Key Issue: Interpretation of 'Person Managing' and 'Person in Control' in HMO Licensing Regime for Health Service Bodies

Citation: [2023] UKUT 306 (LC)
Judgment on

Introduction

The case of Phoebe Cottam & Ors v Lowe Management Limited is a significant decision from the Upper Tribunal (Lands Chamber)1 which addresses important issues relating to the licensing regime for houses in multiple occupation (HMOs), specifically the statutory definitions of “person managing” and “person in control” of an HMO, also exploring the context where the entity managing or in control of an HMO is a health service body. This decision provides clarity on the application of Schedule 14 of the Housing Act 2004 when coupled with the role of health service bodies.

Key Facts

The case involved The Gables, a property formerly operated by the NHS South East London Clinical Commissioning Group (CCG) and classified as a health service body. In 2020, CCG entered into an agreement with Lowe Guardians Limited for the latter to manage The Gables and arrange for guardians to live in the property. Subsequently, the appellants who were guardians at The Gables appealed for a rent repayment order against Lowe Management Limited (the respondent) alleging that it was unlicensed as an HMO during a specified period. The First-tier Tribunal (FTT) found that since CCG as a health service body was in control, the property was exempted from being an HMO according to Schedule 14 of the Housing Act 2004, therefore not requiring a license.

The primary legal principles at issue revolved around the interpretation of “person having control” and “person managing” under section 263 of the Housing Act 2004. The case brought up key legal considerations:

  1. Construction of Schedule 14 of the Housing Act 2004: The ruling confirmed that if the property was managed or controlled by a health service body, it was not categorized as an HMO, except for purposes of Part 1 of the Act.

  2. Section 263 Definitions: The specific definitions in section 263 of the Housing Act 2004 were pivotal. A person “having control” of an HMO relates to someone who receives the rack-rent directly or through an agent, while a person “managing” an HMO covers an owner or lessee who receives payments from occupants or delegates this responsibility through a contractual arrangement.

  3. Relevance of Precedents: The case also applied principles from precedent cases, prominently Pollway Nominees Limited v Croydon London Borough Council2, Truman, Hanbury, Buxton & Co. Ltd v Kerslake3, Pollway Nominees v Croydon LBC4, and R v Lambeth LBC ex p Clayhope Properties Ltd5. These cases established the interpretation of “person having control” by linking the rent-receiving capacity to a current legal right, rather than to a hypothetical ability to receive rack-rent in different circumstances.

Outcomes

The Upper Tribunal (UT) concluded that the FTT had misconstrued paragraphs 1 and 2 of Schedule 14 and section 263(1). Despite the FTT’s correct interpretation of the provision, they erred in finding CCG as the person in control. The UT decided that because the CCG had leased the property to Lowe, it could not be considered the person who would receive the rack-rent if the premises were let at a rack-rent. The UT allowed the appeal on the second ground, remitting the matter back to the FTT to set out the basis on which a rent repayment order should be made against Lowe Management Limited (the respondent).

Conclusion

The UT decision in Phoebe Cottam & Ors v Lowe Management Limited presents a clear legal analysis of the concept of control and management of HMOs, as well as the interpretation and application of Schedule 14 to the Housing Act 2004 in cases where a health service body is involved. This judgment has significant implications in the area of HMO management and licensing, particularly it sets a precedent for understanding the relationship between property ownership, management responsibilities, and potential exemptions when health service bodies are proprietors.