Rent Repayment Orders

Introduction

First introduced in 2004, rent repayment orders were an additional measure used to penalise landlords for HMO licensing offences. This was only available in very limited circumstances though. Tenants for example could only take action once the landlord had been convicted of the criminal offence of operating an HMO without a licence, or that the relevant local authority had secured a rent repayment order for Housing Benefit payments.

In practice this limited the potential number of rent repayment orders as the tenants had to rely on the local authority to take action before they could seek compensation, and were also limited to a maximum of the previous 12 month's rent prior to making the order, preventing tenants who had moved out prior to conviction from applying.

The Housing and Planning Act 2016 has significantly increased the scope for rent repayment orders, and these changes will form the bulk of this guide. From April 6th 2017, landlords will need to be far more aware of rent repayment orders as local authorities, and tenants, will be far more likely to bring these cases against landlords.

What are rent repayment orders?

Rent repayment orders are a means by which a tenant or local authority can seek to have up to 12 months of rent, Housing Benefit, or Universal Credit repaid, usually in addition to other fines. This method is available to the local authority or tenants, where they can prove beyond reasonable doubt that the landlord is guilty of one of the qualifying offences. It is limited to money paid by the body or person making the application.

Who can apply for a rent repayment order?

Prior to the Housing and Planning Act 2016, only the local authority could initiate the rent repayment order process. Tenants could only apply once the landlord had received a conviction for a licensing offence, or the local authority successfully made a claim for rent repayment of any housing benefit.

Now, either the relevant local authorities or tenants may initiate the process, if they believe the landlord is guilty of one of the qualifying offences in the previous 12 months.

Tenants who do make an application prior to a successful rent repayment order will probably need the assistance of a local authority or a solicitor to successfully apply. As part of the Housing and Planning Act 2016, local authorities are expected to consider helping tenants to apply through advising them, or conducting the proceedings for them.

Who can make a rent repayment order?

The Residential Property Tribunal deals with applications for rent repayment orders.

Are there any restrictions on applying for a rent repayment order?

Tenants may apply directly to them for a rent repayment order. The tenant must have lived in the property in question within the preceding 12 months and the offence must have occurred within that time.

The tribunal will only consider making an order for a local authority if the offence falls within the local authority's boundaries, and the landlord has already received a 'notice intending proceedings'. This notice must inform the landlord that they propose to apply for the rent repayment order, state the amount that they intend to seek from the landlord, and must give the landlord no less than 28 days within which to make representations for consideration. If this notice period has not expired then the local authority may not apply for the rent repayment order.

What are the offences a rent repayment order may be made for?

From April 6th 2017, rent repayment orders will be available for the first 6 of the listed offences:

  1. Violence for securing entry
  2. Eviction or harassment of tenants
  3. Failure to comply with improvement notice
  4. Failure to comply with prohibition order etc
  5. Control or management of unlicensed HMO
  6. Control or management of unlicensed house
  7. Breach of banning order

The final offence, breach of a banning order, is expected to come into force from October 2017.

What standard of proof is needed for a rent repayment order to be made?

Rent repayment orders require a criminal standard of proof. So, tenants or local authorities must prove beyond reasonable doubt that the landlord has committed one of the necessary offences before a rent repayment order can be made.

Does this apply to agents who are managing the property?

No, the tenant or local authority would pursue the landlord not the agent.

How are rent repayment orders calculated for local authorities?

The tribunal should take into consideration a number of factors when making their judgement and they are limited in what they can allocate to the amount of Housing Benefit or Universal Credit paid over the period considered. This means that any top-up payments or benefits paid before or after the 12 month period cannot be sought by the Local authority.

Exactly what constitutes 12 months depends on the offence. If the Local authority can prove the landlord has committed the offences of using violence for securing entry or the eviction or harassment of tenants, then the local authority can claim for the 12 months prior to the offence being committed. For all the other offences, the local authority is limited to claiming for up to 12 months while the offence was being committed.

The tribunal will have discretion in how much they award but must consider the landlord's conduct and financial circumstances. However, if the landlord has already been convicted of any of the offences the tribunal must give the maximum available penalty. This is also the case if any financial penalties have been issued in relation to the offence and there is no further prospect of an appeal.

Example 1

A local authority discovers that a landlord forced their way into the property using violence. Nobody has sought to get a conviction separately for this but the local authority can prove beyond reasonable doubt that the offence occurs. The tenant had received £4,000 in Housing Benefit for the property in the 12 months prior to this.

The tribunal is satisfied based on the evidence that the landlord did commit the offence. The landlord's financial circumstances are considered and due to the landlord's difficult financial circumstances, the tribunal decides the local authority is only entitled to a smaller amount of the Housing Benefit and awards £1,000.

Example 2

A landlord is convicted of illegally evicting their tenants after they refuse to leave following a section 21 notice. The Local authority considers whether or not to proceed with a rent repayment order and decides it is worthwhile. The tenants in the property had been paid £14,000 in total for housing benefit over the 12 months prior to the illegal eviction. As the landlord has been convicted already the tribunal has to make a rent repayment order for all of the £14,000.

Example 3

A landlord is convicted of operating an HMO without a licence. The tenants were all employed full time, paying most of the £14,000 of their own rent, except for £500 paid in Universal Credit to one tenant. The property was generally in the good condition expected of an HMO. The local authority has to consider making an application under the law. It decides it is not worth applying for a rent repayment order for themselves as the sum available is low. If the tenants applied for a rent repayment order they would assist with this however. In that case, if the tenants were successful they would be entitled to up to £13,500, the amount they paid. The courts would not be required to give the full amount however.

How are rent repayment orders calculated for tenants?

Calculations for tenants are very similar to local authorities. The tenant is limited to a maximum of 12 months rent, minus any Universal Credit or LHA payments. For violent entry, illegal eviction or harassment, the 12 month period is the period leading up to the offence being committed. For all of the other offences the tenant is limited to a maximum of 12 months during which the offence was being committed.

The tribunal will have discretion in how much they award but must consider the landlord's conduct and financial circumstances. In the event that the landlord has been convicted previously of the offence in question, and that offence is not related to licensing of a property, then the tenant will be entitled to the maximum amount of rent available for repayment. This is also the case if any financial penalties have been issued in relation to the offence and there is no further prospect of an appeal.

Is this legislation backdated?

No, the offence must have been wholly committed on or after April 6th 2017. Alternatively, if the offence began before that date and continues beyond that point, the legislation will only apply if the offence was committed before April 6th 2017 and is still ongoing on April 6th 2018.

Does this apply in Wales?

No, this legislation applies in England only.

Are Local Authorities likely to make use of this legislation?

In short, yes. Local authorities will be able to use the money collected from rent repayment orders to partially finance the costs incurred in meeting its enforcement functions in relation to the private rented sector.

Landlords need to be aware that, in light of this change, local authorities will be incentivised to use improvement notices and prohibition orders more often. Also, as they can keep any money they receive from this provided they use it for enforcement of their duties towards the private rented sector, landlords are very likely to see an increase in inspections and enforcement on HMO standards. It is likely to make additional and selective licensing a less attractive option however as this allows the local authority to directly target specific offenders and make them pay for the enforcement measures.

Landlord & Investment Show
Martin Co
Envirovent
Landlord Broadband

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