Global 100 Ltd v Laleva (2021) EWCA Civ 1835
There is a hell of a lot packed into one appeal here, so I’ll try to be brief. This was Global 100’s appeal of a first instance appeal (our note here) in which HHJ Luba QC had held that the first instance District Judge had been wrong to decide the possession claim against property guardians and make a possession order at first hearing, as there was a defence which appeared to be substantial and required further evidence and hearing.
CPR 55.8 provides
(1) At the hearing fixed in accordance with rule 55.5(1) or at any adjournment of that hearing, the court may –
(a) decide the claim; or
(b) give case management directions.
(2) Where the claim is genuinely disputed on grounds which appear to be substantial, case management directions given under paragraph (1)(b) will include the allocation of the claim to a track or directions to enable it to be allocated.
The issues on the appeal (and cross appeal), in order:
i) What is the test under CPR 55.8(2) for ‘genuinely disputed on grounds which appear to be substantial’?
ii) Was the District Judge right that the defence raised did not meet that test?
iii) Was Global 100 entitled to a possession order at all?
i) The CPR 55.8(2) test
HHJ Luba QC had found that the threshold ‘must be a relatively low one’. On second appeal, Global argued that the threshold should be higher than that of summary judgment (CPR 24), because of the term ‘genuinely’. Ms Laleva argued the threshold should be lower than summary judgment given that Part 55 did not require a defence to be advanced prior to the first hearing, and by analogy with Akerman-Livingstone v Aster Communities Ltd (2015) UKSC 15, that there would be likely to be disputed facts or assessments that could nnot be dealt with summarily.
The Court of Appeal, in Lewison LJ’s lead judgment, held that the test was the same as that for summary judgment. Noting Lady Hale’s comment at (35) and (36) of Akerman, that:
She agreed with this court that the court can deal with possession claims summarily “without the summary judgment provisions of CPR Part 24 being invoked”. If that is the case (and I respectfully agree that it is) then it is inconceivable that a different test would be applied under CPR Part 55.8 (2) from that applicable to an application under Part 24.
Further, the wording of CPR 55.8(2) found its closest parallel in the wording of rule 10.5 (5) of the Insolvency (England and Wales) Rules 2016, that a court may set aside a statutory demand in bankruptcy if “the debt is disputed on grounds which appear to the court to be substantial”. In Collier v P & M J Wright (Holdings) Ltd (2007) EWCA Civ 1329 that test had been held to be the same as that for summary judgment.
Lord Lewison went on to conclude
In my judgment the test for summary judgment is the same test as that which applies to the required threshold under CPR Part 55.8 (2). Were the test to be a lower test, it would be a waste of resources (both the parties’ resources and the court’s resources) to give directions for trial on the basis of a defence (whether pleaded or not) that would not survive an application for summary judgment. Were it to be a higher test, it is difficult (if not impossible) to formulate it with any precision. The question, then, is whether the defendant has shown a real prospect of success in defending the claim. The principles applicable to an application for summary judgment are well-settled (see for example Easyair Ltd v Opal Telecom Ltd [2009] EWHC 539 (Ch)); and I need not set them out here.
It should be noted that this is where a defence has been filed:
It may be procedurally unfair to decide a case against an occupier who turns up unannounced at a hearing without having filed a defence, but who tells the district judge that there is (or may well be) a substantive defence which he wishes to advance. But that does not tell you much, if anything, about the test to be applied once an occupier has filed a defence.
ii) The defence in this case
There were two main components to the defence presented in this case. a) That the guardians’ licences were in fact tenancies, and b) that Global 100 had no right to possession. We’ll come back to the right to possession under iii) below.
Was the written agreement a licence or a tenancy?
The starting point was Street v Mountford (1985) AC 809:
“Both parties enjoyed freedom to contract or not to contract and both parties exercised that freedom by contracting on the terms set forth in the written agreement and on no other terms. But the consequences in law of the agreement, once concluded, can only be determined by consideration of the effect of the agreement. If the agreement satisfied all the requirements of a tenancy, then the agreement produced a tenancy and the parties cannot alter the effect of the agreement by insisting that they only created a licence.”
