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Landlord who cut corners forced to refund rent

Updated 22 December 2022

3min read

Nick Green
Financial Journalist

A landlord has been forced to hand back £15,000 of rent due to not having the correct licence on his property. The action brought by five tenants highlights the need for landlords to ensure they are fully compliant. Article by Nick Green.

A house with multiple occupants needs an HMO licence

Ben Leonard and his housemates had no complaints about the Leeds property they they’d been sharing since August 2017. It would never have occurred to them to lodge a complaint against their landlord, if not for a visit from a housing officer the following May. The council discovered that the landlord did not hold an HMO (House in Multiple Occupation) licence, and informed the tenants that they were entitled to apply for a rent repayment order – since the property had been let to them illegally.

An HMO licence is compulsory for any rental property that has three or more tenants who are not part of the same family – the situation commonly referred to as a ‘houseshare’ or ‘flatshare’. The licence applies to the property (rather than to the landlord), meaning that the landlord must acquire one for every multiple-occupancy property they let. An HMO licence usually last for five years, and confirms that the property meets an acceptable standard and that the landlord is a ‘fit and proper’ person.

Despite the fact that both Ben’s landlord and the property itself appeared to meet these standards in practice, the lack of an HMO licence made the rental illegal. Five of the six tenants pursued the rent repayment order, and in March 2019 were awarded back a full year’s rent totalling £15,000.

Tenants can now apply for rent repayment orders

Recent changes mean that in England tenants can now apply for rent repayment orders themselves, rather than having to wait for the local authority to do so on their behalf. The successful claim made by Ben and his fellow tenants was quickly picked up by social media, garnering nearly 80,000 likes on Twitter. Speaking to the BBC, Ben revealed that the claim was a simple and inexpensive process: ‘The housing officer gave us the forms to fill out and told us where to send them. We had to provide evidence we’d paid rent to our landlord, a copy of our tenancy agreement and witness statements from everyone confirming they lived at the property. [It cost] around £30 each when split between the five of us.’

The case is likely to prompt other tenants across England to double-check that their own tenancies are legally watertight, which could open up many landlords to similar claims. The lack of an HMO licence is only one of many grounds for a rent repayment order, the others being:

  • Violence for securing entry
  • Unlawful eviction or harassment of tenants
  • Failure to comply with improvement notice
  • Failure to comply with a prohibition order
  • Control or management of unlicensed house (not HMO)
  • Breach of a banning order

Most of these offences are unlikely to be committed by the majority of respectable landlords. However, new or inexperienced landlords may fail to acquire the appropriate licences for their properties due to simple oversight. For this reason it is vital for all landlords to know their legal obligations in detail, and to keep up to date on the regular changes in the law.

What else do landlords need to know?

Landlords have many other legal obligations, where failure to comply can result in other fines or penalties. One of the easiest mistakes to make is letting out a property that has been bought with a residential mortgage. In this scenario, the landlord either needs to obtain special permission from the mortgage lender (‘consent to let’), or switch to a buy-to-let mortgage (which will usually have stricter lending requirements). Although this mistake is not grounds for a rent repayment order, it can result in penalties from the mortgage lender, up to and including repossession.

If you are buying to let, a specialist mortgage broker can help you to find the right mortgage and provide lots of other useful guidance too.

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.