Property Guardians revisited

Property Guardians

Back in 2013, Tessa ran a series of articles on this blog about the then fairly new development of property guardianships, looking at the legalities and realities as things stood nearly 6 years ago.

But since that time they have become a lot more common and contentious, so I thought it time for a short revisit.

A regular occurrence

My outfit, Safer Renting, are being called in to advise on more and more of these arrangements, even over the past year and there have been cases through the courts that are throwing more light on the legal nuances.

Government have stood back and watched them grow and whilst obviously aware of the possible legal problems have not stepped in yet with any firm legal opinions, although it is worth noting this passage from just the third paragraph of their online factsheet:-

“The government does not endorse or encourage the use of property guardianship schemes as a form of housing tenure.”

Read the government fact sheet here.

Where the problems arise

The problems come mainly through arguments about security of tenure and repairing obligations. It’s generally accepted by all parties, although usually not employees of guardian management companies, who are often woefully ignorant of the legal process, that guardian arrangements are not automatically excluded from the normal rules that apply to the creation of tenancies.

Rules that apply to everyone in the UK, but their argument is still usually that they are a special case, in that people sign up fully aware that they know what they are getting into and that this includes being moved at short notice and accepting that the property conditions might be below par.

They argue that their special status overrides the law because they provide cheaper housing in a housing crisis and that this should mean everyone should be thankful and just leave them alone to get on with it.

One thing they fail to grasp in security of tenure issues is that it is possible for different individuals in a property to be a mixture of licensee and tenant, dependant on a range of factors.

Is it possible to override the provisions of the creation of a tenancy?

Yes it is, under what Andrew Arden, writing in the Manual of Housing Law refers to as the ‘Control test’, whereby it is possible on mutual agreement, for two parties to agree that the person’s with management control reserve the right to move people to different rooms or properties for the purpose of property management, which you usually see in hostels.

Even if the person enjoys exclusive occupation of a room, normally a hallmark of a tenancy, these arrangements mean they may not have exclusive possession of it.  But simply claiming to have control of the internal use of a property does not mean that they automatically have it.  The courts have to consider whether or not this is merely a ruse to reduce a person’s security, a common enough occurrence in normal rogue lettings.

This principle came up last year in the case of Camelot Guardian Management Ltd v. Khoo (2018), reported on Nearly Legal. You can read it here. where the High Court accepted that in this particular instance a tenancy did not exist, precisely because of the control test.

However….

A new development in the case of Khoo was that the courts also took into account that the purpose of the letting was for the protection of property, an argument always held by Guardian companies but as Nearly Legal points out:-

“For Guardian firms, this is a bit snakes and ladders. The more that guardian occupation is clearly not under a  tenancy because of the purpose of the scheme, the less likely their property owner clients are to get the desired pay-off of not having to pay commercial rates on an empty commercial property.”

An interesting point that may affect the financial viability of some guardian arrangements.

There is also another angle to this licence v. tenancy debate that wasn’t floating around 6 years ago. York University last year produced an informative guide on the various legal angles to guardian lettings which goes beyond matters of security of tenure and into the realm of licensing and enforcement of repairing obligations that gives another double-edged sword to the guardian companies.

Where a property is a residential one then further obligations arise concerning enforcement notices and who they should be served on. This quotes directly from the guide:-

•  In cases where the licence agreements with the property guardians are genuine, there is no one who is in receipt of the rack-rent. In such cases, the person who would so receive is not the property guardian company, but the building owner;
• In cases where the agreements with the occupants are not genuine licences but tenancies, the property guardian firm is the person in control either because the ‘rents’ are two-thirds of the full new annual value, or would be the person who would so receive it if the premises was so let.

In short, in some lettings, if the guardian company want to stick to their guns that the occupiers are licensees, in order to facilitate moving them around, then works notices for repairs get served on the owners, not the management company.

Further problems

Something I’m sure many owners would be none too happy about but this also creates a further problem, in that if the owner is the council, as they are in many instances, then the council cannot serve notices on themselves and the repairs don’t get dealt with.

A conundrum that may find itself being addressed upon the implementation of the Homes (fitness for human habitation) Act 2018 when it comes into force in March, allowing the occupiers to directly sue for disrepair issues.

Who will they then sue? The owner or the guardian company?

Questions, questions but the whole wobbly-wheeled charabanc of guardian arrangements continues to wend its’ way between various bits of housing law, so expect a raft of new cases and legal possibilities as the year rolls on.

Despite the decision in Khoo the normal rules of tenancy and licence continue to apply in each individual case and guardian companies are not exempt, simply because they insist it doesn’t apply to them en masse

And at the end of the day, occupiers in property guardian arrangements, even if they are licensees are not ‘Excluded licensees’.  So if they refuse to be moved the guardian management company still have to obtain a possession order to get them out.

Licensees are also covered by the Protection from Eviction Act 1977 in terms of harassment, because, these provisions protect ALL residential occupiers, regardless of security of tenure, so merely coercing them into moving could still be a criminal offence.

So guardians have more rights than their management companies think.