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Instructing property guardians to occupy a vacant building may break the law if an HMO licence is not obtained following a ruling in the case of Global 100 Ltd v Jimenez and others.
The use of property guardians to occupy vacant commercial premises has become increasingly popular in recent years. Crucially, the recent judgement in Global 100 Ltd v Jimenez and others establishes that HMO licences under Part 2, Housing Act 2004 may be required in certain circumstances to ensure oversight of such arrangements. The judgment in this case should be considered carefully by any property owners looking to use property guardians, not least because a failure to obtain an HMO licence where one is required can result in a criminal conviction, an unlimited fine if the landlord is prosecuted, civil fines of up to £30,000 and rent repayment orders. This article explains the key points arising from the judgment and considers some of the options available to property owners going forward.
Property guardians are private individuals who reside in unused properties, which are usually not intended or designed primarily for residential use, such as office buildings or warehouses. Usually the reason the property owner permits their occupation is for the guardians to provide an element of security to the property and reduce the risk that squatters can pose to a vacant unsecure property. Property guardians typically reside in the property under the terms of a temporary licence and may pay a licence fee and lower rental costs than market rental rates.
An HMO is a property occupied by three or more tenants who are not part of the same household and who share common facilities. If the property and facilities are shared among five or more tenants and at least one of those tenants pays rent, this constitutes a “large HMO” and automatically requires an HMO licence. Local authorities have powers to require HMO licences for smaller HMOs and many local authorities have exercised these powers.
The case of Global 100 Ltd v Jimenez was brought by 3 property guardians who had resided on the third floor of a vacant office building and used a shared bathroom. However, approximately 10-12 individuals in total were reported to have resided in the building when housing officers from the Local Authority visited in November 2020.
One of the requirements for a property to be considered an HMO for the purposes of Part 2 of the Housing Act 2004 (and therefore require an HMO Licence) is that the ‘sole’ purpose of occupation is as living accommodation. The tenants in this case argued that this requirement was met. However, Counsel for Global 100 Ltd argued that the property fell outside of the definition of an HMO as the guardians were also in occupation to protect the property, not just to reside in it - they were required to conduct particular duties such as report damage to the property or any unauthorised attempts to gain entry. As a result, they contended that the property should not require an HMO licence.
The Upper Tribunal found that ultimately, the terms of the agreement were such that ‘the only thing the respondents were entitled to do with the living accommodation was to use it as their main residence.’ The prevention of trespassing and squatters was seen as being incidental. The ‘sole purpose’ of their occupation of the property was therefore to use it as living accommodation and as such, the building fell within the definition of an HMO. As an HMO licence was required and as Global 100 Ltd had not obtained one, it would have to pay each of the respondents sums totalling £6,251.85 as rent repayment.
Some of the key facts the Upper Tribunal referred to as being significant in reaching this judgement were:
Property owners who wish to use property guardians to protect their buildings should be mindful of this decision.
Specifically, landlords and organisations arranging for vacant premises to be occupied by guardians should be careful to consider what the Upper Tribunal may deem to be the ‘sole’ purpose of the occupation and whether an HMO licence will be required. It would be prudent to obtain legal advice prior to putting any such arrangements in place due to the potentially serious criminal and financial consequences of failing to obtain an HMO licence where one is required.
What is unclear is what the occupier’s responsibilities would need to be for the Upper Tribunal to consider their sole purpose to be for security purposes, rather than for use as living accommodation, and therefore outside the reach of Part 2 of the Housing Act. The Upper Tribunal suggested that if the property was protected by professional security grounds 24 hours a day 7 days a week that would be sufficient to fall outside of Part 2 of the Housing Act and therefore not require an HMO Licence. But there are a range of situations in between where the position is currently uncertain. Further guidance or case law to clarify this uncertainty would be welcomed.
Daniel Clyne is a Senior Associate in our Real Estate team. He advises clients on commercial real estate transactions with experience acting on acquisitions, disposals, asset management, pre-lets and lettings, financings and developments.
Simran Tatla is a Trainee Solicitor at Kingsley Napley and she is currently in her second seat with the Real Estate and Construction team, having completed her first seat in the Regulatory Team, working on secondment to the General Optical Council (GOC).
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