Phoebe Cottam & Ors v Lowe Management Limited

Where a building is controlled or managed by a listed public-sector body, paragraph 2 of Schedule 14 to the Housing Act 2004 excludes the building, rather than a particular person, from HMO status outside Part 1. The exclusion cannot therefore apply differently to different managers or controllers.

However, the statutory definition of a person having control turns on the present entitlement to receive a rack-rent. Where premises have already been let, the hypothetical limb asks who, with the existing interests and lettings in place, could grant a rack-rent tenancy. A freeholder which has granted a lease cannot qualify merely because it could formerly have let the premises at a rack-rent.

Seven property guardians sought a rent repayment order against Lowe Management Limited for operating an unlicensed HMO at The Gables. The freeholder was an NHS clinical commissioning group, a health service body. It had granted a lease, through its agent, to Lowe Guardians Limited, which arranged for the respondent to license occupation to guardians.

The First-tier Tribunal held that the freeholder was a person having control. It therefore concluded that Schedule 14 to the Housing Act 2004 excluded the building from HMO status and dismissed the application. The appellants challenged that conclusion. The Upper Tribunal also granted permission to appeal on the further issue whether the freeholder was in fact a person having control.

1. Appeal allowed and remitted. The First-tier Tribunal correctly construed paragraphs 1 and 2(1) of Schedule 14 to the Housing Act 2004. If the person managing or having control is a listed health service body, the building is not an HMO for the Act’s purposes other than Part 1. The exclusion concerns the status of the building and cannot operate only in favour of that particular body.
2. The Tribunal nevertheless erred in finding that the clinical commissioning group was a person having control under section 263(1). The provision identifies the recipient of the actual rack-rent or, where none is received, the person who could receive it if the premises were let at a rack-rent as things presently stand. It does not identify a freeholder which might formerly have granted such a letting but has already granted a lease. That construction followed the reasoning in Pollway Nominees Limited v Croydon London Borough Council, [1987] 1 AC 79, and the earlier authorities.
3. The commissioning group could not receive any rack-rent paid by the guardians. If no rack-rent was paid, its lease to Lowe meant that it could not then grant a lease at a rack-rent. It was also not a person managing under section 263(3), because Lowe was a lessee and so the condition in section 263(3)(b) was not met.
4. Schedule 14 was therefore irrelevant. The First-tier Tribunal had not made a full finding whether the respondent or Lowe was managing or in control, nor made findings sufficient to quantify an order. The case was remitted to the First-tier Tribunal, preferably the same panel, to determine the basis and amount of any rent repayment order.

• Upper Tribunal (Lands Chamber): Allowed the appeal on the additional ground that the health service body was neither managing nor in control of the premises, while confirming the First-tier Tribunal’s construction of Schedule 14 to the Housing Act 2004. Remitted the rent repayment order application for determination.
• First-tier Tribunal (Property Chamber): Dismissed the rent repayment order application after finding that the health service body was a person having control and that Schedule 14 excluded the building from HMO status.