What you need to know about rent repayment orders
Rent Repayment Orders (RRO) are made by the First-Tier Tribunal (Property Chamber) when a landlord has rented a property without the necessary licences in place. The Tribunal may order the landlord to repay the tenant, or tenants, some or all of the rent that has been paid over a period of up to twelve months. Maximum awards can often be substantial.
How can I ensure I do not receive one?
The primary reason a tenant (or tenants) may be entitled to bring an RRO application, will be where a landlord has failed to obtain a licence for what is known as a ‘House in Multiple Occupation’ (HMO). An HMO licence is automatically required where any property:
- Is occupied by at least 5 tenants forming more than one household; and
- Has shared facilities e.g. toilet, bathroom or kitchen used by all tenants.
An HMO will not apply where a family is renting a property and living as one household. Instead, HMOs are those properties that are rented by a group of separate individuals who have their own rooms but share common facilities between them. This could apply to university accommodation or young professionals sharing. It matters not whether the tenants have individual tenancies or one joint tenancy, an HMO would still arise and the need for a licence would automatically apply.
In addition to mandatory licences as referred to above, individual local authorities have the power to impose additional licencing schemes in relation to specific geographical areas within their jurisdiction. This allows them to require HMO licences to be obtained for properties with only 3 or 4 unrelated occupiers. Such schemes bring many more properties into the ambit of the legislation.
As landlords who are reading this will note, there is a substantial financial risk if they choose to let to house-share occupants and do not obtain the necessary licence from the local authority beforehand. We strongly encourage landlords to check with the local authority for the area within which their rented properties are situated whether an additional licensing scheme has been implemented, even if they have properties with fewer than 5 sharing occupants.
Obtaining a HMO licence
Applying for the licence is usually straightforward and requires a small amount of documentation to be provided to the local authority with two fees being payable. The licence itself will consider the size of the rooms and the quality of the accommodation and is there to ensure that housing stock of this type is of an adequate standard to provide suitable accommodation for those tenants who choose to share in groups.
As part of the application process, the council will request information about the size of the rooms and the shared facilities available and may also instigate a visit to check such things themselves. If satisfied, the council will grant the licence and the property will be compliant for the duration of the licence period. If unsatisfied, the council will refuse to grant the licence and will recommend any alterations required for a licence to be granted.
Failure to obtain a licence where one was required constitutes a criminal offence, and the landlord does not need be shown to have intended to commit the offence to still be found liable. This means that an inadvertent failure to apply for a licence prior to letting the property will automatically create liability for the landlord and cause him or her to commit the offence.
What happens if my tenant makes a claim?
Should tenants identify that they have been renting within an HMO that was unlicensed, they are entitled to bring the application to the First-Tier Tribunal. Any application they do bring must be within 12 months of the offence having been committed. The maximum award is 12 months’ rent per tenant, which can amount to a huge sum of money, particularly if it is multiplied across four, five or more tenants.
Whilst12 months is a maximum amount a tenant may be awarded, it may well be possible to persuade the Tribunal to award less in those cases where the culpability of the landlord is less. For example, there will be a significant difference in an award made against a landlord who has inadvertently failed to obtain a licence for a property that would always have been compliant with HMO licensing requirements, as opposed to a landlord who wilfully failed to obtain a licence knowing that the housing stock in question was of a sub-standard nature and would not fit the criteria for the grant of the HMO licence.
Any award made by the Tribunal will usually be for a proportion of the total amount of rent paid over the 12 months with the most serious offences requiring the full amount of rent to be repaid and the least serious being at the other end of a sliding scale.
How can I get advice about Rent Repayment Orders?
Letting agents will sometimes provide advice on this area of the law but not always and should not be relied upon, as it is often considered the landlord’s responsibility to ensure compliance with this particular legal duty.
AtWolferstans Solicitors, we have experience of defending landlords who find themselves the subject of an RRO application and our aim will always be to reduce any award to the minimum amount possible, if not defend the application altogether. Should you require any advice or assistance with defending such a claim or regarding HMO licences generally, our Disputes and Litigation Team is always available to help. Please call us on 01752 292201.