[2023] UKUT 306 (LC)

The facts as found by the FTT, in outline, are as follows.

The Gables is a large property formerly operated by NHS South East London Clinical Commissioning Group (“CCG”) as a residential home. CCG was the freeholder at all times relevant to these proceedings, although it has since disposed of the freehold. It is a health service body within the meaning of section 9 of the National Health Service Act 2008.

In 2020 CCG wanted to dispose of The Gables and appointed NHS Greenwich Charitable Trust (“the Charitable Trust”) as its agent in relation to the sale of the property. The Charitable Trust is not a health service body within the meaning of section 9 of the National Health Service Act 2008. As agent for CCG the Charitable Trust entered into an agreement with Lowe Guardians Limited (“Lowe”); the purpose of the agreement was for Lowe to take on the care of the property and to arrange for guardians to occupy it.

As is well known, the introduction of guardians to live in a property has been devised as a way of securing large buildings designed as offices or other non-residential premises, with the aim of preventing squatting or vandalism. The guardians typically have some obligations relating to the security of the property, but the nature of their occupation and contractual arrangements does not prevent the building from being an HMO (Global 100 Limited v Jimenez and others [2023] EWCA Civ 1243).

The agreement between the Charitable Trust and Lowe was found by the FTT to be a lease. Because the Charitable Trust entered the agreement as agent for CCG, the consequence of that finding was that CCG had leased the property to Lowe, in return for some services but no rent.

The agreement between CCG and Lowe made provision for Lowe to appoint an agent, the respondent, for example at clauses 3.1 – 3.3 (where “LM” refers to the respondent):

“3.1

The Owner appoints LG as the sole and exclusive provider of the Services at the Property and grants possession of the Property to LG.

3.2

To enable LG to provide these services, the Owner agrees that LG may grant permission to LM to provide the Services.

3.3

The Owner acknowledges and accepts that in order to facilitate the provision of the Services, LM is permitted to grant Licences to Guardians selected to share occupation of such part or parts of the Property as LM may designate from time to time.”

In accordance with that agreement the respondent made agreements with guardians, and hence was the respondent in the FTT and is the respondent to this appeal.

In January 2022 the appellants applied to the FTT for a rent repayment order against the respondent. Their case was that The Gables should have been licenced as an HMO from 25 September 2020 to 14 January 2021 but was not so licensed; the respondent had therefore committed the offence created by section 72(1) of the 2004 Act. A rent repayment order was sought in the sum of £11,003.67.

In response it was argued for the respondent that the provisions of paragraphs 1 and 2 of Schedule 14 to the 2004 Act meant that the property was not an HMO because CCG was the person having control of or managing the property.

Mr Penny for the appellants argued that that was not the effect of Schedule 14 but that (paragraph 34 of the FTT’s decision):

The FTT accepted the respondent’s argument. It found that CCG was a person in control of the building and that the effect of paragraphs 1 and 2 of Schedule 14 to the 2004 Act was that the building was not an HMO; therefore no offence had been committed and no rent repayment order could be made. At paragraph 72 of its decision it said:

“This outcome could be described as infelicitous, in that, purely from the point of view of effective regulation of shared housing accommodation, it is difficult to see why an empty property that happens to be owned by a health service body (or any of the other categories of owner in paragraph 2 of schedule 14) should be wholly exempted from the legislation controlling HMOs for that reason alone. That, however, is the law as it seems to us to be. And it is not an outcome that we could characterise as absurd or irrational. It is understandable that the Government department responsible for the legislation would have sought to have over-determined the exemption of buildings relating to other government departments’ concerns as a matter of policy, in principle leaving their regulation to other structures.”

The FTT gave permission to appeal on the ground that it was arguable that the FTT had misconstrued paragraphs 1 and 2 of Schedule 14.