In Global 100 Ltd v Jimenez and others  UKUT 50 (LC), the Upper Tribunal decided that accommodation occupied by ‘property guardians’ constitutes a 'house in multiple occupation' (HMO). As such it requires an HMO licence and serious consequences apply to the person who controls or manages the accommodation if no licence has been obtained.
Practical implications of the case
Government guidance estimates that there are around 5,000 to 7,000 people in the UK living as property guardians.
Local authorities will note that as a result of this Upper Tribunal decision, many, if not all, buildings which are occupied by property guardians will constitute HMOs and will therefore require an HMO licence under Part 2 of the Housing Act 2004 .
This will result in property guardians having greater rights as concerns the standard of the accommodation which they occupy in their capacity as property guardians.
More broadly, the decision could be seen as showing a keenness by the Upper Tribunal to uphold and extend the protection of Part 2 of the Housing Act 2004 – which requires HMOs to be licensed and therefore to meet certain standards – as widely as possible and to prevent property guardians from being excluded from the protections of the HMO licensing regime. The Upper Tribunal’s judgment referred extensively to the fact that the HMO licensing regime was introduced to provide protection for the often vulnerable people who occupy HMO accommodation.
The judgment turned on whether the sole use of the property was as living accommodation.
Arguably, if property guardians were given explicit duties to guard the property – for example being required to inspect the building or to give regular reports on its condition – then the reasoning applied by the Upper Tribunal in this decision might not apply since, in such a scenario, the occupants’ use of the building would be not merely as living accommodation but also an explicit security function.
However, given that the concept of a property guardian is generally one which is limited to their living in the building and not having any explicit security duties, the Upper Tribunal’s decision in this case is likely to apply to almost all property guardians and to bring them within the protection of the HMO licensing regime. As a consequence, a lot more HMO licences will need to be applied for in the future.
35-37 William Road in Euston, London is a building which used to be offices belonging to Addison Lee, the taxi company. Following the building being vacated by its commercial occupants, an organisation called Global 100 was instructed to install property guardians into the building.
The concept of a property guardian was defined by the Court of Appeal in London Borough of Southwark v Ludgate House Limited  EWCA Civ 1637 as:
“ … a private individual who, usually with others, occupies vacant premises under a temporary contractual licence until the building owner requires it for redevelopment. The arrangement provides the guardian with accommodation at a lower cost than in the conventional residential letting market, it provides the supplier with a fee for making the arrangements, and it provides the building owner with some protection against squatters and with the prospect of mitigating liability for non-domestic rates.”
Housing officers from Camden Council inspected the building on 26 November 2020 and found that between 10 and 12 individuals were living on the third floor who were there as property guardians.
Several of the occupants of the building brought proceedings in the First Tier Tribunal (FTT). The occupants argued that the property was an HMO and therefore required an HMO licence under Part 2 of the 2004 Act, which it did not have. The FTT agreed and made rent repayment orders (orders requiring Global 100 to repay some of the rent paid by the occupants to them).
What the Upper Tribunal decided
Section 254 of the 2004 Act defines when a property is an HMO. One of the conditions for a property to be an HMO is that the “occupation of the living accommodation constitutes the only use of that accommodation” (section 254(2)(d)).
In the Upper Tribunal, Global 100 argued that the only use of the accommodation was for occupation as living accommodation. Global 100 argued that the word ‘use’ and the word ‘purpose’ were synonymous. They argued that the purpose of the occupants living in the building was not just so that they had living accommodation but was also to provide the building with security and to prevent it from being squatted in or stolen from.
The Upper Tribunal rejected this argument, describing it as “linguistic gymnastics” which were not persuasive.
The Upper Tribunal held that the terms of the agreement between Global 100 and the occupants were not determinative of the question of the use of the property. The Upper Tribunal placed importance on the statutory context and noted that the purpose of the HMO licensing regime in Part 2 of the 2004 Act is to provide protection to the residents of converted buildings with shared facilities. The Upper Tribunal clearly considered that the occupants in this case should fall within that legislative purpose.
Moreover, the Upper Tribunal considered that the licence agreement prevented the occupants from doing anything in the property other than using it as their main residence – business use was not allowed. This supported the argument that the only use of the building was as living accommodation.
Finally, the Upper Tribunal held that the security benefits of the building being occupied were to a very large extent the consequence or by-product of their living there rather than the actual use of the property. The Upper Tribunal noted that if the property were protected by professional security guards who were present around the clock, nobody would argue that that changed the use of the building. In the same vein, the security benefits of using property guardians did not affect its use.
The Upper Tribunal therefore upheld the FTT decision and dismissed Global 100’s appeal.
This analysis was first published on Lexis®PSL.