A man who let a house to a company which in turn let rooms in it to tenants has succeeded in his appeal against a rent repayment order after the Upper Tribunal (UT) concluded that he was not the tenants’ immediate landlord and therefore no such order could be made against him.

The man let the house to the company for a period of 18 months. The lease included covenants that the company would not permit more than four occupants to reside in the house. However, the company sublet individual rooms to five tenants, which meant that the house was required to be licensed as a house in multiple occupation (HMO). The subtenancies extended beyond the expiry of the company’s lease: the legal effect of such a situation is that the subtenant becomes the direct tenant of the landlord.

Three of the tenants applied for rent repayment orders against the man on the basis that he was a person having control of or managing an unlicensed HMO, contrary to Section 72(1) of the Housing Act 2004. The First-tier Tribunal (FTT) accepted that, the company having granted subtenancies extending beyond its own lease, the man effectively became the tenants’ landlord. The FTT also concluded that he was a person having control of the house and managing it.

The man stated that he had been out of the country for much of the time and had relied on the company, but the FTT did not specifically examine whether he had a reasonable excuse. It ordered that he should repay 60 per cent of the rent paid by the tenants, a total of £7,549. The man appealed to the UT.

The UT accepted the man’s argument that he was not the tenants’ landlord within the meaning of Section 40 of the Housing and Planning Act 2016. The tenants had continued to pay rent to the company, rather than to him, after the company’s lease expired. He was therefore not a person against whom a rent repayment order could be made. The rent repayment order was set aside.

The UT went on to consider the man’s other grounds of appeal. It accepted that the FTT had been wrong to conclude that he was a person managing an HMO. Furthermore, the man had included a provision in the company’s lease that the house was not to be occupied by more than four people, and the company had breached that provision without his knowledge. The UT therefore found that, had he had control of an unlicensed HMO, he would have had a reasonable excuse.