Property Guardians and HMO Licences

A “house in multiple occupation” (“HMO”) is defined in s.254, Housing Act 2004. It includes a requirement that the “occupation of the living accommodation constitutes the only use of that accommodation”. Where an HMO contains five or more persons who form two or more households, it must be licenced by the local authority. A person who manages or has control of an unlicensed property commits an offence, subject to a defence of reasonable excuse. Where a local authority is satisfied beyond reasonable doubt that a person has committed a “relevant housing offence”, it may – as an alternative to prosecution – use a procedure culminating in a penalty notice for up to £30,000. Further, The Housing and Planning Act 2016 makes provision for “rent repayment orders”, i.e. an order of the First-Tier Tribunal (Property Chamber) made where a landlord has committed one or other of a prescribed list of housing offences.

The appellants in Global 100 Ltd v Jimenez and others; Global Guardians Ltd and others v (1) Laleva and others (2) Hounslow LBC [2023] EWCA Civ 1243 were property services companies which provided “property guardians” to building owners by way of temporary occupiers who would provide security to prevent the building being targeted by squatters. Each had entered into licence agreements with the respondents pursuant to which they paid the appellant a weekly licence fee and were permitted to occupy a building as property guardians. The respondents contended the property guardians counted as occupiers and so they were occupying an unlicensed HMO so that they were entitled to a rent repayment order.

In each case, the companies appealed to the FTT. They argued that the property was not an HMO because the purpose of the occupation by the respondents was to provide security services so that it could not be said that the “only use” of the accommodation was as living accommodation. They also argued that the respondents had led no evidence of the open-market letting value of the land, so that it could not be said that they were in receipt of a rack rent and, therefore, they could not be said to be managing the properties for the purposes of s.72. The FTT and UT each rejected both arguments.

The Court of Appeal dismissed further appeals. The only use which the occupiers made of the land was as their living accommodation. Whilst their presence may have had the effect of deterring squatters, that was not a “use” of the land. The appellant companies were receiving significant sums from the guardians. They were not charities but commercial enterprises which existed to make money. The obvious inference was that the letting was on the best available terms and there was no need to lead valuation evidence in order to establish the rack rent.

The properties were therefore HMOs and therefore unlicenced.

Oliver Kew

Published on 08/11/2023