But as well as what ws on the page, the Court could consider the circumstances in which the agreement was made, as per AG Securities v Vaughan (1990) 1 AC 417:
“In considering one or more documents for the purpose of deciding whether a tenancy has been created, the court must consider the surrounding circumstances including any relationship between the prospective occupiers, the course of negotiations and the nature and extent of the accommodation and the intended and actual mode of occupation of the accommodation.”
If an agreement conferred on the occupier the right to exclusive possession, for a term at a rent, “then in all likelihood a tenancy has been created”. But that exclusive possession was not the end of the matter. As per Street v Mountford:
“There can be no tenancy unless the occupier enjoys exclusive possession; but an occupier who enjoys exclusive possession is not necessarily a tenant. He may be owner in fee simple, a trespasser, a mortgagee in possession, an object of charity or a service occupier.”
Further, sole use was not the same as exclusive possession, even where (as in this case) the occupier was in sole occupation of a dwelling house for which they paid. E.g. Stewart v Watts (2016) EWCA Civ 1247, an almshouse case (our report). The surrounding circumstances to an agreement included why the occupier had been let into occupation. In Westminster CC v Clarke (1992) 2 AC 288 (a hostel for the homeless), exclusive possession was found to be inconsistent with the purposes for which the Council provided the accommodation.
In the present case the purpose of G100 in allowing Ms Laleva (together with others) into occupation was to provide guardian services to NHS Property Services. It was essential, in order to fulfil that purpose, that G100 should be able to hand back the Property as and when NHS Property Services required it. Those who occupied the various rooms in the Property were chosen by G100. They were not a self-selected group.
Turning to the substantive terms of the agreement, there are a number of points to be made. First, the purpose of the agreement was set out at its inception. It was to enable the provision of guardian services which required Ms Laleva to occupy the designated space in order to perform those services. Second, that was repeated in the preamble to clause 1 and in clause 1.1. Clause 1.3 entitled G100 to alter the location and extent of the living space, which is, in itself, inconsistent with the grant of exclusive possession. That, in turn was reinforced by clause 1.5. Third, clause 4.3 required amicable and peaceful sharing of the property with others selected by G100. Fourth, the description of the rights granted was “non-exclusive occupation” of the whole property, not any particular part of it.
As I have said, the nature of the agreement was the provision of the guardian services. Occupation of the property by Ms Laleva and others was necessary in order for those services to be provided. That is reinforced by clauses 4.1 and 4.2 of the agreement which required Ms Laleva to sleep in the property for at least five nights out of seven; and to ensure that she or at least one other guardian was in the property at any given time. Those obligations were necessary in order to perform the guardian services.
To this extent, the occupation was akin to a service occupation. Even though guardians wre not employees of the guardian firm providing the service to the property owner, this analysis had been followed in Ludgate House Ltd v Ricketts (2020) EWCA Civ 1637 (our note).
And so
In my judgment, on the proper interpretation of Ms Laleva’s agreement considered in the light of the surrounding circumstances and the purpose of the agreement, the argument that it created a tenancy rather than a licence has no real prospect of success.
Was the agreement a sham, or was there a real prospect of establishing this?
To establish a sham it was necessary to establish that both parties shared the intention as to the actual purpose of the agreement. While Ms L may well have had the intention of having a tenancy not a licence, there was no prospect of establishing that G100 shared that intention. This was regardless of whether G100 had exercised all its rights under the agreement, or even if it did not intend to do so. The rights still existed.
the very purpose of the arrangement between NHS Property Services and GGM was so that the latter could provide guardian services to the former. It was essential, in order to fulfil that purpose, that GGM should be able to hand back the Property as and when NHS Property Services required it. There is no basis on which it could successfully be argued that the arrangement between NHS Property Services and GGM was a sham (even if such an allegation had been pleaded). The inter-company arrangement between GGM and G100 was made in furtherance of that arrangement. Given that it is common ground (expressly admitted in the defence) that the purpose of the agreement between G100 and Ms Laleva was also that she would occupy the Property in order to facilitate the provision of guardian services by G100, the unreality is in the contention that the agreement was a sham, for all the reasons that Butcher J gave.
iii) Was Global 100 entitled to possession?
