16/12/2019

Property Guardians and Rent Repayment Orders

Oxley v Live in Guardians Limited LON/00BG/HMF/2019/0037

Thanks to Flat Justice (who represented the applicant) for news of this First Tier Tribunal decision.

Ms Oxley occupied a room and shared communal space at a property that was formerly industrial offices, but had been somewhat adapted for occupation by property guardians, with lightweight partitions creating ‘rooms’. Over four floors there were some 16 such rooms, with shared cooking, bathroom and storage facilities per floor. Ms O occupied this property between August 2018 and February 2019. She had been given a ‘licence’ to do so by Live In Guardians Ltd, (LIG) a guardian firm, on a monthly licence fee of £927

No HMO licence had been obtained by LIG in respect of the property. After leaving the property, Ms O brought an application for a rent repayment order.

Ms O argued i) that she was a tenant, but if not, then ii) she was a licensee and as such Housing Act 2004 and Housing and Planning Act 2016 applied, such that the property was a licensable HMO and she was entitled to a rent repayment order.

LIG argued that HPA 2016 didn’t apply because Ms O was neither a tenant nor a licensee. And, as not occupied by tenants or licensees, the property was not an HMO.

These were brave submissions by LIG, and not only because the licence agreement for the property described itself as a licence agreement and the occupation as under a licence. Nonetheless, LIG’s counsel argued:

His submission went on to deal with the approach to the consideration of legislation, relying on an extract from Bennion on Statutory Interpretation. The definition of license was to be found in the text book ‘The Law of Real Property’. He drew to our attention, set out in both the Agreement and the Handbook an obligation on the part of a resident to stay at the property on a full-time basis. The effect he said was that Ms Oxley having signed the Agreement came under an obligation to go into occupation and to stay there. This was solely for the benefit of the respondent. There was a legal requirement to live at the property It was he said a personal contract which did not create a licence.

This did not go very well. While the Tribunal, in view of Camelot Guardian Management Ltd v Khoo (2018) EWHC 2296 (QB)  (our report), was prepared to hold that Ms O had a licence, not a tenancy, that did not help LIG:

In our finding the Agreement has all the elements of a licence to occupy the room at the Building and that Ms Oxley and Mr Burke had, in real and practical terms, the exclusive use of the sleeping accommodation. The definition of the Nature of a Licence to be found in The Law of Real property at chapter 33 is consistent with this. We heard from Ms Oxley that it was never suggested that she would change rooms, other than by reaching agreement with another guardian and there was no realistic intention that their occupancy of that room, 4.1, would be changed. We find that by reference to the terms of the Agreement, where the phrase licence is used throughout, as it is in the Handbook, and taking into account the authorities provided to us, that Ms Oxley did indeed occupy as a licensee, had in reality exclusive use of the room 4.1 and as such falls within the provisions of the HPA and is entitled to apply for a RRO.

The question then was how much LIG should pay, given that it was common ground that the property would have been be a licensable HMO and should have been licensed if occupied by tenants or licensees.

The rent/licence fee was £927 per month, which included utilities. While LIG was entitled to a deduction from the RRO sum for utilities, that would be 10%, not the 15% alleged without evidence, as that was too high.

Other sums for a deposit and pre contract costs were not awarded, as were not rent.

LIG’s other attempts at mitigation failed because, amongst other points abut them being a professional landlord, they had been one of a group of property guardian firms that had commissioned a detailed paper on the relevant law for property guardianships “prepared by some eminent lawyers including Andrew Arden QC”, which was described by that group as a “white paper” (Full disclosure below).

On the FTT considering the ‘white paper’:

The respondent is a professional landlord and has received advice from lawyers as to the basis upon which they can let buildings of this nature. The terms of a white paper were included within the documents provided by the applicant.

There is a specific part of the white paper setting out the possibility of HMO requirements indicating it is essential to identify whether the property or part thereof is an HMO and whether it requires a licence. In that regard we find the fact that the respondent has applied to the local authority for an HMO licence for the Building is evidence of its true position. Further, it is noted that under the heading HMO exceptions it states that it is unlikely that this would be relevant to Property Guardianship. We find that this property is an HMO and that the respondents should have known that before letting it to individuals. In the circumstances therefore we find that the respondents conduct in not applying for an HMO licence before July of this year means that it would be inappropriate to reduce the amount of the RRO beyond the 10% reduction we have made.

