WARNING: Rent reforms ‘could reverse RRO court judgement’ for landlords

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Superior landlords could find themselves hit by Rent Repayment Orders if the government decides to amend the upcoming Renters Reform Bill.

Property lawyer at JMW, David Smith (main picture), says that despite the Supreme Court’s ruling in the case of Rakusen v Jepsen- that an RRO cannot be made against a superior landlord but only against the immediate landlord of the tenancy that generates the relevant rent – there was still uncertainty.

“I could see interested MPs laying down amendments to the Bill to mute this judgement,” he tells LandlordZONE. “Whether they would be accepted is another matter.”

Sanctions

The Justices said there was a range of other sanctions available to combat rogue landlords, including fines, civil penalties and banning orders, but that it was ultimately up to Parliament to decide whether these were sufficient.

Smith adds that it was gratifying the Supreme Court acknowledged his intervention on behalf of the NRLA and accepted their argument, name-checking the landlord body in its judgement.

The NRLA had pointed out the full range of penalties currently available to prosecute errant landlords and explained: “It might be thought that [the] prospect of a property owner entering into such an arrangement solely to evade a potential RRO, while simultaneously leaving themselves open to prosecution for criminal offences, is a little far-fetched.”

Directors

Smith says he would prefer to see a change in the law, making directors of companies liable for Rent Repayment Orders, to address the issue of rent-to-rent operators setting up front companies that go bust rather than pay the penalties.

“That could then be easily rectified as you could prosecute directors of companies for failure to licence,” he adds. “It wouldn’t be a huge change to direct an order against a director instead.”

The justices in the Supreme Court case were told this too by one of the lawyers, who pointed out that rent-to-rent companies often ‘disappear’ once deals go south, only to phoenix with the same directors a few months later.

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