Ms L, in this appeal, had advanced a rather elegant argument that, as Global 100 was expressly itself a licensee under the agreement with Global Guardian Management, and the property owner, it was estopped from asserting any other rights than those of a licensee, and one not in occupation. A licence did not give a possessory interest in land
a licensee is not entitled to bring a claim in nuisance (which is an interference with the possession of land): Hunter v Canary Wharf (1997) AC 655. Nor can a licensee bring a claim in trespass: Hill v Tupper (1863) 2 H & C 121. If a licensee cannot complain of trespass, it follows that he is not entitled to bring a claim for possession.
To that end Manchester Airport plc v Dutton (2000) 1 QB 133 was either wrongly decided or should be distinguished and limited.
The Court of Appeal did not agree. There was an estoppel in operation, but it was that as between landlord and tenant, which extended to licensor and licensee.
If a person with no interest in land purports to grant another a tenancy of it, that person (if let into possession) is estopped from disputing the grantor’s title. If the grantor subsequently acquires title, then the estoppel is, as the old phrase puts it, “fed”. This means that the landlord by estoppel is treated as if he had always owned the estate out of which the lease could have been granted. The tenant thereupon acquires the interest in the land which the transaction purported to grant him and which, up to that time, rested purely in estoppel.
Here,
GGM granted G100 a right to possession for the purpose of bringing claims for possession against guardians to whom it had granted licences. Even if that was not effective as at the date of the inter-company agreement between GGM and G100, GGM subsequently acquired a right to possession granted by NHS Property Services before the date of issue of the claim form. As at the date of the inter-company arrangement, G100 would have been estopped from challenging GGM’s title to grant it that right, and the subsequent grant of that right by NHS Property Services would have fed the estoppel.
And secondly, Ms L was given the right by G100 to occupy the property. It was not open to her to assert that G100 had no right to recover possession. As per Doe d Johnson v Baytup (1835) 3 Ad & El 188
The critical point is that the act of asking permission to come in gives rise to the estoppel. The title (or the lack of it) in the licensor is simply irrelevant.
Further
The fact that there is an estoppel means that, as between claimant and defendant, whether the claimant does or does not have a possessory interest in the land makes no difference. Either way, the defendant is unable to set up an alternative title whether in herself or a third party. That is entirely consistent with the bedrock principle of relativity of title which pervades English land law. (…)
Here Ms Laleva has enjoyed everything that the licence purported to grant her. Having done so, she must now perform her part of the bargain by leaving the Property.
Such an estoppel did not need to be pleaded by Global 100, only the relevant facts. Global 100 was entitled to seek possession under CPR 55. Whether they could do so aginst a pure trespasser was another matter and not this case.
Appeal allowed and cross appeal dismissed.
Comment
On CPR 55.8 – the position at a first hearing where a defendant tenant (or indeed licensee) attends and puts forward or indicates an inchoate or potential but undetailed defence, then 55.8(1)(b) should properly come into play – adjournment with case management directions, most likely including a pleaded defence. This has not changed.
However, once a fully pleaded defence has been filed, including if done for first hearing, then 55(8)(2) is potentially at play. Routinely, the defence will ‘appear to be substantial’ – there will be issues of fact and/or law that can not be dealt with summarily. That said, in the wake of this judgment and the effective importation of CPR 24 into Part 55 proceedings, I would anticipate, at least for a while, quite a few more applications or submissions from claimants that the defence did not meet the ‘summary judgment’ threshold and should be dismissed and a possession order made. This is not just a matter for first hearing, but could be done at a subsequent hearing after a defence was filed.
The summary judgment test, at CPR 24.2, is:
24.2 The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if –
(a) it considers that –
(i) that claimant has no real prospect of succeeding on the claim or issue; or
(ii) that defendant has no real prospect of successfully defending the claim or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial.
On the issue of property guardians, this is a very significant judgment. Camelot Guardian Management Ltd v Khoo (2018) EWHC 2296 (QB) (our report) had established, at least in the context of occupation of a commercial property, that the licence was not a tenancy, but this case was effectively of a residential unit (part of an old nurses’ home, although last used as offices), and in a position where Ms K could argue she did have sole possession, even exclusive occupation, of a particular lockable room. Further, the licence clauses about sharing the whole space, and being moved to another area of the property had not been exercised and it appeared wouldn’t be practicable to exercise.
Nonetheless, in the context of the purpose of the agreement – that Ms K occupy as a guardian, for the purpose of GGM/G100 providing guardian services to the owner, this was held to be a licence.
