Housing – House in multiple occupation – Property guardians – Appellant companies bringing conjoined appeals arising from management of unlicensed HMOs – Whether properties capable of meeting standard test for HMOs within section 254(2)(d) of Housing Act 2004 – Whether freeholder of property granting tenancy or licence of property – Whether appellant was person “in control” of property within section 263(1) – Appeals dismissed
The appellant property guardian companies brought conjoined appeals against decisions concerning their management of the former Addison Lee office building at 35-37 William Road, Euston, London, and a former nursing home at 14-16 Stamford Brook Avenue, London W6. In the first appeal, the appellant was a company managing the William Road property. In the second appeal, the appellants (GGM and Global) were companies in control of or managing the Stamford Brook property and a director of those companies. In each case, it was argued that the appellants were “in control” of an unlicensed house in multiple occupation (HMO), contrary to section 72 of the Housing Act 2004.
In the William Road appeal, the respondents were property guardians at the premises. The First-tier Tribunal and Upper Tribunal ruled that the appellant had committed an offence under section 72(1) by failing to licence the property and made rent repayment orders (RROs) in favour of the respondents: [2022] UKUT 50 (LC); [2022] PLSCS 40.
In the Stamford Brook appeal, the respondents were the local authority for the area in which the property was located and property guardians at that property. The FTT and UT held that the appellants had each committed an offence under section 72. They dismissed appeals by the appellants against civil penalty notices issued under section 249A by the first respondent and made RROs in favour of the other respondents: [2022] UKUT 259 (LC); [2022] PLSCS 159.
Held: The appeals were dismissed.
(1) Under section 254(1)(a) of the Housing Act 2004, a building or a part of a building was a “house in multiple occupation” if it met the conditions in subsection (2) (the standard test). Under section 254(2)(d), a building or a part of a building met the standard test if the occupation of the living accommodation constituted the only use of that accommodation.
On the findings of fact made by the FTT, it was apparent that the property guardians were using the living accommodation as their main residence. They had no responsibilities as property guardians save to live in the accommodation. The presence of the property guardians in their living accommodation and the property might have deterred persons from entering the property, but it did not convert the use made of the living accommodation. In those circumstances, the Upper Tribunal was right in both appeals to find that the occupation of the property guardians of the living accommodation constituted the sole use of that living accommodation. The standard test set out in section 254(1)(a) of the Housing Act 2004 was satisfied in respect of both properties: Ludgate House Ltd v Ricketts [2020] EWCA Civ 1637; [2021] EGLR 3 and Global 100 v Laleva [2021] EWCA Civ 1835; [2022] EGLR 2 considered.
(2) The issue of whether GGM had been granted a tenancy, and not a licence, in respect of the Stamford Brook property was relevant to the finding that it was a person managing the property. That was because the person managing the property was defined by section 263(3) of the 2004 Act as the person who was an owner or lessee of the property. The definition of lessee in section 262 of the 2004 Act was a person with a grant of a lease or tenancy.
The agreement had provided for a term and payment of rent, and there was sufficient evidence before the FTT to support its finding that GGM had been given exclusive possession, even though the written agreement had been drafted using language more consistent with a service agreement or licence. On those findings, and in the light of the decision in Street v Mountford [1985] 1 EGLR 128, it was apparent that GGM had been granted a tenancy of the Stamford Brook property.
As was apparent from the judgment of the Court of Appeal in Laleva, GGM had then licensed the guardians to occupy the property. It was liable as a person managing the Stamford Brook property, and there was no need to establish whether it was also liable as a person in control of the property.
(3) That issue was relevant to the finding that Global was a person having control of the property. That was because section 263(1) of the 2004 Act defined a person having control as “the person who receives the rack-rent of the premises (whether on his own account or as agent or trustee of another person), or who would so receive it if the premises were let at a rack-rent”. Section 263(2) defined a rack-rent as “a rent which is not less than two-thirds of the full net annual value of the premises”.
The FTT and UT were entitled to find that Global had received the rack-rent for the property. The freeholder had only received £600 per month for letting the property. GGM, with Global, had arranged for the property to be modified for habitation and then licensed property guardians to live in the property. That generated £15,000 per calendar month. Global was in the business of making money. The property guardians were willing licensees of the living accommodation and Global was a willing licensor.
The evidence of the transactions between Global and the property guardians was, at the least, some evidence of the market value of the accommodation, and the FTT and UT were entitled to rely on it to find the rack-rent of the property. There was nothing to suggest that anything more could be obtained from letting or licensing the property. In any event, as Global was the only person who could charge the guardians for living in the property, if the property had been let at a rack-rent, it would be Global that “would so receive” the rack rent for the purposes of section 263(1).
Nicholas Grundy KC and Sean Pettit (instructed by Kelly Owen Ltd) appeared for the appellants in both appeals. Justin Bates and George Penny (instructed by Hammersmith & Fulham Law Centre) appeared for the respondents in the first appeal; Ranjit Bhose KC and Tara O’Leary (instructed by HB Public Law) appeared for the first respondent in the second appeal; Justin Bates and George Penny (instructed by Hammersmith & Fulham Law Centre) appeared for the other respondents.
Eileen O’Grady, barrister
