A person having control of or managing a house in multiple occupation commits an offence, under section 72 of the Housing Act 2004, if the HMO is required to be licensed but is not so licensed.
A tenant can apply to the First-tier Tribunal for a rent repayment order to be made against such a person. In recent years, applications for RROs have become a fertile source of litigation between private residential tenants and their landlords. In Cottam and others v Lowe Management Ltd [2023] UKUT 306 (LC), the Upper Tribunal (Lands Chamber) was asked to determine on appeal who, within the meaning of section 263 of the 2004 Act, was a “person having control” of premises.
The provisions
Section 263(1) defines a “person having control” of premises as the person who receives the rack rent of the premises or who would so receive it if the premises were let at a rack rent. The “rack rent” is defined in section 263(2) as a rent which is not less than two-thirds of the full net annual value of the premises.
Pursuant to paragraphs 1 and 2(1)(f) to Schedule 14, a building is not an HMO for any purposes of the 2004 Act, other than Part 1, if the person managing or having control of it is a health service body within the meaning of section 9 of the National Health Service Act 2006.
The background
The Gables was a former residential home operated by NHS South East London Clinical Commissioning Group. CCG was a health service body within the meaning of section 9. At all material times, CCG was the freeholder of the Gables, but it subsequently disposed of its interest.
In 2020, CCG appointed as its agent NHS Greenwich Charitable Trust. The trust was not a health service body. Acting as agent for CCG, the trust entered into an agreement with Lowe Guardians Ltd. Under the terms of the agreement, Lowe was to provide guardianship services in respect of the Gables. The FTT found that CCG had effectively leased the Gables to Lowe at nil rent.
Lowe appointed the respondent, Lowe Management Ltd (LM), to enter into agreements with various guardians to occupy the Gables, including the appellants, Phoebe Cottam and six other guardians.
The dispute
In January 2022, the appellants applied to the FTT for an RRO against LM. They argued that LM had committed an offence under section 72(1) as the Gables was an HMO that had been unlicensed during the period of their occupation.
LM contended that the Gables was not an HMO by virtue of paragraphs 1 and 2 to Schedule 14 because CCG was the person having control of the Gables. The appellants argued that a building could be an HMO in relation to one person and, at the same time, not another person. Although CCG was exempt by virtue of paragraphs 1 and 2 to schedule 14, LM was not. Accordingly, the Gables was an HMO in respect of LM as it was a person in control of or managing the Gables. The FTT disagreed with the appellants as it found that CCG was the only person in control of the Gables. The appellants appealed.
Clear as day
On appeal, it was argued on behalf of the appellants that the FTT had misconstrued paragraphs 1 and 2 to Schedule 14. The appellants argued that Schedule 14 had to be considered with reference to each individual person rather than in relation to the particular building. In essence, more than one person could be the “person having control” of a property.
LM argued that paragraphs 1 and 2 to Schedule 14 were clear. A straightforward reading of the provisions meant that, if the person in control of the building was a body listed in paragraph 2(1) to Schedule 14, then the building was not an HMO for any purposes of the 2004 Act, save Part 1. The UT agreed.
The UT found that the appellants’ construction of Schedule 14 was strained and ran contrary to the plain words of the statute. If CCG satisfied the definition of a “person having control” under section 263(1) then the Gables could not be classed as an HMO.
Reality
It was further argued by the appellants that the FTT had erred in finding that CCG was the “person having control” of the Gables. The FTT had determined that CCG let the Gables to Lowe on a lease but not at a rack rent. Yet it found that CCG was the person in control of the Gables by construing section 263(1) as importing a hypothetical proposition of the person who would have received the rack rent had the property been let at a rack rent.
The UT found that the FTT had erred. Section 263(1) did not import any hypothetical proposition. Relying on the authorities, the UT observed that, if premises were let at a rack rent, the “person having control” was the person who received the same. In determining who was the person “who would so receive it if the premises were let at a rack rent”, such a determination had to be grounded in reality – who could grant a new lease at a rack rent. In the present case, CCG had already granted a lease of the property to Lowe and could not grant a lease of the same to anyone else at a rack rent.
Image © Pavel Danilyuk/Pexels
Elizabeth Dwomoh is a barrister at Lamb Chambers