What is more, the issue of the guardian firm’s entitlement to recover possession from the guardian after termination of the licence, which I know has troubled some District Judges and seen some claims thrown out, was decided for the Guardian Firm – regardless of their lack of interest in the land, their licensee was estopped from denying their right to possession (assuming of course that the termination of the licence and NTQ were all up to legal requirements). So, regardless of whether the Guardian Firm would actually have sufficient interest to bring a possession claim against, say, a pure trespasser who had entered the property, this is simply not a defence that their licensee can raise against them.
That is, for the moment, pretty much game, set and match on property guardian’s rights…
It was the way that this case came to the court of appeal that decided its outcome.
It allowed the judgement to ignore the elephant in the room by simply accepting the central falsehood of Global and most other “guardian companies” i.e. that there is such thing in housing law as a guardian and that there are “guardian functions”. If there are not the claim of service occupation is false. This is the main sham. Whether the licence is a tenancy or not is not the issue of sham, that is an issue of fact and this is well established in Street v Mountford and Bruton v Quadrant Housing. The elevation of the commercial purposes of the company to essential issues – as with Camelot v Khoo – that require adherence to them by the “guardian” is a nonsense, and is clearly contradicted in Bruton.
The judgement does not settle the issues.
Hi Heiko
I’m afraid that point was raised by Ms K in the Court of Appeal hearing, including that NHS Properties were being paid by Global, so couldn’t be said to be receiving a service, but that argument didn’t go anywhere. The ‘way the case came to the Court of Appeal’ did not involve ignoring any elephants.
You are mistaken that the judgment accepts there ‘is such a thing in housing law as a guardian’. Nor is the decision wholly reliant on occupation being ‘service occupation’. It doesn’t say it is service occupation.
Street v Mountford is not simply a get out – it does require any agreement that says it is not a tenancy to be a sham or a pretence. The appearance of exclusive possession is not enough.
Bruton has nothing to do with the issues around guardian occupation and doesn’t make the issues around the purpose of guardian occupation a nonsense, as far as I can see.
I’m afraid this does dispatch the licence/tenancy issue for Guardians, at least unless there are substantially different facts. The biggest problem for any such future argument is that unless the licence agreement can be established to be a sham or pretence, the guardian is estopped from asserting the guardian firm has no right of possession.
Hi Giles,
Bruton concerned a flat occupied by one person. In essence Global 100 Ltd v Laleva was simply a reaffirmation of Camelot v Khoo.
But Global rents over 100 flats in the Clapham Park estate, many to individual guardians. This is substantively different to either case.
I’m afraid not. The key point about Bruton was not the kind of property occupied per se, but the terms of the agreement, which did create exclusive possession. It was not disputed in Laleva that Ms L had sole possession of her room. And so you are back to the need to demonstrate that a guardian licence is a sham or pretence (and this was both parties’ intention).
Noteworthy but not addressed in the Appeal hearing, as this did not pertain – in the Global contract in parts 4.3, 4.4, 6.5 and 12 para 3, it states that “This condition does not apply to those living in single occupation of self-contained flats”
It was discussed. Mainly because it was wholly opaque as to what condition was being referred to. The contract was a mess.
I suggest that these parts of Bruton are relevant.
Although Bruton was only granted a licence to occupy a flat. Lord Jauncey of Tullichettle explained:
“On 31 January 1989 the Trust entered into an agreement with the appellant which stated that occupation of a flat in the block was being offered to him on a weekly license from 6 February 1989 and that the Trust had the property on license from the council. I need not condescend further on the relevant terms of the agreement which have been fully set out in the speech by my noble and learned friend Lord Hoffmann. I do not doubt that both parties to the agreement were under the impression and indeed intended that the legal consequences of the agreement should be those of a license. A not unreasonable intention given that the Trust’s only interest in the subject was that of a licensee. However, the issue in this appeal is whether that professed intention was achieved or whether the legal consequences of the agreement amounted to a tenancy bringing into operation section 11 of The Landlord and Tenant Act 1985.”
