Introduction

The case of Rakusen v. Jepsen & Ors (Rev 1) ([2021] EWCA Civ 1150) addresses a pivotal issue in landlord-tenant law within England and Wales. The central question was whether a Rent Repayment Order (RRO) under Chapter 4 of Part 2 of the Housing and Planning Act 2016 can be imposed on a superior landlord—the ultimate owner of a property—not directly involved in the tenancy, or if it is restricted solely to the immediate landlord—the party directly leasing the property to the tenant.

The appellant, Mr. Martin Rakusen, sought to have the Respondents' claim for an RRO struck out, arguing that such an order could only be applied to immediate landlords. The Respondents contested this interpretation, asserting that superior landlords should also be subject to RROs. The First-tier Tribunal and the Upper Tribunal had previously upheld the stance that RROs could target both immediate and superior landlords. However, the Court of Appeal overturned this position, thereby setting a significant precedent.

Summary of the Judgment

The Court of Appeal, comprising Lord Justice Arnold, Lord Justice Andrews, and Lord Justice Baker, delivered a unanimous decision allowing Mr. Rakusen's appeal. The court held that Rent Repayment Orders can only be made against immediate landlords, not superior landlords. This interpretation was grounded in a thorough statutory analysis of the Housing and Planning Act 2016, emphasizing the language and intent of the relevant sections.

The judgment meticulously dissected the provisions of the Act, particularly focusing on section 40(2)(a), which defines the scope of landlords against whom RROs can be imposed. The court concluded that the phrase "the landlord under a tenancy of housing" inherently refers to the immediate landlord, based on linguistic analysis and the context within which the legislation was framed.

Analysis

Precedents Cited

The judgment referenced prior decisions from the First-tier Tribunal (Property Chamber) and the Upper Tribunal (Lands Chamber), notably Goldsbrough v CA Property Management Ltd [2019] UKUT 311 (LC), [2020] HLR 18. These cases had previously interpreted RROs as applicable to both immediate and superior landlords, setting a contrasting precedent that the Court of Appeal sought to rectify.

Additionally, the court considered principles from statutory interpretation, including those outlined in resources like Bennion on Statutory Interpretation (7th ed), emphasizing that ambiguities in penal legislation should be resolved in favor of the defendant to avoid unintended penalties.

Legal Reasoning

The Court of Appeal conducted a detailed statutory interpretation of Chapter 4 of Part 2 of the Housing and Planning Act 2016. The key focus was on section 40(2), particularly subsection (a), which outlines the conditions under which an RRO can be made.

• Language Interpretation: The court emphasized the natural and ordinary meaning of the words used. "The landlord under a tenancy of housing" was interpreted to denote a direct, immediate landlord-tenant relationship.
• Contextual Consistency: By analyzing subsection (b) in conjunction with subsection (a), the court reinforced that both are intended to target relationships within the same tenancy, thereby excluding superior landlords who are not directly involved.
• Policy Considerations: While acknowledging the legislative intent to deter rogue landlords, the court maintained that extending RROs to superior landlords was not explicitly supported by the statutory language.
• Legislative Intent: The court noted the absence of clear legislative language expanding RROs to superior landlords, suggesting that Parliament intended to focus on immediate landlords to ensure enforceability and clarity.

The court also dismissed the Respondents' arguments that broader interpretations were necessary for policy effectiveness, stating that such extensions should be explicitly legislated rather than inferred.

Impact

This landmark decision narrows the scope of RROs, limiting them to immediate landlords. Consequently, it clarifies the enforceability of RROs, ensuring that tenants cannot pursue superior landlords who do not have a direct contractual relationship with them.

However, this ruling may have unintended consequences, particularly in "rent-to-rent" schemes where superior landlords lease properties to companies that then sublet them. Such structures might shield superior landlords from RROs, potentially undermining the deterrent effect intended by the legislation.

The decision underscores the necessity for Parliament to consider legislative amendments if it intends to hold superior landlords accountable through RROs. Until such amendments are made, the judiciary has confined the application of RROs to immediate landlords only.

Complex Concepts Simplified

Rent Repayment Order (RRO)

An RRO is a legal mechanism that allows tenants or local housing authorities to recover rent paid under specific circumstances where a landlord has breached certain legal obligations. Under the Housing and Planning Act 2016, RROs can be sought for offenses such as operating an unlicensed House in Multiple Occupation (HMO) or failing to comply with improvement notices.

Immediate vs. Superior Landlord

• Immediate Landlord: The party directly leasing the property to the tenant. This is the landlord with whom the tenant has a contractual agreement.
• Superior Landlord: The ultimate owner of the property who leases it to an immediate landlord. In layered tenancy arrangements, superior landlords may not have direct dealings with tenants.

House in Multiple Occupation (HMO)

An HMO is a property rented out by at least three people who are not from one household but share facilities like the bathroom and kitchen. HMOs require specific licenses due to the increased number of occupants and potential for overcrowding, ensuring safety and compliance with housing standards.

Conclusion

The Court of Appeal's decision in Rakusen v. Jepsen & Ors firmly establishes that Rent Repayment Orders under the Housing and Planning Act 2016 are confined to immediate landlords. This interpretation provides clarity and enforceability within the existing legal framework but also highlights gaps in addressing complex tenancy structures like "rent-to-rent" arrangements. Moving forward, legislators may need to reassess and potentially amend the Act to ensure that superior landlords do not circumvent accountability, thereby reinforcing the protective intent of RROs for tenants.