Global Guardians Management Limited and others v LB Hounslow and others  UKUT 259 (LC)
Appeals were brought by two property guardianship companies, Global 100 (G100) and Global Guardians Management Limited (GGM) against penalties issued by the London Borough of Hounslow. The companies managed a disused office which had been converted into temporary residential accommodation by 30 occupants acting as property guardians over a period of five years. The occupants complained about inoperative showers and issues with heating and hot water.
LB Hounslow considered that the property was being used as an HMO and therefore that a licence was required. The companies disagreed and refused to apply for a HMO licence which led to LB Hounslow serving a Civil Penalty Notice (CPN) of £6,000 each on G100, GGM and the sole director of both companies, Mr Kyprianou. LB Hounslow also served a CPN on the freeholder (NHS Property Services) which paid the CPN without objection.
Global Guardians argued they had not committed an offence because:
- they weren’t persons in control of or managing the Premises within the meaning of s263 Housing Act 2004 because they received licence fees only and were not entitled to the rack rent;
- the standard test for HMOs was not met because the guardian’s use of the Premises was not solely for accommodation purposes as per s254(2)(d) Housing Act 2004, but that it was also used for the dual purpose of a property guardian operation, and
- the property was exempt from the HMO licensing scheme because the freeholder was NHS Property Services and was exempt under Schedule 14 of the Housing Act 2004.
The argument that the companies and the director were not the persons in control of or managing the Premises depended on the intertwined nature of the corporate and contractual relationship between GGM and G100. The concepts of “person having control” and “person managing” an HMO are defined by section 263 of the 2004 Act.
A “person having control”, means the person who receives the rack-rent of the premises (whether on his own account or as agent or trustee of another person), or who would so receive it if the premises were let at a rack-rent.
A “person managing” means, the person who, being an owner or lessee of the premises receives (whether directly or through an agent or trustee) rents or other payments from those in occupation or who would so receive those rents or other payments but for having entered into an arrangement with another person who is not an owner or lessee of the premises by virtue of which that other person receives the rents or other payments and includes, where those rents or other payments are received through another person as agent or trustee, that other person.
Under section 251 a director can be liable for an offence committed by a body corporate where this is committed with his consent or connivance or is attributable to any neglect on his part.
In Global 100 Limited v Laleva  EWCA Civ 183, the Court of Appeal, held that the guardians were licensees and not tenants, noting that it was an essential part of such a guardian business model that companies should be able to return properties to the owners when they required vacant possession.
The First Tier Tribunal (FTT) dismissed all grounds and upheld the penalties amounting to £18,000 on the following basis;
- Ground 1 – the companies and the director did not give any evidence that they were not persons managing or in control of Premises.
- Ground 2 – the companies’ definition of sole use would undermine the statutory objectives of the 2004 Act.
- Ground 3 – the exemptions to the HMO licensing scheme are exhaustive and therefore do not extend to companies or other entities which are owned or controlled by persons who do benefit from the exemptions.
Simultaneously, rent repayment order (RRO) applications were brought by 11 guardians and the FTT granted nine RROs against G100 totalling over £36,000.
G100 had permission to appeal to the Upper Tribunal on the “sole use” point.
The Upper Tribunal upheld the First Tier Tribunal’s decision that the companies and their director had committed the criminal offence of operating an unlicensed HMO under s.72(1) of the Housing Act 2004.
Both the CPNs totalling £18,000, and Rent Repayment Orders of £36,000 were upheld.
Do watch this space for more on property guardians as this case is very relevant to other guardianship operations or HMOs operated by associated companies.