On 27 October 2023, the Court of Appeal handed down judgment in respect of two appeals: Global 100 Ltd v Jimenez & Others and Global Guardians Management Limited & Others v (1) La Leva & Others & Hounslow London Borough Council.
The decision confirms that legislation relating to Houses in Multiple Occupation (HMOs) applies to guardianship properties and HMO licences were required for the relevant properties.
If an HMO licence is required but has not been obtained, the guardianship companies could be liable under section 72(1) of the Housing Act 2014 for rent repayment orders in favour of property guardians who occupy the properties, as was the case here.
Background
The appeal involved two cases brought by connected property guardian providers, Global 100 Limited (Global 100) and Global Guardians Management Limited (Global Guardians).
The providers entered into licence agreements with individuals who paid a fee in return for residing in former commercial buildings. The issue for the Court of Appeal was whether the properties should have been licensed as HMOs.
The first issue that the Court of Appeal had to consider was whether the residential occupation by the property guardians of their living accommodation constituted the "only use" of that accommodation, a relevant limb of the assessment of whether a property was in HMO use.
The Court of Appeal held that it was apparent that the property guardians were using the living accommodation as their main residence. Whilst the guardians' live-in presence may have deterred unwanted third parties from entering the property, the use of the property remained as living accommodation. Therefore, the Court of Appeal rejected Global 100 and Global Guardians' argument that the guardians' use of the accommodation was for the dual purpose of security as well as living accommodation.
The second issue that the Court of Appeal dealt with was whether the Upper Tribunal (UT) was wrong to conclude that Global Guardians had a tenancy of one of the commercial buildings. Whilst the language of the agreement was more consistent with a licence, it was held that Global Guardians had been granted a tenancy and this was relevant to the finding that they were a "person managing" the property within the meaning of section 263(3)(b) of the Housing Act 2014.
Thirdly, the Court of Appeal considered whether the guardianship management companies were considered a person in control because they were receiving rack rent. Global 100 disputed that it was not a person "in control" as the guardians had provided no evidence of the open market letting value of the land. However, the Court of Appeal dismissed this argument and agreed with the First Tier Tribunal and Upper Tribunal that Global 100 was a commercial organisation and would be achieving a market rent, the Court was prepared to reach a decision on this point in absence of valuation evidence.
Guardianship properties of sufficient size need to be licenced as HMOs and additional protections will be required in agreements with the property owner to ensure there is a clear obligation on the guardianship companies to obtain an HMO licence as required. Managing a licensable HMO without a licence and failure to comply with the requirements of a licence is an offence under Section 72(1) of the Housing Act 2004 and can result in fees upon conviction or civil penalties.
