Martin Jospeh Rakusen v Mikkel Jepsen
| Jurisdiction | England & Wales |
| Judge | Lord Briggs,Lord Burrows,Lord Lloyd-Jones,Lord Kitchin,Lord Richards |
| Judgment Date | 01 March 2023 |
| Neutral Citation | [2023] UKSC 9 |
| Court | Supreme Court |
[2023] UKSC 9
Lord Lloyd-Jones
Lord Briggs
Lord Kitchin
Lord Burrows
Lord Richards
Appellants
Edward Fitzpatrick
Timothy Baldwin
(Instructed by Hammersmith & Fulham Law Centre)
Respondent
Tom Morris
(Instructed by Winckworth Sherwood LLP (London))
Intervener — National Residential Landlords Association
Robert Brown
Rosamund Baker
(Instructed by JMW Solicitors LLP (London))
Intervener – Safer Renting CIC
Justin Bates
Charles Bishop
(Instructed by Anthony Gold Solicitors LLP (London Bridge))
Heard on 26 January 2023
Lord Briggs AND Lord Burrows ( with whom Lord Lloyd-Jones, Lord Kitchin and Lord Richards agree):
This appeal is about Rent Repayment Orders (“RROs”). They are an important sanction against rogue landlords who commit certain types of offence in relation to the private rented sector of the housing market. Along with other sanctions, the aim of RROs is to encourage landlords to comply with the law and to drive them out of the market if they do not. They were originally introduced in relation to the non-licensing of houses in multiple occupation (or subject to a selective licencing scheme) by the Housing Act 2004 (“the 2004 Act”) but are now governed in England (but not Wales) by Chapter 4 of Part 2 of the Housing and Planning Act 2016 (“the 2016 Act”) under which they enjoy a greatly extended scope.
The jurisdiction to make RROs is conferred on the First-tier Tribunal (“the FtT”). In bare outline, where the relevant conditions are satisfied, the FtT may by an RRO require a landlord to repay an amount of rent paid by a tenant, or to pay a local housing authority an amount in respect of universal credit awarded in respect of rent, where the landlord has committed one or more of a list of housing-related offences.
The question to be decided in this case is whether, unlike its predecessor, the 2016 Act enables the FtT to make an RRO not merely against the immediate landlord of the tenant, who paid the rent or who was awarded universal credit in respect of the rent, but also against a superior landlord. The FtT decided that it could make an RRO against a superior landlord of the property let to the applicant tenants, and the Upper Tribunal (“UT”) agreed. But the Court of Appeal reached the opposite conclusion. The tenants now appeal to the Supreme Court.
Although counsel ranged far and wide through the 2016 Act, the 2004 Act, and the pre-legislative materials, it is our view that the answer to the question posed turns on a short point of statutory interpretation that yields a short answer. That answer comprises a straightforward interpretation of the words in section 40(2) of the 2016 Act: see paras 24 – 33 below. The same answer is on balance supported by, or at least is consistent with, a range of additional factors that go to the wider context and purpose of section 40(2): see paras 34 – 59 below.
The next three sections (paras 6 – 23) summarise the factual background and the proceedings below and set out the relevant provisions of the 2016 Act.
The respondent on this appeal is Martin Rakusen, who can be referred to as a superior landlord of property licensed out to the appellants, Mikkel Jepsen, Ronan Murphy and Stuart McArthur. They can be referred to as the tenants (a term which, for all relevant purposes under the 2016 Act, includes licensees). The appeal arises out of an application to strike out the appellants' claim for an RRO on the ground that it has no reasonable prospect of success. The central assumed facts are as follows.
The relevant property is Flat 9, Mandeville Court, Finchley Road, London. In 2006 the freeholder of the building granted a lease of the flat to Mr Rakusen for a term of 999 years. In 2013 Mr Rakusen assigned the lease to himself and his partner Ms Sarah Field. For a time, the couple lived in the flat as their home before moving elsewhere and deciding to let the flat. On 31 May 2016 Mr Rakusen granted a tenancy of the flat to Kensington Property Investment Group Ltd (“KPIG”), a company to which he had been introduced by his letting agents, Hamptons. The tenancy was for a term of 36 months, less one day, at a rent of £2,643.33 a month. The agreement was a standard form of short-term residential tenancy under which Mr Rakusen was responsible as landlord for keeping the property in repair. One modification of more conventional terms is found in clause 7.5 which provided that “the Tenant [ie KPIG] shall have the right to sublet each unit individually or the whole as part of the day to day management of their business”.
Later in 2016, and at different times, KPIG entered into separate written agreements with the appellants, each of whom was granted the right to occupy one room in the flat. The documents were described as licence agreements and made provision for the payment of a licence fee. The aggregate sum paid by the appellants was £2,297 per month. Presumably (and there is some evidence to support this) KPIG was not making a loss on the flat because at least one other person was granted the right to live there. It is not in dispute that the flat was a house in multiple occupation (“HMO”) and was required to be licensed under Part 2 of the Housing Act 2004.