RRO for £4,937.40 made.

Comment

Full disclosure moment – along with Andrew Arden QC and Andrew Dymond, I was an author of the document that got called a ‘white paper’ by the Guardian firms that commissioned it. You can download a copy here. It pre-dates Camelot v Khoo, but I don’t think Khoo majorly impacts our advice on the tenancy/licence distinction, and certainly not our advice on the application of Housing Act 2004 on HMO licensing and obligations. (Yes, I am saying we told you so.)

What HPA 2016 does do is make clear that rent repayment orders can also be sought by licensees. As such it seemed very likely that property guardian firms could face RROs for unlicensed HMOs. We’ve seen that Guardian firms are not necessarily great at licensing HMOs… (Indeed LIG have an entry on the Mayor of London’s rogue landlord database following a £15,000 civil penalty for an unlicensed HMO by Westminster City Council. The property in this case was in E2, not in Westminster).

LIG’s inventive defence in this case – that occupation was not under a tenancy or a licence, but a contractual obligation to occupy – was, I think, rightly doomed to failure.

So, many property guardian occupied properties will be HMOs, and fall under either mandatory or selective or additional licensing. If they are not licensed, property guardians can claim up to 12 months ‘licence fees’ back for the unlicensed period.

We’ve seen that the Camelot ‘replacement’, Watchtower, is still getting the basics of the applicable law wrong (after Camelot was folded by their Dutch parent company after hefty legal costs on a prosecution for failure to licence an HMO and meet HMO management regulation requirements). And they are far from alone in not meeting regulatory requirements. It is one thing being in a grey area on the tenancy/licence distinction, but ignoring regulatory requirements on the basis that, as LIG’s counsel put it, it is “a business model that helps all, a good thing and everyone is happy”, is not going to fly.

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.

8 Comments

  1. getrentbackblog

    Would be interested to know what you think on the tenancy v licensee issue here. The Tribunal held it was a licence not a tenancy. But they agreed that Ms O had exclusive occupancy of a room. Surely that would argue for this being a tenancy not a licence?

    Reply
    • Giles Peaker

      Necessary but not sufficient. Have another read of Khoo v Camelot, particularly para 27.

    • Michael Barnes

      I read it as “being a licence is sufficient for a RRO; LiG have provided evidence for believing it is a licence; therefore no need to determine if it is a tenancy”.

    • Giles Peaker

      Not quite. See para 45.

  2. Daniel N

    “Mr Tanney in his submissions to us asked us to find that Ms Oxley was neither a tenant at nor a licensee but somebody occupying the property in effect on a term of employment.”

    Is there something I’m missing here about this aspect of the defence, or is this as daft as it sounds? I mean, is there any precedent to suggest that accommodation occupied as a term of an employment contract *isn’t* at least a licence? Seems to fly in the face of basically every authority on tied accommodation.

    Reply
    • Giles Peaker

      Let us just note that the argument was not successful ;-)

  3. getrentbackblog

    On the tenancy v licence argument, normally the 3 tests for a tenancy would be (i) rent paid for a (ii) period with (iii) exclusive possession. All 3 met here.

    The brochure from LiG helped defeat their own argument re employment at the hearing, as we pointed out: under the BIG heading WHAT IS A GUARDIAN? “…You will not be required to undertake any security functions other than occupying the Property…”

    Reply
    • Giles Peaker

      Exclusive possession is not the same as exclusive occupation. The fact that someone has a room ‘of their own’ does not make it exclusive possession. See para 27 of Khoo.

      See also the ‘white paper’ at 1.2

      “The relevant issues are therefore whether the occupier has exclusive possession and, even if he or she does so, whether the surrounding circumstances suggest that the relationship is not one of tenancy. There is an element to which these criteria interact, i.e. although an occupier appears to enjoy exclusive possession, the surrounding circumstances may mean that he or she is not a tenant, which would mean that, however much the occupier enjoys it in practice, he or she does not have it as a matter of law.”

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