One of the first decisions faced by a tenant applying for an RRO is who to make the claim against. The Housing and Planning Act 2016 is clear that RROs are orders made against a landlord, but no definition of landlord is given.
Who is the landlord?
In most cases it is not difficult to work out who the landlord is. A property owner who grants a tenancy and is named in a tenancy agreement as the landlord clearly is the landlord.
However, many tenancies are granted by someone who is not the ultimate owner of the property. If a flat is let to a tenant, the landlord is usually going to be a leaseholder, who holds the property under a long lease and has their own landlord, the freeholder. And sometimes there will be an additional layer, if, for example, the owner has granted a 3-year lease to a ‘rent to rent’ company, who then sublets to the actual occupier.
There are other entirely legitimate reasons why the identity of the landlord on a tenancy agreement might not match the registered owner of the property – one of two joint owners might grant tenancies for example. Sometimes the landlord might use a more complex structure for perceived tax benefits, and sometimes a confusing structure can be used as a means to thwart law enforcement.
‘Landlord’ is not simply another way of describing the owner of the property – it is term that is best understood as relational: a landlord is always landlord to another person.
Claims against letting agents
At first it might appeal obvious that an agent is not the landlord. This has not prevented applications being made against agents in the past although none successful as far as I am aware. A landlord might blame their agent, and sometimes they might even be able to recoup the amount they pay to the tenant under an RRO from their agent through a negligence claim, but this does not make the agent directly liable under a RRO.
However, sometimes the person who refers to themselves as an agent is not in law in an agent (someone who acts on behalf of the landlord), but is in fact the landlord themselves. This is most commonly seen when established letting agents expand into ‘rent to rent’ arrangements where they take a lease but continue to refer to themselves as ‘agent’.
Difficult cases involving agents
A typical letting agency contract entitles the agent to take a percentage of the rent as commission, with the balance paid to the landlord, whereas a typical ‘rent to rent’ contract gives the property owner a fixed rent. In such cases it is reasonably simple to work out who is the landlord, provided you have the information.
But more complex arrangements exist, and it is entirely possibly for an agency contract to be set up with a ‘guaranteed’ fixed payment or ‘minimum rent’ paid to the landlord. This is still a form of agency contract, called del credere agency, and this would not change the identity of the landlord.
Is the person described as ‘landlord’ in the tenancy agreement always the landlord?
The easiest thing for a tenant to do will be to name the person identified as landlord in their tenancy agreement as landlord in the respondent to their application for a RRO, but unfortunately this is no guarantee to work.
Earlier this year I acted for a property owner who had let their property to a company. That company sublet the property room by room to individuals, without permission from my client, and the property was an unlicensed HMO. My client was very surprised to discover that they were named as landlord in the tenancy agreements provided to the occupants: did this make them the landlord? The owner argued that they had not authorised the tenancies and were not the landlord. The tribunal accepted that my client was not capable of being the landlord because she had divested herself of her interest in the property by granting the tenancy to the company, and the true landlord was the person who granted these unauthorised sub-tenancies.
A recent case was examined rather differently by the tribunal. A tenancy was granted by a limited company, but the tenants argued that their landlord was really the director of that company, who was one of the joint owners of the property. They suggested that the director might be using the company as a device to avoid paying any award.
The tribunal was greatly influenced by their view that there was no evidence before them that the registered owners (a couple) had granted any interest in the property to the company such that it would be capable of granting a tenancy.
The tribunal’s conclusion was of real assistance to the tenants in this case, who have a much better chance of actually enforcing their RRO against an individual than against a limited company. However, as a housing lawyer, I am unconvinced by some elements of this decision. The tribunal asserted that, in the absence of evidence that the company had sufficient authority interest, the company could not be the landlord. This is certainly open to question: the authoritative practitioner textbook Hill and Redmond Law of Landlord and Tenant explains at Chapter 1 A 4 “a person who has no legal estate in the land may nevertheless purport to grant a lease of that land; in that event, there is created between him and his purported tenant a tenancy by estoppel which binds them and their respective successors in title just as if the landlord had a sufficient interest to grant the lease.” It is therefore entirely possible for a tenancy to arise despite the landlord not truly having an interest in the property – although there is perhaps some room to argue about the effect of a ‘tenancy by estoppel’ in the context of a rent repayment order application, and which parties the tribunal is entitled to apply the designation ‘landlord’ to.
The tribunal’s decision also does not address the principle that a tenant is prevented or ‘estopped’ from denying the right of their landlord to grant a lease. If the tenants were to argue that in fact their landlord was someone other than the person identified in their tenancy agreement, that principle is not engaged, but there would need to be some evidence to support that proposition. If the tenants simply attack the entitlement of their landlord to grant their lease, without demonstrating that another person is the landlord, this principle might perhaps be violated.
What this means for tenants making applications for RROs
Understandably some are arguing that tenants should always be entitled to obtain an RRO against the registered owner of the property and I understand that this the subject of a pending appeal to the Upper Tribunal.
I am doubtful that the Upper Tribunal will be particularly receptive to the tenant’s arguments in this case – it is not really the role of the tribunals to close perceived loopholes in legislation – but this area of law is going to be problematic for the tribunal, tenants and their advisers. Guidance from the Upper Tribunal about when it is legitimate to look behind the names of the parties as identified in the tenancy agreement would be of real assistance.
Litigators have been wrestling for centuries over issues such as the identities of parties to contracts and the circumstances where agents assume personal responsibility for liabilities under a contract they entered into on behalf of their principal. From a contract law point of view this is already fiendishly complicated even before getting into matters such as ‘tenancies by estoppel’.
Efforts to expand the scope of RROs are well-intentioned but the law in this area is not simple. It is unfortunate that the tribunal will have to determine many of these issues without the benefit of hearing from specialist lawyers to make the arguments on behalf of each party.
From the point of view of tenants, there will be a real incentive to name every plausible candidate for landlord as a respondent when starting the claim. To date the Tribunal has demonstrated a willingness to substitute a different respondent when part way through a claim it appears the incorrect respondent to the application has been named. However, tenants should take care here as in the civil courts in general a new defendant cannot be substituted into a claim if the limitation date has passed – that principle might also apply in Tribunal proceedings, so it is important to identify the correct target for a rent repayment order application as early as possible.