The recent Upper Tribunal decision in the case of Vadamalay v Stewart has overturned the basis of awards in Rent Repayment Orders and made this a far more ‘hostile environment’ for landlords.
A Rent Repayment Order (RRO) is an order made by the First Tier Tribunal on application by either a tenant or (where rent is paid by some form of benefit) the Local Authority where a landlord has breached the law in one of various specified ways – the most common being failure to obtain an HMO license.
The Vadamalay case has held that rather than the landlord’s profit being the starting point for calculating awards, the starting point is the total rent received.
The only expenses likely to be deducted now are where the landlord pays for utilities.
The court will still have a discretion on the amount they award (in most cases) but that will be based on a higher figure.
Or, according to Robin Stewart of Anthony Gold solicitors who specialises in this area of law:
“The Vadamalay case tells us that the ‘starting point’ is the full rent, which is likely to result in considerably higher awards.
“However, that does not necessarily mean that the full rent will be the usual (or a common) result.
“The Tribunal will have to consider whether RROs for the full rent should become the norm, or whether this is a punishment reserved for the worst offenders.”
With a new case altering the basis of awards in rent repayment orders, it is likely that even more tenants will now seek to reclaim rent from their landlords.
It is really important that landlords faced with these claims take steps to protect their position.
Landlords can protect themselves from rent repayment orders by:
1. Keeping up to date with the licensing rules in force where their properties are. Different rules apply in different parts of the country because ‘additional’ and ‘selective’ licensing schemes are set up by local housing authorities rather than the Government.
2. Being wary of ‘rent to rent’ or ‘guaranteed rent’ arrangements. Such schemes are often associated with unlicensed HMOs – which can lead to a rent repayment order. Landlords should always carry out due diligence on anyone offering them ‘guaranteed rent’.
3. Where a property has been unlicensed for any reason, landlords should fix the problem as quickly as possible (usually by applying for a licence). The longer the landlord leaves it, the larger any rent repayment order is likely to be.
Landlords needing help may want to consider a new ‘HMO Hotline’ advice service which is a collaboration between Landlord Law (where you go to book your call) and Anthony Gold (whose solicitors provide the advice).