Is an office building occupied by "property guardians" a house in multiple occupation (HMO)?

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Is an office building occupied by "property guardians" a house in multiple occupation (HMO)?

There has long been a problem with the Housing Act 2004 and the requirement that for a property to be an HMO it must be solely use for residential purposes. One of the elements of this has been the business of property guardianship where it can be argued that the residential use of the property is not the sole use as the premises are also being “guarded” and they are also intended as commercial premises with the residential guardians being there as a temporary expedient.

This issue has recently come before the Upper Tribunal (UT). It was essentially seeking to decide if a a former office building occupied by "property guardians" a house in multiple occupation (HMO), applying the standard test in section 254(2) of the Housing Act 2004.

The concept of a property guardian was defined by the Court of Appeal in London Borough of Southwark v Ludgate House Limited [2020] 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.”

Background

The case involved the former five storey Addison Lee Building in Euston – a suite of three offices on the third floor with a communal bathroom on the adjoining land were occupied by three property guardians. Briefly, the duties of the guardians were limited to sleeping on the premises five nights out of seven, ensuring that the building was never left empty. The guardians were not given any security responsibilities for which a licence might be required. This situation and this guardian company has recently been fertile ground for property lawyers as it has already resulted in important decisions of the court of appeal which my colleagues have written about.

Claim

A Rent Repayment Order (RRO) claim was issued by the former occupants at the First Tier Tribunal (FTT) pursuant to the Housing and Planning Act 2016 on the basis that they lived in an HMO which should have been licensed. This was disputed on the basis that the residential use was not the sole use of the property. The FTT found against the landlord, imposing a RRO. The landlord then appealed to the UT.

What the Upper Tribunal decided

Section 254 of the Housing Act 2004 outlines the definition of an HMO. A property will be an HMO under the standard test if the “occupation of the living accommodation constitutes the only use of that accommodation” (section 254(2)(d)) (one of the conditions).

In the Upper Tribunal, Global 100 argued the following:

  1. The words ‘use’ and ‘purpose’ were synonymous;
  2. Their occupation did not constitute the sole use of the building as, although the guardians were in occupation, their sole purpose was to provide security and protect the building being taken over by squatters/trespassers.

The first argument was really an effort to bring decisions from the Court of Appeal in other cases into effect to assist the landlord. The Upper Tribunal disagreed and described these arguments as “linguistic gymnastics” which were not persuasive.

Reframing the question to ask whether the occupation of the living accommodation was the only "purpose" for which it was being used did not really advance Global 100’s argument. The Upper Tribunal placed significant importance on the statutory purpose of promoting the public good and providing protection to the occupants of converted buildings with shared facilities (Part 2 of the 2004 Act).

The Upper Tribunal considered that the occupants were not permitted to do anything in the building other than using it as their main residence - conducting a business or holding meetings on the premises were not permitted. This of course strengthened the argument that the only use of the building was as living accommodation.

Finally, the Upper Tribunal held that to a very large extent the services performed by the guardians were a consequence or by-product of their use of the building as living accommodation as opposed to being that use. It was their presence in the building which was intended to deter squatters/trespassers - one would therefore say the purpose of the guardians in preventing damage or trespass was an additional use to their living accommodation.

The Upper Tribunal therefore dismissed the appeal and confirmed the rent repayment orders made by the FTT.

Looking ahead

It is questionable as to whether or not property/building owners will want to become involved in the HMO licensing process considering all the endless compliance burden. 

Will this open the doors to former or current property guardians (GOV.UK - indicates that between 5,000 – 7,000 people) in making a RRO claim?

If you require any assistance in seeking advice as a property guardian in making a RRO claim or as a landlord defending one, please contact us and we would be happy to assist you.

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