Global Guardians Management Ltd and others v Hounslow London Borough Council and others

Housing – House in multiple occupation (HMO) – Civil penalty – Vacant office block converted into temporary residential accommodation occupied by property guardians – Respondent local authority considering building was HMO requiring licence – First respondent issuing civil penalty notices – First-tier tribunal confirming notices – Appellant guardianship companies appealing – Whether property licensable as HMO – Whether appellants liable for failure to license as persons “in control of” or “managing” premises – Appeal dismissed A property known as Stamford Brook Centre, Stamford Brook Avenue, London W6 was a vacant office building. The first appellant was a property guardian management company which entered into an agreement with the freehold owner which agreed to pay the first appellant for “guardianship services”. The appellant agreed to install “property guardians” to live in the empty building to provide security against damage or squatting. The first appellant converted the building to create 30 bedrooms with four kitchens, four bathrooms and four toilets. It licensed the second appellant to give occupation licences to individual guardians. The third appellant was the director of both companies. The first appellant paid the freeholder £600 per month for its use of the premises, whilst collecting £15,000 pcm in licence fees. The first respondent local authority considered that the property was used as a house in multiple occupation (HMO) which required a licence pursuant to Part 2 of the Housing Act 2004. It imposed civil penalty notices of £6,000 on each of the three appellants. The First-tier Tribunal (FTT) confirmed that the appellants had committed the criminal offence of operating an unlicensed HMO under section 72(1) of the 2004 Act and upheld the civil penalty notices.  Rent repayment orders were also made totalling £36,000 in favour of nine individual guardians. The appellants appealed. The issues were whether the property came within section 254 of the 2004 Act and had to be licensed as an HMO; and whether the appellants were persons “in control of” or “managing” the premises within section 263. Held: The appeal was dismissed. (1) The facts were materially indistinguishable from those in Global 100 Ltd v Jimenez [2022] UKUT 50 (LC); [2022] PLSCS 40 where the deputy president held that the occupiers were only entitled to use their accommodation as their only or main residence. The purpose or motive of the licensor in licensing occupiers to reside in premises was not the same issue as the use of the premises, which was to be judged objectively. In any event, providing security services to or for the protection of a building was not a use of the building, within the meaning of section 254(2)(c), (d).   Permission to appeal in Jimenez was granted but the appeal had not yet been heard. Therefore, the appropriate course was to follow the earlier decision. Accordingly, the appellants’ argument that there was a second use of the living accommodation in the property, namely the provision of security to the property, would be rejected. The condition in section 254(2)(d) of the 2004 Act was satisfied and the property was at the material time an unlicensed HMO. (2) The FTT was right to conclude that the first appellant was a tenant of the property and therefore a “lessee” within the 2004 Act. Although the proposal was couched in terms of providing services to the freeholder, the reality was that those services were only provided by virtue of the first appellant having exclusive possession of the property and being able to exploit it for its own gain, first by converting it to residential use and then by licensing up to 30 residential occupiers to occupy all the habitable space in the property. The benefit, which the freeholder sought, of protecting the property from trespassers and vandalism, was secured by means of the occupation of the property by others. The first appellant was granted exclusive control of the property for a term at a rent of £600 per month. That arrangement was in fact a tenancy agreement. (3) Under section 263(3)(a), indirect receipt of some of the income from the property only made the first appellant a person managing it if the second appellant was its agent or trustee. The respondents had to satisfy the FTT beyond reasonable doubt that the second appellant was the first appellant’s agent if the offence was to be established on that basis but they had failed to do so. The first appellant, but not the second appellant, was a “person managing” within the meaning of section 263(3)(b) because it was a lessee and “would have received” licence fees but for its agreement with the second appellant. That was so even though the occupants’ licences were granted by the second appellant, and the first appellant never had any contractual entitlement to receive them. However, the second appellant was a person ‘in control’ within section 263(1) because it received the “rack rent” as defined by section 263(2). The appellants accepted that “rack rent” as defined could include licence fees, and there was sufficient evidence to show that £15,000 pcm amounted to at least two-thirds of the net annual value of the property given its condition at the material time. There was no distinction between the rack rent of the property as a whole versus the aggregate rack rent of the licensed rooms. However, the tribunal was not satisfied that the first appellant was a person “in control” in the absence of evidence that it received all the rack rent: receiving only some of those funds was not enough: Laleva v Global 100 Ltd [2022] EGLR 2 considered. (4) The first appellant had succeeded in establishing that it was not a person having control of the property but its appeal against the penalty notice ultimately failed because it was a person managing the property. The second appellant had succeeded in establishing that it was not a person managing the property but its appeal against the penalty notice failed because it was a person having control of the property. It followed that the third appellant’s appeal was dismissed, since both the first and second appellants remained liable. The second appellant’s appeal against the imposition of the rent repayment orders was dismissed. They remained justified because the second appellant was a person having control of the property, receiving the licence fees when an offence under section 72 of the 2004 Act was being committed. Sean Pettit (instructed by Kelly Owen Ltd) appeared for the appellants; Tara O’Leary (instructed by HB Public Law) appeared for the first respondent; George Penny (instructed by Direct Access) appeared for the second to ninth respondents; The tenth and eleventh respondents appeared in person. Eileen O’Grady, barrister Click here to read a transcript of Global Guardians Management Ltd and others v Hounslow London Borough Council and others