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Can Directors be liable for Rent Repayment Orders?

The Upper Tribunal (Lands Chamber) decision in Kaszowska -v- White 2022 provides directors with the answer!

This Appeal centred around whether a rent repayment order (RRO) can be made against the director of a corporate landlord.  Ten property guardians applied for RROs for a property that they alleged was an unlicensed HMO.  Their application was brought against two company directors, one of who played no part in the hearings.

At the First-tier Tribunal (Property Chamber) (FTT), the application for RROs was dismissed on the grounds that the FFT had no jurisdiction to make a RRO against someone who was not a landlord.  The applicants appealed.  They were seeking an order to obtain repayment from one of the directors since the guardianship company, their landlord, was in liquidation.

In deciding this matter, Martin Rodger QC, Deputy Chamber President, referred to the recent Court of Appeal decision of Rakusen v Jepson [2021] which confirms that a RRO could only be made against the immediate landlord.  He made particular reference to section 40(2) of the 2016 Act which defines what a RRO is and identifies who such an order can be made against.  Further, he noted that a RRO requires a landlord to repay rent that it had received from the tenant/ licensee.  A director is not a person listed in the section and as Mr Rodger QC states ‘had it been intended to extend the scope of rent repayment orders to company directors Parliament would surely have said so in explicit terms’.

This decision will reassure company directors that they are not personally liable to repay rent to tenants/ licensees under RROs.  Only the landlord company can be liable if they have committed one of the seven offences listed in section 40(3).

Should you have any queries about this decision or property guardianship then do get in touch.

This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. This update relates to the prevailing circumstances at the date of its original publication and may not have been updated to reflect subsequent developments. If you have general queries about our updates, please email: mailinglists@greenwoods.co.uk




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