Housing – House in multiple occupation – Rent repayment order – Appellant owning freehold of house – Appellant appointing company as agent to manage property – Company purporting to grant respondent licence to occupy room – Respondent applying for rent repayment order against appellant – First-tier Tribunal rejecting evidence that appellant received no benefit from letting – Appellant appealing – Whether appellant being person managing or having control of HMO – Whether appellant being landlord of respondent – Appeal dismissed
In 2005, The appellant purchased a six-bedroom terraced house at 6 Bellamy Close, West Kensington, London. The property was on two floors with a converted attic; the former kitchen and living room had been repurposed as bedrooms to maximise the number of occupants. The appellant was married to G who was the sole director of a company incorporated in February 2015, specialising in the short-term letting of properties.
In January 2016, the appellant appointed the company as her agent to manage the property for an annual renumeration of one peppercorn.
In September 2016, the respondent signed an agreement allowing her to occupy one of the rooms in the property. The agreement was headed with the name and address of the company and stated that the document was a “licence to occupy a room as holiday let”. G signed the agreement on behalf of the company. The arrangement was to be for a minimum of six months but continued thereafter from month to month until the respondent gave one month’s notice.
The respondent initially paid her rent in cash to G but, from June 2018, she paid by bank transfer into an account held by the appellant’s brother (D). In June 2019, she moved out of the property. In September 2019, the local housing authority investigated whether the property was an unlicensed HMO.
The respondent applied for a rent repayment order. The First-tier Tribunal (FTT) was satisfied that the property was an HMO which required mandatory licensing and ordered the appellant to repay the full amount of £9,600 paid in the last year of the respondent’s occupancy. The appellant’s appeal was determined on written representations.
Held: The appeal was dismissed.
(1) The concepts of having control of, or managing, an HMO under section 263 of the Housing Act 2004 were both related to the receipt of rent. There was no doubt that in this case the property was let at a rack-rent and that the rents were received for the purposes of section 263. Nothing in section 263(1) required that the person having control should have any interest in the property itself. That was in contrast to a person managing, who had to be an owner or lessee of the premises.
The reference in section 263(1) to someone who “receives” rent, was to actual receipt. Money had to come into the hands of the person who had control. A person managing also received rent, but they might do so “whether directly or through an agent or trustee”.
An owner of property who did not collect the rent was not a person in control. Whether or not the rent was being passed on did not matter for that purpose. It followed that the FTT was not entitled to find that the appellant was a person having control of the property: London Corporation v Cusack-Smith [1955] AC 337 considered.
(2) Section 263(3)(b) applied where an owner or lessee of an HMO did not receive rents or other payments from those in occupation of parts of the premises, because they had entered into “an arrangement… with another person who is not an owner or lessee of the premises by virtue of which that other person receives the rents or other payments”. The owner or lessee who entered into the arrangement was a person managing the property notwithstanding they did not receive any rent.
Taking the management agreement between the appellant and the company at face value, it was an arrangement within section 263(3)(b). The appellant had not been receiving rent or other payments from those in occupation of the property and would have received the rents “but for having entered into” the management agreement.
The effect of the agreement was that the appellant was not in a position to receive rent or other payments from those in occupation. She had placed the management of the property with the company and had stipulated that the company was to be entitled to retain the income from lettings “with no recourse or accountability” to her. That was sufficient to demonstrate the required causal connection between the arrangement and the non-receipt of rent.
The arrangement was made with another person who was not an owner or lessee of the property. The management agreement stated explicitly that it did not create any relationship of landlord and tenant “nor any tenancy, licence, lease or joint venture”. The FTT’s findings that section 263(3)(b) applied and that the appellant was a person managing the property were correct.
It followed that the obligation to obtain an HMO licence under Part 2 of the 2004 Act fell on the appellant and she committed an offence under section 72(1) when she failed to do so.
(3) The relationship between the company and the appellant was that of agent and principal. The agent was given power, within prescribed limits, to effect the principal’s legal relations with third parties.
The FTT found that, under the management agreement, the company had express authority to manage the property exclusively for the appellant’s benefit, and to let it, and to deal with the income from the lettings as it and the appellant agreed or as she directed; whichever was the case, the result was that the appellant had the benefit of at least part of the rent and was entitled to receive a rack rent: Bruton v London & Quadrant [1999] 2 EGLR 59 and Rakusen v Jepsen and others [2020] UKUT 298 (LC); [2020] PLSCS 203 considered.
(4) The appellant was an “undisclosed principal” who might sue or be sued on any contract made on her behalf by her agent acting within the scope of its authority.
The evidence showed that, although the company let the property in its own name, it did so on behalf of the appellant as her agent; it thereby created the relationship of landlord and tenant between the appellant and the respondent. Unlike the company, which had no proprietary interest, the appellant was the owner of the freehold legal estate and a tenancy granted by an agent acting on her behalf would be good against the world: Siu Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 applied.
Accordingly, the FTT was entitled to find that the appellant was the respondent’s landlord and could be the subject of a rent repayment order.
Eileen O’Grady, barrister
