[2025] UKUT 196 (LC)

I am not attracted to an over-literal construction of section 263(3). The importance of the definition of “person managing” is not that it identifies an event or a transaction but that it describes a status to which certain responsibilities are attached, including responsibility for licensing, where it is required, and responsibility for compliance with the Management Regulations. It is true that that status will be acquired at a particular time but it does not seem to me to be helpful in deciding whether an individual does or does not have that status to focus on the precise instant at which it begins. To do so would be to pay too little attention to the context and would risk creating distinctions which cannot have been intended.

To take the case of a landlord rather than an agent, a landlord receiving rent from a tenant in occupation of an HMO is a person managing within the definition in section 263(3). It cannot have been intended that the acquisition of that status and the responsibilities which go with it should depend on the precise timing of the first payment of rent. A landlord who receives a deposit and an instalment of rent on the execution of a tenancy agreement before the new tenant has moved in must surely be a person managing the property during the whole of the first month of the tenancy. It would be inconsistent with the object of the legislation, which is the improvement of housing standards for the protection of tenants, for a payment made before the commencement of occupation to be disregarded with the result that the landlord’s statutory responsibilities only commence when a second instalment of rent is received, by which time the tenant has begun to occupy.

It is a general principle of interpretation that a construction that produces an absurd result is unlikely to have been intended by Parliament. The application of that principle was considered by the Administrative Court in the recent case of Clearsprings Ready Homes Ltd, R (On the Application Of) v Swindon Magistrates' Court [2024] EWHC 2023 (Admin) which raised a different question about the construction of section 263 and the Management Regulations, namely, whether they apply where the occupants of an HMO have been placed there by a local authority under statutory obligations and pay no rent but where payment is made under a statutory scheme by the Home Office. Warby LJ and Dove J referred to the following application of the presumption, at [28]:

“An example provided in support of the principle is R v Lehair [2015] EWCA Crim 1324, [2015] 1 WLR 4811, a case which concerned section 77(5) of the Proceeds of Crime Act 2002 relating to tainted gifts. The provision defined tainted gifts as gifts which were made at any time after "the date on which the offence was committed". The appellant had robbed a bank at 14.37 on the day in question and then at 16.15 the same day she gifted a portion of the proceeds of the robbery to her husband. It was argued in the confiscation proceedings that this could not come within the definition of a tainted gift because it was not made after the date on which the offence was committed. The Court of Appeal concluded that the literal meaning of the Act gave rise to absurd results on the basis that it appeared to provide a criminal with a day's grace to dispose of the proceeds of crime, and meant the treatment of a tainted gift would depend upon the time of day when an offence was committed. Macur LJ, giving the lead judgment in the Court of Appeal, adopted a purposive construction of this provision, reading it as though the date on which an offence was committed referred to the actual time of its commission, after which any tainted gift would fall for consideration for confiscation.”

It would be anomalous, or absurd, to adopt an approach which delayed the obligation on the landlord of an HMO to obtain a licence or to take steps to ensure proper management arrangements and fire precautions were in place until a time after the tenancy had commenced and the tenant had gone into occupation. The precise timing of payment and commencement of occupation cannot have been intended to matter. Consideration of the language of section 263(3) alongside the purpose of the legislation therefore suggests that a strictly literal approach as advocated by Ms O’Brien will not do. I would have no difficulty in regarding a landlord as being a person managing and as capable of committing an offence on the day of the letting if, on that day, the tenant went into occupation on agreed terms which provide for the payment of rent, whether the first payment was made earlier or later than the commencement of occupation.

But what of an agent for the landlord? It was the receipt by the Company as agent for the landlords of a single instalment of rent on 12 October 2021 which the Council say made the Company a person managing the HMO on that day, notwithstanding that its only function in relation to the HMO had been to let the remaining room, a function which was complete when the letting was achieved.

The definition of person managing is intended to identify someone who undertakes management responsibilities and to make them subject to relevant statutory obligations. It is not a status or designation created for its own sake. The receipt of rent or other relevant payments is the hallmark of that status and it is understandable why it should be so. The receipt of rent is one of the fruits of property ownership to which obligations for the benefit of those paying the rent ought properly to attach. The receipt of rent is also a management function, and it is therefore an appropriate way of identifying those who should be made subject to statutory management responsibilities.

But can it have been intended that the receipt of a single instalment of rent by an agent who has no continuing management responsibilities should be enough to place the agent under the same statutory obligations as a landlord or a managing agent?

If a “let only” agent who receives a single instalment of rent on behalf of a landlord at the commencement of the letting is a person managing, they would commit a criminal offence if, for example, they failed to comply with regulation 3 of the Management Regulations by ensuring that their own name, address and telephone contact number were clearly displayed in a prominent location in the HMO. They would also be under duties imposed by the Management Regulations to ensure that the water supply, the common parts and the living accommodation in the HMO were all maintained in an appropriate condition and that arrangements were made for the disposal of refuse. It is the nature of property management that it is a continuing activity and the duties imposed by the Management Regulations are necessarily therefore continuing duties which are not to be performed on a single day.

