Property Guardians: (2) What is the law?

Part 2 in our short series looking at Property Guardians

A few days ago Samir Jeraj wrote about the phenomenon of ‘property guardians’. People who get a low rent in exchange for looking after a property by living there.

From reading Samir’s article and also the Shelter page he refers to, it looks like a rather precarious and unsatisfactory way to find a home. But needs must when the devil drives …

However, there is a big question mark (in some people’s minds anyway) over the legal status and rights of Property Guardians.

Before looking at this though, its perhaps worth noting that there is a difference between what people actually do and what their strict legal rights are.

Real life v. potential legal rights

In the context of Property Guardians, these are all people who need somewhere to live but can’t afford a normal rent.

Yes, the PG arrangement requires them to leave on just two weeks notice – which is not long (and is arguably not enforceable – see below). However, from reading some of the websites, it looks as if the Property Guardian company will then relocate the PG to another property, so they are not left homeless.

If you are hard up and need somewhere to live, assuming you will not be made homeless if you acquiesce and leave when asked, and bearing in mind also that the Property Guardian companies are businesses with solicitors and barristers at their beck and call – are you going to risk antagonising the company by refusing to move out?

I think not.

But what if they did?

What do the companies say?

Looking at the FAQ for property owners, on the website of a well known Property Guardien company, Camelot,  it says

The occupation agreement used by Camelot Property Management is legally watertight. A ‘Guardian’ in their capacity as a temporary occupier cannot derive the right to remain in your [ie the owner’s] property once you no longer require our services. Furthermore, the occupation agreement explains the rights and obligations of the Guardian in a crystal clear manner.

We use contracts which are constructed by Halliwells solicitors and approved by an independent barrister.

Any non lawyer reading that will immediately think  “oo-er, they must know what they are doing with all those solicitors and barristers involved …”

In fact my immediate reaction on reading that was exactly the same – until my inner lawyer reared its head and said “but hang on a minute …”

Occupation rights – looking at the law

There are two types of occupation of property possible here:

• A tenancy or
• A license

A tenancy is a form of ownership of land (under the Law of Property there are two ways you can own land – a lease or freehold), and carries rights – for example relating to basic standards of repair and the right to stay until evicted.

Even if you have a tenancy for just one month – for that month you are the legal owner of the property – or perhaps more correctly, you will have a legal ‘interest’ in the land (read here for more information on this).

A license, on the other hand, is just a personal permission from the owner allowing you to stay there, which means that you are not a trespasser.

The foundation-stone of the property guardian business is that the guardians are licensees and therefore have no, or very few, rights.

Or do they?

Notice periods and Notices to Quit for licensees

As pointed out by Nearly Legal,  even licensees are entitled to a four week Notice to Quit under the Protection from Eviction Act 1977 and have the right to stay until evicted by a Court Order.

Which means that a PG who does not want to move out could insist on remaining until evicted by the court bailiffs.

Or, if he was forcibly removed, a PG would be able to sue for compensation.

‘Excluded’ licenses

There are exceptions to this rule.  One is where the occupier shares living accommodation with the landlord (ie where they are lodgers).  This is unlikely to apply in a PG situation though, where the whole point of the exercise is to have someone looking after an empty property.

Another type of excluded license is where it is ‘granted otherwise than for money or money’s worth‘.  This could apply to a PG situation – one of the PG company sites refers to the PG payment being just to cover expenses.

Most of them refer to ‘rent’ though which would rule this out.  ‘Money or money’s worth’ will include a nominal rent.

If they do not have an excluded license, licensees will need to be given notice to quit and evicted via the courts, it they don’t leave voluntarily.

But ARE PGs licensees?

One of the most famous cases in housing law is that of Street v. Mountford in 1985. In this case, Mrs Mountford, who was being evicted by her landlord Mr Street as a licensee, defended on the basis that actually she had a tenancy.

In support of his claim, Mr Street produced a ‘license agreement’ signed by Mrs Mountford which had the following wording:

I understand and accept that a license in the above form does not and is not intended to give me a tenancy protected under the Rent Acts

(The Rent Act 1977 which was in force at that time, made it difficult for landlords to evict tenants).

The Law, particularly in the area of housing and contracts with consumers, has a tendency to disregard this sort of statement on legal documents.  Often these documents will have been signed by people who do not properly understand them, and/or who sign them because there is no other way that they can get somewhere to live.  Judges instead will look to what actually happens.

In the Street v. Mountford case, their Lordships decided that notwithstanding the statement on the agreement, the circumstances of the letting to Mrs Mountford were those of a tenancy. Ergo it WAS a tenancy.

Labels are not law

As one of the legal sources (Lexis) I consulted said:

“Labels that the parties attach to their agreement are not to be regarded as in any way decisive—it is for the court to rule on the legal effect of the agreement”

I don’t see why this type of reasoning wouldn’t apply to Property Guardians too. After all (if this got to the Court of Appeal), their Lordships are not going to be intimidated by statements that solicitors and barristers have checked the paperwork and say its all right.

So if they want to be immune from challenge, it is up to the PG Companies to make sure that the occupation agreements they use actually ARE watertight.

How can they do that?

Employees rights

One good way to do it would be to make the PGs employees. If an employee is required to live in a property as part of his job, then that is automatically a license, and they can be evicted reasonably quickly (although not in two weeks) even if they decide to make a stand for it.

However if the PGs are employees, they will then potentially acquire employees rights – things like the right to a minimum wage, holidays, pensions, redundancy rights etc. So thats no good then.

The normal tactics

Which means we are left with the sort of tactics used by Mr Street and other would be license landlords – which DO sometimes work.

Probably the two most relevant for PGs are –

• Stating that the occupier does not have ‘exclusive occupation” and
• Providing that the landlord has the right to move the occupier to another room or another property

This must be the sort of thing that the PG companies are relying on.

For example, it could be argued that the strong inspection rights in the agreement (particularly if they are regularly used) mean that the PGs do not have exclusive occupation.

And putting in clauses saying that the landlord can move them to another property if the owner wants his warehouse back again, would also go to support the allegation that this is not a tenancy.

I can see a court upholding that argument, assuming all other facts support the landlords claim.

But each case is different …

However the legal texts all make it very clear that each situation will be judged on its own merits, in the context of what actually happened (or happens) on the ground in the specific case being looked at.

So if a kindly Property Guardian company employee says to a potential PG, worried that she will be moved on in a few weeks “Don’t worry love, you’ll be there for a long time”, that might be enough to give her tenant’s rights.

It might not of course, its hard to say – it would depend on what else happened. But I would not rule it out of court.

So a PG company will have to take great care in the way PGs are treated and what is said to them, if the licensee status (assuming they have it) is to be maintained.

Three things

You know, while sitting here writing and thinking about this subject, there are three things that keep coming into my mind. A character, a story and a phrase.

The character is Tinkerbell, the fairy in JM Barrie’s play, Peter Pan. Tinkerbell, according to one theory I read, can only exist while people believe in her.

The story is the Emperor’s new clothes.

And the phrase? Take a look at the picture above.

Afternote – if you want to read more on this topic, I recommend the following posts by Giles Peaker writing on Anthony Gold Blog and Jon Dickens on his Digging the Dirt blog.  Both of them very experienced properly solicitors.