The private rental sector has received its fair share of legislative attention over the last 100 years but are Rent Repayment Orders an effective tool to hold rogue landlords to account or merely a money making scheme for unscrupulous tenants and ambulance chasers?
A bit of background
In 1915 the government introduced controls to restrict rents to the levels of 1914 in order to prevent landlords from profiteering during the 1914-18 war, a time when private rentals accounted for 90% of housing stock in the UK.
By 1957 the depressed state of the rental sector led to the gradual softening of these provisions in the first of two Rent Acts, the second of which in 1965 introduced fair rents set by independent officers.
The sector was eventually deregulated under the Thatcher government in 1988, by which time private rentals made up only 10% of the housing stock.
Far from settling the question of balancing the rights of landlords and tenants, the history of legislative provisions seems simply to have solved one problem by creating another. The most recent piece of controversial legislation was introduced in 2004.
What are Rent Repayment Orders?
Rent Repayment Orders (RROs) were designed to deter or penalise landlords who were convicted of HMO (house in multiple occupation) offences and to award compensation to tenants up to a maximum of the previous 12 months’ rent.
The scope of Rent Repayment Orders was very limited because tenants could take action only after their landlord’s conviction and a conviction could only be secured if the local authority chose to take action against the landlord. Furthermore the limit of 12 months’ rent excluded tenants who moved out before the conviction.
How have Rent Repayment Orders evolved?
The 2004 Act applied to both England and Wales but The House and Planning Act 2016, which applies only to England, significantly widened the scope of RROs and included offences identified in several other acts.
One of the biggest changes is the removal of the requirement for a conviction. An application for a RRO can be made by a tenant or the local authority to the First Tier Tribunal (Property Chamber) where the merit of the claim will be decided on the basis of the proof the applicant can provide that the landlord committed any one of a number of criminal offences.
The updated provision also made it possible for the tenant to make an application against the head landlord even though the tenancy was not entered into with them directly.
In Wales, the Housing (Wales) Act 2014 introduced Rent Smart Wales, and the licensing of landlords and agents. The RRO provisions were amended to roughly the same extent as in England but with application only to Rent Smart Wales licensing offices.
In the same year the Housing (Scotland) Act was passed, setting out the conditions under which a landlord could be penalised for not registering with the council and served with a rent penalty notice (RPN), but this does not have the same compensatory function as the RRO. However, while an RPN is in force the tenant is not obliged to pay rent.
Penalties
The offences for which a Rent Repayment Order can be imposed include:
- managing an unlicensed HMO
- managing any unlicensed property
- failure to comply with prohibition or improvement notice
- harassment
- illegal eviction
In Scotland fines of up to £25,000 for illegal eviction have been proposed.
Meanwhile in London, Mayor Sadiq Khan is asking the government to double the amount of rent that tenants can recover through RROs to two years’ worth which could mean landlords having to repay upwards of £35,000 plus the costs of bringing the prosecution.
At the same time he is seeking powers to reintroduce rent controls to combat the spiralling costs of private rentals as well as funding a new qualification and training for local authority housing enforcement officers
Uncertain times for private landlords
The COVID-19 pandemic has and continues to cause very serious difficulties in the private rental sector, with many landlords’ income impacted by tenants who could not keep up with their rent payments but who also could not be pursued under the government’s temporary moratorium.
While it’s undeniable that there are some unscrupulous landlords whose only motivation is to make as much money as they can with little regard for investment and service, the majority of responsible landlords could easily find themselves on the wrong end of a RRO application which could be entirely vexatious or at best, questionable.
Part of the problem is the potential for wide interpretation of the qualifying offences.
While illegal eviction may be relatively easy to disprove and licensing should not be a problem for a reasonable landlord, it is under the heading of harassment that lines can be very easily blurred.
Harassment has no legal definition but is judged by a tribunal on the circumstances of an individual case, and can come down to the power of argument.
It is therefore more important than ever for landlords to maintain good relationships with their tenants as well as ensuring that all their dealings are thoroughly documented.
Property Reports and Inspections
One of the biggest areas of dispute between landlord and tenant is the condition of the rental property, its fixtures, fittings and furnishings.
At Inventory Base we understand the difficulties of sustaining agreement between the parties on liability for issues of maintenance, loss, damage, wear and tear.
A dispute could conceivably be characterised as harassment by the tenant, so conducting third party property inspections at regular intervals is the best way to cover off any potential issues that may lead to disagreements or court action.
Our property inventory software makes the conduct of inventory property management quick, easy and accurate. The reports generated provide a reliable ‘snapshot in time’ of the condition of the property and, taken together, the series of regular reports will help inform a tribunal of the history behind any attempted application.
At best, you can defeat any action and at worst, you can minimise the size and impact of a Rent Repayment Order to what could be a more manageable level.
Are Rent Repayment Orders fit for purpose?
From a tenants point of view (and law firms and ambulance chasers) yes, as they protect the tenant from landlords who fail to take their responsibilities seriously, putting tenants lives at risk through poor housing and a failure to protect both their physical presence in the property as well as their deposit.
However, the majority of landlords maintain their property and genuinely care about the tenants and providing a long term and safe solution to the mounting housing crisis.
Ben Beadle, chief executive of the NRLA, was recently quoted in an article by The Guardian where he said there is a “supply crisis now engulfing the sector” and that “urgent action” was needed to provide affordable rental housing.
With the UK needing 230,000 new rental homes to meet growing demand there is the very real danger that tenants are forced into unregulated properties through sheer desperation leaving them exposed to health & safety risks.
RROs are a tool to help regulate and support the PRS but there is also a real danger that they will be used more as a stick than a carrot.
Key Takeaways
- A landlord/agent doesn’t have to have received a conviction in order for an RRO to be made
- First Tier tribunal has to be satisfied beyond reasonable doubt (the criminal standard of proof) that one of the prescribed offences has been committed
- A fee may be chargeable to raise a Rent Repayment Order case
- There is the potential for recovery of rental payments to double if recovered through Rent Repayment Order costing landlords upwards of £35,000 plus legal fees
- A program of property and regular inspection reports reduces the risk of disputes
Let Inventory Base help you cover and protect your business and assets.
Contact us for more information on how property reports and inspections can reduce your risks or set up a free trial today.