In Cabo v Dezotti [2022] UKUT 240 (LC), the Upper Tribunal (Lands Chamber) has determined three important issues in respect of an application for a rent repayment order against a freeholder owner of an HMO, who was not named as the landlord in the tenancy agreement but who had contracted with a company, with no proprietary interest in the property, to manage the same.
The First-tier Tribunal found the appellant guilty of being in control of or managing an unlicensed HMO contrary to section 72(1) of the Housing Act 2004. It was satisfied that she fulfilled the definition of “a person having control” of an HMO within the meaning of section 263(1) because she was entitled to receive the rack rent. Additionally, the FTT found that she fell within the definition of “a person managing” an HMO within the meaning of section 263(b). As the owner of the property, the FTT found that the appellant had entered into an arrangement with a company that was neither the owner nor the lessee of the property, by which the company received rents that would otherwise have been received by the appellant herself. The FTT was also satisfied on the evidence that the appellant was the landlord of the property for the purposes of the Housing and Planning Act 2016. It found that the company had no proprietary interest in the property and was acting as the undisclosed agent of the appellant.
The UT was asked to determine the following issues on appeal by the freeholder:
- Could the owner of a property be a person in control when someone else was collecting the rack rent and it was said not passing it on to the owner?
- Did the FTT correctly interpret and apply section 263(3)(b) in making its alternative finding that the appellant was a person managing the property?
- Could a company with no proprietary interest in the property be a landlord?
The UT analysed the definition of “a person having control” of an HMO as set out in section 263(1) by having regard to the definition of “a person managing” an HMO in section 263(3). The UT noted that both concepts related to the receipt of rent. In the case of “a person having control”, it was the entitlement to receive the rack rent; namely, at least two-thirds of the property’s full net annual value. In the present case, the property was let at a rack rent and the rents were received. Yet, “a person having control” was required to be someone in actual receipt of the rents. In the present case, the appellant, by virtue of her agreement with the company, was never in actual receipt of the rents – she was not “a person having control” of an HMO. Indirect receipt was insufficient for the purpose of section 263(1).
When considering the alternative basis of fixing the appellant with responsibility for licensing the property, the UT found the FTT had not erred. The appellant was “a person managing” an HMO within the meaning of section 263(3)(b). Owing to the arrangement the appellant had with the company, she was not in receipt of the rent or any other payment from those in occupation of the property. It was expressly stipulated in the agreement that the company could retain all income from lettings “with no recourse or accountability to her”. Further, the company was not an owner or lessee of the property, but was entitled to receive the rents by virtue of its management agreeement with the appellant.
Lastly, the UT found that a relationship of landlord and tenant could exist where a person did not have a proprietary interest in the property. Yet, the proper question was whether the FTT was correct to find that the appellant was the respondent’s landlord? It was. The UT found that the company acted as the undisclosed agent of the appellant when it entered into the tenancy agreement with the respondent. When the true relationship between the company and the appellant became known, the respondent was entitled to apply for an RRO to be made against the appellant as her landlord.
Elizabeth Dwomoh is a barrister at Lamb Chambers
