Civil penalties: property guardian companies and licensing of HMOs

Property guardian companies and their legal representatives should pay attention to the decision of the Upper Tribunal in Global Guardians Management Ltd and others v London Borough of Hounslow [2022] UKUT 259 (LC). The appeal concerned vacant commercial premises situated in London W6. The property was owned by NHS Property Services Ltd (NHSPSL). In March 2016, NHSPSL entered into a contractual agreement with the first appellant, Global Guardian Management Ltd (GGM), to provide guardianship services at the property for a fee. GGM subsequently entered into a contractual agreement with the second appellant, Global 100 Ltd, to procure occupants to act as “guardians” of the property and to report any problems with the same. The guardians entered into purported licence agreements and paid monthly “licence fees” to Global 100. In February 2020, the property was inspected by an officer of the London Borough of Hounslow. The officer was satisfied that the property was being occupied as an HMO that was required to be licensed under the Housing Act 2004. The council issued civil penalty notices against GGM, Global 100 and their sole director on the basis that they were persons having control of, and persons managing, an unlicensed HMO contrary to section 72(1). GGM and Global 100 appealed the imposition of a civil penalty to the First-tier Tribunal, but they penalties were upheld. The respondent guardians, who were all licensees of rooms in the property, applied to the FTT for a rent repayment order to be made against Global 100 on the basis that it had committed an offence under section 72(1). An RRO was duly made by the FTT. GGM and Global 100 both appealed the imposition of civil penalties. Global 100 also appealed the RRO. The issues the UT was asked to determine were: (a) whether the property was an HMO within the meaning of section 254 because the occupation of the rooms licensed to the respondent guardians as their only and main residences was “the only use of that accommodation” for the purposes of section 254(2)(d). Secondly, whether GGM and Global 100 were each a “person having control” of and a “person managing” the property within the meaning of section 263 and therefore liable for a fine in light of the failure to licence the property. The UT found that the facts of the present case were materially indistinguishable from Global 100 Ltd v Jimenez and others [2022] UKUT 50 (LC); [2022] PLSCS 40, and it was bound to follow the same. The contractual intention of Global 100 was irrelevant in the face of the actual use of the property by the guardians. The provision of security services or protection of the building was not a “use” of the building within the meaning of section 254. Contractually the respondent guardians were required to use the property as their only or main residence. In respect of the second ground of appeal, the UT found in part for GGM and Global 100, but the penalties and RRO were still upheld on the its findings. Relying on Global 100 Ltd v Laleva [2021] EWCA Civ 1835; [2021] PLSCS 207 the UT found that only Global 100 fell within the definition of a person “in control” under section 263(1) as it was in receipt of the rack-rent as defined by section 263(2). There was strong evidence that the fees being paid by the guardians to Global 100 were in aggregate the net annual value of those parts of the property, or at least more than two-thirds of that value of the property. There was no relevant distinction between the rack-rent of the licensed rooms and the rack-rent of the property because all the lettable space in the property was let. GGM was not a person “in control” of the property because there was no evidence that it was in receipt of the whole of the rack-rent as agent or trustee for Global 100. It was not enough to be a person “in control” because some monies representing rent was paid to that person. The UT was satisfied that GGM, only, fell within the definition of a person “managing” the property. It was the lessee of the property and would have otherwise received the income from the guardians save for the agreement it had in place with Global 100. There was no evidence that Global 100 was an owner or lessee of the premises or an agent or trustee of GGM. Section 263 did not apply to mere licensees. Elizabeth Dwomoh is a barrister at Lamb Chambers