[2024] UKUT 255 (LC)

This is an appeal brought with the permission of this Tribunal against a rent repayment order under section 40, Housing and Planning Act 2016 (the 2016 Act) made by the First-tier Tribunal, Property Chamber (the FTT) against the appellant, Mr Kumar in favour of the respondents, Mr Kolev, Mr Niven and Ms Marshall. The order required Mr Kumar to pay the respondents sums totalling £7,549.25 in respect of their occupation of an unlicensed house in multiple occupation (HMO).

Mr Kumar owned the freehold of the HMO but as far as he (and the respondents) were concerned he was not their direct landlord. He had let the whole house to a company called Like Minded Living Ltd (LML) in a “rent to rent” arrangement and LML granted the respondents their sub-tenancies of individual rooms in the HMO.

In Rakusen v Jepsen [2023] UKSC 9 the Supreme Court held that a rent repayment order may only be made against the tenant’s immediate landlord who received the rent which is to be repaid. It might therefore have been thought that the FTT would have had no jurisdiction to make an order against Mr Kumar. But the peculiarity of this case is that the individual sub-tenancies granted by LML to the respondents were each expressed to be for a term which was longer than the remaining term of LML’s own lease from Mr Kumar.

There is a long established principle of English property law, exemplified by the decision of the Court of Appeal in Milmo v Carreras [1946] 1 KB 306, that where a tenant grants a sub-tenancy for a term equal to or longer than the remaining term of their own tenancy, the purported grant takes effect as an assignment of the tenancy by operation of law; no relationship of landlord and tenant is thereby created between the tenant and the sub-tenant and the sub-tenant instead becomes the direct tenant of the head landlord, whether the parties know it, or want it, or understand it. The same principle applies where the tenant grants a sub-tenancy of part of the premises demised to them for a term equal to or longer than their own term; the effect is the same as an assignment of the head tenancy in relation to that part of the premises (Grosvenor Estates v Cochran [1999] 2 EGLR 83).

In this case the FTT considered that, by the operation of this rule, a relationship of landlord and tenant had come into existence between Mr Kumar and the respondents and that that relationship was sufficient to give it jurisdiction to make a rent repayment order against him. The main issue in this appeal is whether the FTT was right.

At the hearing Mr Kumar was represented by Tom Morris, and Mr Kolev, Mr Niven and Ms Marshall were all represented by Cameron Neilson of the advocacy organisation Justice for Tenants. I am grateful to them both for their interesting submissions.