Global Guardians Management Ltd & Ors v London Borough of Hounslow & Ors

For the sole use condition in Housing Act 2004, section 254(2)(d), the relevant use is the objective use of the occupiers’ living accommodation. A licensor’s commercial purpose of obtaining property-protection services does not create a second use of rooms occupied only as residences.

An agreement framed as a services arrangement may nevertheless create a tenancy where its substance gives exclusive possession and beneficial control for a term at a rent. Under section 263, separate companies must be assessed separately. A lessee who arranges for another non-lessee to grant occupational licences may be a person managing. But receipt of an unentitled and indeterminate part of rent does not itself make that person a person having control. The aggregate payments for all lettable rooms may constitute the rack-rent of the HMO.

The First-tier Tribunal upheld civil penalties imposed on the three appellants for control or management of an unlicensed HMO at Stamford Brook Centre. It also made rent repayment orders against Global 100 Ltd, whose licence agreements governed the residential occupation of the rooms.

The appellants challenged the findings that the guardians’ rooms were used solely as residences, that the agreement between the owner and Global Guardians Management Ltd created a tenancy, and that each corporate appellant was both a person managing and a person having control under the Housing Act 2004.

The appeal therefore required the Tribunal to determine the statutory meaning and application of sole residential use, lessee, person managing, person having control and rack-rent.

1. The appeals were dismissed. The Property was an unlicensed HMO. The guardians used their rooms only as their residences. The purpose for which the licensor arranged their occupation, namely property protection, was not a separate use of their living accommodation: section 254(2)(d) of the Housing Act 2004 was satisfied.

2. The arrangement between NHS Property Services Ltd and GGM was a tenancy in substance. It gave GGM exclusive control and beneficial use of the Property for a term, in return for £600 per month. Its description as a services agreement and the parties’ subjective intentions could not displace that legal effect. GGM was therefore a lessee for the purposes of the Act.

3. GGM was a person managing the HMO under section 263(3)(b). Although the evidence did not prove that Global 100 was GGM’s agent or trustee for section 263(3)(a), GGM would have received the income from occupational licences but for its arrangement allowing Global 100, a non-lessee, to exploit the Property by granting them. Section 263(3)(b) includes that arrangement; it is not confined to diversion of income already received from the actual occupiers.

4. Global 100 was not a person managing. It was neither owner nor lessee, and no agency or trust for GGM was proved. Its agreement with GGM did not grant exclusive possession or a sub-tenancy. A sufficient interest to bring possession proceedings against licensees did not require a proprietary interest.

5. Global 100 was, however, a person having control. The aggregate licence fees for all lettable rooms represented at least two-thirds of the Property’s net annual value and were the rack-rent of the HMO. There was no relevant distinction between the aggregate rack-rents of the rooms and that of the Property. GGM was not a person having control: its receipt of only some income, without entitlement to it or proof that it received the whole rack-rent as agent, trustee or on its own account, was insufficient.

6. The penalty notices and the rent repayment orders against Global 100 consequently remained in force.

• Upper Tribunal (Lands Chamber): dismissed the appeals from the First-tier Tribunal, while correcting aspects of its reasoning on the respective statutory statuses of GGM and Global 100.
• First-tier Tribunal (Property Chamber): decision dated 15 December 2021 upheld civil penalty notices under the Housing Act 2004 and made rent repayment orders against Global 100.