“In Street v. Mountford [1985] A.C. 809 this House decided that where residential accommodation is granted for a term, at a rent with exclusive possession, the Landlord providing neither attention nor services, the grant is a tenancy notwithstanding the fact that the agreement professes an intention by both parties to create a mere licence. It is the legal consequences of the agreement which is determinative rather than the label which parties have chosen to attach to it. In this case the Trust granted exclusive possession to the appellant, a fact which is fortified rather than detracted from by the reservation of rights of access by the Trust and the council for limited purposes (Street v. Mountford, Lord Templeman at p. 818). Prima facie therefore the agreement constituted a tenancy. This notwithstanding the fact that the Trust had only a limited interest in the subjects.”
Lord Jauncey rejected the possibility that there were special circumstances that negated a tenancy yet also rejected the notion that the Housing Trust’s charitable function (its business model) could be claimed to be an exception to Street v Mountford, even though he was concerned that the judgement might impact on the provision for homeless people by the Trust or similar entities.
Lord Hoffman’s contribution to the judgement in Bruton is clear:
“Did this agreement create a “lease” or “tenancy” within the meaning of the Landlord and Tenant Act 1985 or any other legislation which refers to a lease or tenancy? The decision of this House in Street v. Mountford [1985] A.C. 809 is authority for the proposition that a “lease” or “tenancy” is a contractually binding agreement, not referable to any other relationship between the parties, by which one person gives another the right to exclusive occupation of land for a fixed or renewable period or periods of time, usually in return for a periodic payment in money. An agreement having these characteristics creates a relationship of landlord and tenant to which the common law or statute may then attach various incidents. The fact that the parties use language more appropriate to a different kind of agreement, such as a licence, is irrelevant if upon its true construction it has the identifying characteristics of a lease. The meaning of the agreement, for example, as to the extent of the possession which it grants, depend upon the intention of the parties, objectively ascertained by reference to the language and relevant background.”
No, they aren’t – they don’t get you anywhere, unless the agreement functions to give exclusive possession. The agreement, not the de facto nature of the occupation.
And it is Lord Hoffman’s judgment that is the key one.
So can we expect every letting agent for HMOs to rebrand themselves as a Guardian firm now?
Hasn’t got the necessary circumstances. (And they could have done this since AG Securities v Vaughan, in any event).
It’s already happening – this is exactly what my private LL does. The guardian style licence to occupy he uses confuses the normal go-to advice services, so you can’t get much help. I imagine that Khoo and Laleva make things harder; there’s nothing that says only genuine property guardian companies can utilise guardians.
Btw, my landlord is a barrister who believes he’s enjoying “the benefit of his ingenuity”. Even if he’s mistaken, you’d have to get yourself involved in complex, tangled legal arguments to take him on, which he’s fully aware of.
He’s uses Section 21 notices though! Personally, I don’t think this should be allowed when a landlord has misled with a dodgy license.
Yes, and AG Securities was the basis for the “guardian” fraud in the first place, There is no such thing as a “guardian company” who perform “guardian functions” it is all a fiction to avoid statutory obligations. The Appeal Court ruling, which I have read over a few times now, simply accepts these fictions as reality. Thus no sham! This was a poorly fought case by the defendant’s barristers. There was no guardian function and there never has been in any “guardianship” scheme that I have known of, and I know a lot of them. They are all frauds designed to smash housing rights and profit from the grey areas with and they are helped by poorly investigated cases like this with no witness statements, and no evidence.
Heiko, I’m sorry but this is absurd. Of course there are guardian companies, and they provide a specific service to property owners. That is the guardian function.
If the landlord is using s.21 notices, then there is a very clear suggestion that the licenses are a sham, as s.21 only applies to assured shorthold tenancies. If the landlord owns the property, then it is clearly not a guardian set up. It sounds like the landlord isn’t being as clever as they think they are.
I don’t think this has anything to do with guardian set ups per se, it sounds like an old fashioned (and still quite widespread) sham licence situation.
I understand that property guardianship is a grey area not defined in law, but genuine guardian companies providing legitimate services do exist. I also understand that judges want to be fair to these companies but in doing so, have they opened a door to rogue landlords? This might sound far-fetched but my landlord already rents his properties (not all HMOs) using phoney guardian licences. Other landlords or agents might also be doing this and more could follow.
Both parties might know the licence is a sham or pretence but the tenant/licensee would have the onerous task of having to prove this in court. If the determining factor is the agreement rather than the de facto nature of the occupation, then all the rogue landlord needs is a well drafted licence agreement.