In November 2018 Hamptons informed Mr Rakusen that KPIG wished to apply to the local housing authority for an HMO licence. The evidence does not show if such an application was ever made, but no licence was ever granted. Mr Rakusen did not renew KPIG's tenancy at the end of the fixed term in May 2019.
On 27 September 2019 the appellants applied to the FtT under section 41 of the 2016 Act for RROs totalling £26,140 against Mr Rakusen and Ms Field. The grounds for making the application were stated to be “control or management of an unlicensed HMO”. In their response to the application, Mr Rakusen and Ms Field invited the FtT to strike out the application on the ground that there was no reasonable prospect of its succeeding because an RRO could only be made against the immediate landlord of the person who made the application. Ms Field also relied upon the fact that she had never been party to any agreement in respect of the property with either KPIG or the appellants.
Although not relevant to the strike-out application, Mr Rakusen says that he only became aware of the licence agreements entered into by KPIG after the applications for RROs were made; and he denies that he committed an offence under section 72(1) of the 2004 Act because he was not a person having control of the HMO or a person managing it. In the alternative, he relies on the defence provided by section 72(5)(a) of the 2004 Act that he had a reasonable excuse for having control or management of an unlicensed HMO.
The FtT (LON/00AG/HMJ/2019/0065) struck out the application against Ms Field on the ground that there was no reasonable prospect of its succeeding against her. It refused to strike out the application against Mr Rakusen because it was bound by the earlier decision of the UT in Goldsbrough v CA Property Management Ltd [2019] UKUT 311 (LC), [2020] HLR 18 in which Judge Elizabeth Cooke had decided that an RRO could be made against a superior landlord as well as the immediate landlord.
The UT ( [2020] UKUT 0298 (LC)) dismissed Mr Rakusen's appeal. In his judgment, Martin Rodger QC, the Deputy Chamber President, considered that “as a matter of first impression” (see para 32) the language of section 40(2)(a) suggested the need for a direct relationship of landlord and tenant so that RROs in favour of the tenants could not be made against the superior landlord (Mr Rakusen). But he went on to hold that those first impressions were unreliable when one looked in more detail at all the relevant provisions and factors. He appeared to have been particularly influenced by the fact that a superior landlord could commit one of the offences in relation to which RROs can be made; and that, if RROs could only be made against the immediate landlord, the grant of a short-term tenancy to an insubstantial intermediary who then sub-lets (as on the facts of this case) provides a route for avoidance of RROs.
The Court of Appeal (Arnold, Andrews and Baker LJJ) [2021] EWCA Civ 1150, [2022] 1 WLR 324 allowed Mr Rakusen's appeal. In essence, they considered that Martin Rodger QC's first impressions of the meaning of section 40(2) of the 2016 Act had been correct and were consistent with an analysis of all the relevant provisions and the purpose of the 2016 Act.
Section 40(1) and (2) provide:
“ 40. Introduction and key definitions
(1) This Chapter confers power on the First-tier Tribunal to make a rent repayment order where a landlord has committed an offence to which this Chapter applies.
(2) A rent repayment order is an order requiring the landlord under a tenancy of housing in England to—
(a) repay an amount of rent paid by a tenant, or
(b) pay a local housing authority an amount in respect of a relevant award of universal credit paid (to any person) in respect of rent under the tenancy.”
A table of seven offences, or sets of offences, committed by a landlord to which Chapter 4 applies is provided in section 40(3). Two involve violence or harassment: using violence to secure entry contrary to section 6(1) of Criminal Law Act 1977, and unlawful eviction or harassment of occupiers contrary to section 1(2), ( 3) or (3A) of the Protection from Eviction Act 1977. Four are offences under the 2004 Act: failure to comply with an improvement notice (section 30(1)) or a prohibition order (section 32(1)) or being in control or management of an unlicensed HMO (section 72(1)) or...
To continue reading
Request your trial
-
Anthony Charles Clapham v Dee Narga
...Wainwright v Home Office [2002] QB 1334, R (O) v Secretary of State for the Home Department [2022] 2 WLR 343 and Jepsen v Rakusen [2023] 1 WLR 1028. 66 In my judgment, the Judge was right to conclude that section 75 applied to the title which the Appellants had acquired under the LA 1980......
-
The King (on the application of Coal Action Network) v Welsh Ministers
...scheme, in particular section 26A(1) of the 1994 Act. 55 As Lord Briggs and Lord Burrows said in their judgment in Rakusen v Jepsen [2023] UKSC 9 (at paragraph 34), “[the] objective of interpreting statute is to identify the meaning of words used by Parliament in the light of their context......
-
Living In 2024 - Living Sector Talking Points For The New Year
...This judgment will also have important implications for lease extensions. Rakusen (Respondent) v Jepsen and others (Appellants) [2023] UKSC 9: Of interest, to those the rent-to-rent model, the Supreme Court found that, where there had been a breach under the Housing and Planning Act 2016, a......