was not licensed. That is not in dispute. The question resolves around whether ‘the landlord’ (i.e. the immediate landlord who receives the rent directly, manages the property and is named on the tenancy agreement) should be responsible for a rent repayment order. Or can ‘a landlord’ i.e. (a superior landlord, or any landlord in the chain) be held responsible.
The Housing and Planning Act 2016 specifies that an order can be made against ‘a landlord’. The Court of Appeal decision found that had parliament wished the legislation to act as a deterrent to superior landlords, it could have made “clear and express provision for it”, which it did not.
In our intervention we do not seek to defend bad practice or provide a route for rogue rent-to-rent operators to evade sanctions. We intend to make clear the potential implications for other superior landlords who may equally be victims of unscrupulous rent-to-rent firms.
If you have ever let property on a rent-to-rent basis we would love to hear from you.
Please take a few moments to complete this short survey about your experiences: https://www.nrla.org.uk/rent-to-rent-survey
Your insight will be invaluable in informing counsel and compiling our intervention to the Supreme Court.