Handing out sham licences for occupants of HMOs has been a common, albeit unlawful, practice for many landlords for many years. Both local authority TROs and courts are familiar with it.
The circumstances of the agreement are critical, as per the Court of Appeal. A landlord handing out licences to their tenants won’t cut it, no matter how well drafted.
A search of the Hammersmith and Fulham HMO database shows that the building in the Global 100 Ltd v Laleva case never had an HMO.
In other words it was an illegal housing relationship. I can name you dozens of such illegal Guardian HMOs. As far as I can see it it true of most “guardianships”. Where is this the case they are simply criminal operations. And the companies brazenly advertise such illegal HMOs for rent.
The main objective of the agreements on the part of so-called guardian companies is to engage in such criminal activity.
The fact that this was not raised at the Court of Appeal shows a basic flaw in the defence arguments. In Camelot V Khoo Justice Butcher pointed out that “(6) The production of a sham device or of a pretence ordinarily involves a degree of dishonesty. The court is slow, but not naively or unrealistically slow, to find dishonesty (Westminster Bank plc v Jones at [46] and [68]).”
Surely the objective of avoiding statutory obligations to have an HMO constitutes “a sham device or pretence”? In fact the Camelot v Khoo case was also an illegal HMO, an HMO was slapped on the building by the council but higher levels the the council hierarchy deleted it, and although it was presented to the court, it was ignored in the High Court Appeal.
The building was owned by NHS Properties. No HMO licence was required, as controlled by a public sector body (Schedule 14 Housing Act 2004)
Even if a licence was required, but not obtained, this would not change the status of the agreements, as they are irrelevant for HMO status (the requirements are the same for tenancies or licences – so no attempt to avoid liabilities through the nature of the agreements). It would leave the guardian company subject to rent repayment order applications, though.
“The building was owned by NHS Properties. No HMO licence was required, as controlled by a public sector body (Schedule 14 Housing Act 2004)”
– I would think the property was controlled/managed by the guardian company who were collecting rent and the guardian company would therefore need to HMO licence? (same control/manage role that they were basing their possession ability on)
More than one person/body can be in control/manage at the same time. If a public body was also in that role, the exception applies. The point in this case – as necessarily argued by Ms K – was that Global did not themselves have exclusive possession or a tenancy.
The building was not controlled by the NHS but by Global. In Camelot v Khoo (although not considered by the High Court), Westminster council owned the property but the council officer nevertheless imposed an HMO on the guardian company because it was in control. The creation of the guardian agreements in de-facto HMO’s are explicitly designed to break the law. in other words they involves more than “a degree of dishonesty”. They are generally criminal enterprises. The fact of the building being an HMO is one of reality or not depending on the quantity of people “sharing”. Most “Guardianships” are enterprises and agreements whose explicit purpose is the avoidance of statutory obligations by ignoring HMO obligations, often endangering the lives of residents in the name of fictional security roles. I have had direct contract with dozens of such properties and have never found one guardianship scheme that operated legally.
Heiko, Global had a licence from the NHS. That was Ms K’s case (as it had to be, given that she was denying Global’s right to possession on that basis). Not an interest in land, so maybe Global managing, but not controlling, or at least not solely controlling. Control also stayed with NHS. (That said, it is arguable the other way – that the guardian form has a tenancy, so is controlling. See https://nearlylegal.co.uk/2021/06/property-guardians-council-properties-licensable-hmos-and-rros-against-directors/ But that was not, and could not be the argument in this case.)
It is nonsense to say that creation of guardian agreements in de-facto HMOs are explicitly designed to break the law. Let me be entirely clear, as you didn’t get it first time, for HMO licensing requirements, it doesn’t matter if the occupiers have a licence or a tenancy, HMO licensing requirements apply the same way. Many HMO firms have been very bad at understanding this. More do now. As do more councils. And some have had to pay out RROs fro not licensing. Eg. https://nearlylegal.co.uk/2019/12/property-guardians-and-rent-repayment-orders/
I don’t understand what you mean about an HMO being about reality not the number of people sharing. It makes no sense. The legal definition of an HMO under any of the criteria is based exactly on the number of people sharing.
