Rent Repayment Orders: The Real Cost of an Unlicensed HMO

Of all the penalties attached to unlicensed HMO operation, the Rent Repayment Order is the one that catches landlords most off guard. Unlike a council-imposed civil penalty, it can be brought by tenants directly, it is aimed squarely at money already collected, and — since the Renters' Rights Act 2025 took effect — the numbers involved have become large enough to threaten the underlying property, not just the year's profit.

What is a Rent Repayment Order

Under the Housing and Planning Act 2016 (as amended), a tenant, or in some cases a local authority, can apply to the First-tier Tribunal for a Rent Repayment Order against a landlord who has committed certain housing offences — operating an unlicensed HMO chief among them. If the Tribunal grants the order, the landlord must repay rent already received during the unlicensed period, paid directly back to the tenant or the authority that brought the claim. This is not a fine paid to the state on top of the rent; it is the rent itself, clawed back.

Tenant satisfaction with the property is irrelevant

It does not matter whether the tenant knew the property was unlicensed, or was perfectly happy living there, or never raised a single complaint about the condition of the flat. The offence being penalised is operating without a licence, which is a strict matter of fact rather than a judgement about the quality of the tenancy. A tenant who loved living in the property can still bring — and win — an RRO claim purely on the basis that the HMO was unlicensed while they were paying rent.

The exposure has doubled under the Renters' Rights Act 2025

The Renters' Rights Act 2025 received Royal Assent on 27 October 2025, and its landlord-facing provisions, including the changes to Rent Repayment Orders, commenced on 1 May 2026. Before that date, the amount recoverable under an RRO was capped at 12 months' rent, and a claim had to be brought within 12 months of the relevant unlicensed period. From 1 May 2026, both figures doubled: the cap rose to 24 months' rent, or the rent actually paid if that figure is lower, and the window in which a claim can be brought extended to 24 months after the relevant period. Practically, this means a tenant who lived in an unlicensed HMO at any point going back two years, not one, can now bring a claim, and the maximum they can recover is twice what it was previously.

Why the cumulative exposure is often underestimated

Because an HMO by definition houses multiple households, each tenant or tenant group in the property is separately entitled to bring their own RRO claim over the same unlicensed period. A landlord thinking of their exposure as "one claim, one payout" is miscalculating. In a five-bedroom shared house with five separate tenancies, a Tribunal finding of an unlicensed period running close to two years could, in principle, see five separate claims each seeking up to 24 months of that tenant's rent. Even where a Tribunal does not award the maximum in every case — it retains discretion over the amount, taking into account matters such as the landlord's conduct and any previous convictions — the cumulative exposure across a single unlicensed property with several tenants can run well into six figures.

This sits on top of, not instead of, other penalties

An RRO is not an alternative to council enforcement action; it sits alongside it. The same unlicensed operation can trigger a civil penalty from the council, which under the Renters' Rights Act 2025's tiered structure introduced from 1 May 2026 can now reach up to £7,000 for minor or initial non-compliance and up to £40,000 for serious, persistent, or repeat non-compliance, with criminal prosecution available as an alternative route in the most serious cases. A landlord facing an RRO claim from tenants can simultaneously be facing a separate civil penalty process from the local authority arising from the same underlying failure to licence the property.

How Tribunal proceedings actually work

An RRO application goes to the First-tier Tribunal (Property Chamber), the same body that hears HMO licensing appeals. The tenant or authority bringing the claim must show that the offence — here, operating an unlicensed HMO — was committed, generally to the criminal standard of proof (beyond reasonable doubt), though a prior conviction or civil penalty for the same offence makes this straightforward to establish. The Tribunal then decides both whether to make an order and, within the statutory cap, how much to award, weighing factors including the seriousness of the offence, the landlord's financial circumstances, and any previous relevant conduct. Landlords are entitled to make representations and can be legally represented, but the safest position by far is never reaching this stage at all.

How to protect yourself

The only real protection against an RRO is not operating unlicensed in the first place. If you are unsure whether your property currently requires a licence — mandatory, additional, or selective — or if a previous licence has lapsed without your noticing, treat that uncertainty as urgent rather than routine, because the clock on both the licensing offence and any RRO claim is already running the moment the property falls out of compliance. Contact us today; we will confirm your exact licensing position and, if a licence is needed, handle the full application — a mandatory HMO licence from £500+VAT, or an additional HMO licence from £300+VAT — before an unlicensed period has the chance to build into a claim.