Court of Appeal clarifies HMO classification and property guardian agreements in recent case law.

Citation: [2023] EWCA Civ 1243
Judgment on

Introduction

In the combined appeals of Global 100 Ltd v Carlos Jimenez & Ors and Global 100 Limited and Global Guardians Management Limited v London Borough of Hounslow and Maria Laleva & Ors, the Court of Appeal (Civil Division) addressed several issues pertaining to the Housing Act 2004 and the concept of a “house in multiple occupation” (HMO). The appeals centered on the classification of properties used by “property guardians” as HMOs, the nature of the occupational agreements, as well as the roles and responsibilities of the parties involved in such arrangements.

Key Facts

The appeals involved two properties, the former Addison Lee Office building at 35-37 William Road, Euston, London (the William Road property), and a former nurses’ home at 14-16 Stamford Brook Avenue, London W6 (the Stamford Brook property). These properties were occupied by property guardians who lived in the buildings primarily to secure and safeguard them from trespassers and vandalism while these buildings were empty. The guardians paid licence fees to Global 100 Ltd and Global Guardians Management Ltd, companies that were found to manage the properties.

The central question raised in both appeals was whether the property guardians’ use of their living accommodation constituted ‘the only use’ of that accommodation under section 254(2)(d) of the Housing Act 2004, therefore classifying both properties as HMOs. The Upper Tribunal had affirmed the First-tier Tribunal’s decisions that the relevant properties were HMOs, and this was appealed by Global 100 Ltd and Global Guardians Management Ltd.

The court applied several legal principles in reaching its decision:

  1. Definition of HMO: The definition hinges on the condition that the occupation of the living accommodation constitutes the only use of that accommodation (Housing Act 2004, section 254(2)(d)). The presumption in favor of sole use (section 260) applies unless the contrary is shown.

  2. Use vs. Purpose: The court distinguished “use” from “purpose,” noting that “use” describes what is done with the living accommodation, while “purpose” pertains to why that use is made. The guardians’ purpose to secure the buildings did not affect the ‘use’ of the accommodation.

  3. Tenancy vs. License: The nature of the agreement between the owner (NHS PS in the case of the Stamford Brook property) and the property guardian companies (Global Guardians and Global 100) was scrutinized to ascertain if it granted tenancy or merely a license. The court relied on established legal principles such as those in Street v Mountford [1985] 1 AC 810 to assess the presence of exclusive possession, determination of a tenancy versus a license.

  4. Issue Estoppel: The principle of issue estoppel was considered in relation to a previous judgment involving Ms. Laleva, which the court ultimately found non-applicable owing to it being an issue of arguability rather than a final and necessary decision.

  5. Person Having Control and Person Managing: The Housing Act 2004’s definitions of ‘person having control’ and ‘person managing’ were applied to identify the parties responsible under the statutory scheme, particularly in connection with the receipt of the rack rent.

Outcomes

The court’s conclusions were as follows:

  1. The Upper Tribunal did not err in finding that the properties were HMOs. The occupation by the property guardians constituted the sole ‘use’ of the living accommodation, thereby satisfying the conditions of section 254(2)(d) of the Housing Act 2004.

  2. Global Guardians was found to have a tenancy of the Stamford Brook property, thus establishing it as a ‘person managing’ the property pursuant to section 263(3) of the Housing Act 2004.

  3. Global 100 was determined to be the ‘person having control’ of the Stamford Brook property, as it was found to have received rack-rent as defined by section 263(1) and (2) of the Housing Act 2004.

  4. The issue of estoppel raised by Global 100 regarding the contractual nature of the Stamford Brook property was rejected as there was no final, necessary decision from a previous case to constitute an estoppel.

Conclusion

The Court of Appeal has reaffirmed the definitions and tests for determining what constitutes an HMO within the meaning of the Housing Act 2004. This case underscores the importance of examining both the purpose of an arrangement and the factual ‘use’ made of a property in classifying HMOs. Additionally, it addresses the commercial reality behind agreements involving property guardians, the application of legal tenets in characterizing such agreements, and the resultant statutory obligations toward local authorities. The judgments provided a clear articulation of the standards for what constitutes ‘use’ versus ‘purpose,’ as well as an instructive analysis of the

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