Yes I understand that tenancies and licences can both be HMOs. If you create a housing relationship, say with 5 guardians in a shared building where an HMO is required and you do not apply for one, how can that not be an intentionally criminal agreement? A lack of knowledge of the law is not an excuse and the guardian companies know very well that they are breaking the law.
If an HMO licence is needed, and they don’t get one, it is an offence, the council can fine or prosecute and the guardians can apply for a rent repayment order. It has absolutely no bearing on whether the licenses are a sham or not, because exactly the same would be true if they were tenancies.
If the agreement, whether licence or tenancy, establishes an illegal relationship then it shows a very high level of dishonesty – criminal dishonesty.
As Justice Butcher cited in Camelot v Khoo “The production of a sham device or of a pretence ordinarily involves a degree of dishonesty. The court is slow, but not naively or unrealistically slow, to find dishonesty (Westminster Bank plc v Jones at [46] and [68]).”
Where such blatant criminal dishonesty is evident, how can the courts not conclude or, at the very least be compelled to enquire, whether or not the whole agreement is explicitly designed to break the law and avoid statutory obligations. If the court needs to carefully investigate each case, I suggest that the Court of Appeal decision, no more than the Camelot v Khoo decision will be the final word on the issues.
But that is the point – the agreement doesn’t establish an illegal relationship. The criminal act is not having an HMO licence, not ‘having licensees’. And given that the criminal act would be the same whether the occupiers had a licence or a tenancy, it has nothing to say at all about whether the licence is a sham and it is actually a tenancy. In short, it gets you absolutely nowhere on that issue. (And it is impossible to argue that the guardian licence is ‘explicitly designed to break the law’. It isn’t, because an HMO licence is still required.)
‘NHS’ Property Services is not really the NHS as one might think given it’s appellation
It is limited company wholly owned by Department of Health.
Not sure it meets Schedule 14 Housing Act 2004 as a public sector body (health service body in s9 National Health Service Act 2006)…
I would think it likely to, though clearly could be subject to argument.
Having looked into it, you are right. Not a Health Service Body via s.9, so no Schedule 14 exemption.
In a number of current cases the “guardian companies” are renting self-contained one bedroom flats out in a single building where there are no shared spaces.
If, as the contracts claim, they are shared buildings then they require an HMO licence. Not having one shows that the company is engaged in criminal dishonesty.
If on the other side nothing is shared then no HMO is required and the claim to being a shared arrangement are a sham or pretence and the circumstances are on all fours with Bruton. i.e. regardless of the label on the tin they are tenancies.
Whether an HMO licence is needed is a matter of statute, not what it might say in a licence agreement. And you have gone back to your flawed view of Bruton and Street, which can’t survive Laleva. Sole occupation does not necessarily equal exclusive possession, and the circumstances of the agreement fall to be considered.
That with the proviso that as I understand it there are some circumstances where a building which is not shared may also be deemed to be an HMO.
Well we are going to have to agree to disagree on this. We’ll see how the courts deal with these cases.
On HMO licensing for the property (or lack thereof), civil penalties by the Council and successful RRO applications, see here – https://cornerstonebarristers.com/news/property-guardianship-companies-director-held-liable-failing-licence-premises-hmo/ Our note to follow.
Could I check what basic practical/functional consequence this ruling has for guardians desparate to stay in the property for as long as possible?
Is it
“if you as a ‘property guardian’ have not complied with a valid NTQ and landlord is making a possession order against you as a ‘tresspasser’ – don’t expect to secure any further courts delay via claiming to be a tenant at the possession order hearing”
?
Yes, basically that. Assuming no substantial factual difference.
What do you think the way forward is GP ? Maybe a specfici guardian contract for guardian frim type setup?
Ir will this just end ip being abused by the PRS
Your thoughts? :)
It would probably be a matter for legislation. I doubt abuse by the PRS is likely. There are plenty of iffy landlords doing sham licences already, particularly for HMOs. I can’t see many (or any) going to the lengths necessary to establish the commercial and function ‘guardian’ purpose to get around tenancies.
One “guardian company” with its contract at one location won a decision (in my view by the back door). All such contracts are different. There is no definition in law of a guardian company. And different circumstances with the same company may produce different results. That is my expectation anyway.The Camelot decision was also hailed as the be all and end all but it was not. In fact it was Camelot that folded after their Pyrrhic victory.