In Global Guardians Management Ltd v London Borough of Hounslow [2022] UKUT 259 (LC); [2022] PLSCS 159, the Upper Tribunal (Lands Chamber) was tasked with determining if a former office building, occupied by property guardians, was a house in multiple occupation – and, if so, whether civil penalties and a rent repayment order could be levied against the corporate entities and director who controlled and/or managed it.
Terms of licence
The Stamford Brook Centre was a former office building situated in London, W6. The London Borough of Hounslow was the relevant local housing authority for the area.
In March 2016, Global Guardian Management Ltd (GGM) entered into a contractual agreement with the owner of the building, NHS Property Services Ltd (NHSPSL). Under the agreement, GGM was to provide guardian services at the building for a fee. On taking possession, GGM converted the building, creating 30 bedrooms with four kitchens, four bathrooms and four toilets.
GGM subsequently entered into a purported contractual service agreement with its sister company, Global 100 Ltd (Global). Under the terms of the agreement, Global was to find guardians and grant them licences to occupy the rooms.
Under the terms of the licence agreements, the guardians were required to occupy their rooms for the purpose of protecting the building. Each guardian had a key to their room and paid a monthly “licence fee” to Global.
Guardians of the HMO
The respondent guardians applied to the First-tier Tribunal for a rent repayment order to be made against Global on the basis that it had committed an offence under section 72(1) of the Housing Act 2004.
Global denied the building was an HMO on the basis that the guardians did not solely occupy their rooms as their only or main residences, and that they also occupied their rooms for the provision of property protection services. The FTT disagreed. It found that the guardians had exclusive use of their rooms and that use was for residential purposes only within the meaning of section 254(2)(d) of the 2004 Act.
On appeal to the UT on this issue, Global and GGM both argued that guardians were not in rateable occupation of the building because their position was analogous to the position of a service occupier, who did not enjoy exclusive occupation. Their occupation was necessary for the provision of guardian services.
The UT paid short shrift to this proposition. Global and GGM accepted the facts of the appeal were materially indistinguishable from Global 100 Ltd v Jimenez and others [2022] UKUT 50 (LC); [2022] PLSCS 40. The UT held in Jimenez that whether the guardians were in rateable occupation of the building was of no assistance in determining whether section 254(2)(d) was satisfied. The purpose of the ratings legislation and the 2004 Act were materially different. The focus on the latter was the objective use of the premises in question and not on the respective rights of the licensor and licensee in their agreements. The only use of the living accommodation was use as the only or main residences of the guardians. Accordingly, the condition in section 254(2)(d) was satisfied and the building was at the material time an unlicensed HMO.
Person managing
The UT upheld the FTT’s finding, on the evidence that GGM had been granted exclusive possession of the building under the terms of its agreement with NHSPSL. GGM’s possession was not attributable to the provision of services or an agency agreement with NHSPSL. Protection and security for the building was merely a by-product of GGM’s exclusive beneficial use of the building.
The FTT additionally found that GGM and Global were both persons managing the building and persons in control of the building. The UT departed from the FTT’s findings of these two matters.
In light of the finding that GGM was a lessee of the building, the UT found that it was also a “person managing” the building for the purposes of section 263(3)(b) of the 2004 Act. But for its arrangement with Global, GGM would have granted the occupational licenses to the guardians and it would have received the licence fees.
Global was not a “person managing” the building because, although it received the licence fees from the guardians, it was not the owner or lessee of the building. Additionally there was no evidence that it was acting as a trustee or agent of GGM.
Conversely, the UT found that Global was a “person in control” of the building, but GGM was not. Pursuant to section 263(1), Global was in receipt of the rack-rent as defined by section 263(2). On balance the evidence demonstrated that guardians were paying Global in aggregate more than two-thirds the net annual value of the building within the definition of “rack-rent” in section 263(2). A clear distinction could not be drawn, in law or fact, between the aggregate of the licence fees payable by the guardians, being the fees for occupation of the 30 available residential rooms in the building, and the rack-rent of the building as a whole.
Finally
Although Global and GGM succeeded in part on their appeal, the UT found that the civil penalties were properly issued because they were found to be either a person managing or a person in control of an HMO.
For the same reason, Global’s appeal against the RRO failed.
Elizabeth Dwomoh is a barrister at Lamb Chambers