Similarly, the obligations imposed by HMO licensing are continuing obligations. In one sense a licence is a snapshot, in that it provides confirmation that in the view of the authority the property meets the conditions in section 64(3) of the Act (which include that it is suitable for occupation by a maximum number of households). But a licence is more than a record of circumstances which existed on a particular day. It is a means of imposing the conditions described in section 67 of the Act; these include in every case the conditions in Schedule 4 of the Act, which concern the provision of gas safety certificates, the safety of appliances, and safety precautions such as smoke or carbon monoxide alarms. Once again, these are continuing management responsibilities which are required to be observed for so long as the licence is in force.

The fact that the purpose of the definition of person managing is to identify those who will be subject to continuing obligations, backed by criminal and civil sanctions, calls into question the intended breadth of the definition. Did Parliament mean to attribute that status to an agent with no involvement in management? I would suggest not.

My main reason is to do with the purpose of the definition, as I have described it, which is not served by including an agent who has nothing to do with continuing management. The imposition of the statutory obligations on such a person (in addition to the owner) would be redundant and might even be counterproductive. It would create ambiguity as it would be very difficult to know for how long the status would continue after the single transaction which created it. Would the letting agent remain a person managing, with all the relevant responsibilities, only for the period to which the payment was referable, or throughout the tenancy, or for some shorter or longer period? There is no obvious answer to that question, and Ms O’Brien was unable to suggest one. To extend the status of “person managing” to someone with no continuing involvement might also create confusion in the mind of tenants over who was managing the property, which regulation 3 of the Management Regulations is intended to avoid.

Secondly, simply as a matter of language, it would be surprising if the descriptor “person managing” was intended to apply to an agent who was not engaged to manage the property and who had no power to do so.

Thirdly, the relevant words of section 263(3) include within the definition an agent or trustee “where those rents or other payments are received through” them. The reference to “those rents” is to rents received by an owner or lessee from tenants or licensees in occupation. The rents received by the owner or lessee will typically be instalments received over an extended term, rather than a single payment. The reference to a situation “where those rents … are received” suggests a continuing state of affairs and is not apt to describe a single payment received by a letting agent at the commencement of the letting, even if it is a payment of rent. That payment is not received in the context of a continuing relationship between the agent and the tenant, or the agent and the landlord; it is a one off payment and unconnected with management.

A tantalising hint that the status of “person managing” may not be acquired by the receipt of a single payment can be found in Jacques v Liverpool City Council (1997) 29 H.L.R. 82. That was a decision of the High Court concerning the predecessor of section 263(3), section 398(6) of the Housing Act 1985, which defined “person managing” as follows:

“Person managing”

(a)

means the person who, being an owner or lessee of the premises, receives, directly or through an agent or trustee, rents or other payments from persons who are tenants of parts of the premises, or who are lodgers, and

(b)

includes, where those rents or other payments are received through another person as agent or trustee, that other person; and for the purposes of the foregoing paragraphs, where rents or other payments are received by means of a payment made on behalf of any person, they shall be treated as rents or other payments received from that person.

It will be seen that paragraph (a) of the definition in the 1985 Act is the same as that in section 263(3)(a), with slightly different punctuation, while paragraph (b) includes the same wording concerning receipt through an agent or trustee.

Mr Jacques was prosecuted by his local housing authority for breach of the HMO Management Regulations then in force. He was found by the Magistrate to be the person responsible as agent of the landlord for the day to day management of an HMO which was let to tenants whose rent was all paid through Housing Benefit. He had originally collected rent directly from tenants in the HMO but had not done so for four years. He now collected Housing Benefit cheques from the tenants made payable to the landlord and he also emptied the gas and electricity coin meters. He appealed against his conviction by way of case stated to the Divisional Court.

It was conceded by the Council that the receipt of the cheques for Housing Benefit were not payments, whether by way of rents or otherwise, within section 398(6) of the 1985 Act because the cheques were made out to the landlord and all that the appellant did was to collect them and pay them in to the landlord’s bank. The Court (Saville LJ and McKinnon J) agreed that concession was correctly made.

Next, the Court agreed with Mr Jacques that no inference about his status as a person managing could be drawn from his receipt of rent and payments towards arrears of rent directly from tenants, because this had occurred three or four years before the date of the alleged offence.

Finally, the Court accepted the submission of the housing authority that the reference to “other payments” should not be understood as being limited to payments similar to, or in the nature of rent (such as a licence fee). “Other payments” should be understood in the context of the management of premises and, McKinnon J said:

“[O]ne has to look at the context in which the other payments are made and it seems to me right to limit the words “other payments” having regard to that context so as to make other payments referable to any sums of money other than rent payable in respect of the management of the premises which would be received by the landlord from the tenant in the ordinary course of the tenancy. Thus, “other payments” do include the collection of meter monies.”

Saville LJ agreed but confined his answer to the critical question to the circumstances of the particular case before the Court (i.e. to a case in which payments were collected every week). He explained the need for that qualification in this way:

“I would rather like, subject to any submissions to the contrary, to have that qualification because I can conceive of a case where there is a complete one-off transaction, when one might be able to argue that this really was not intended to be comprehended by section 398. Unless either of you have any objection I think we can simply answer, “Yes, in the factual circumstances of this case”.”

Three relevant points emerge from Jacques. The first is that there must be some temporal connection between the receipt of rent and the relevant offence. The defendant was not found to be a person managing because he had collected rent from tenants three or four years previously. The second is the importance of the statutory context in limiting a literal reading of the language, so as to confine “other payments” to payments of money related to the management of the property. Finally, there is Saville LJ’s reluctance to extend the meaning of “other payments” to cover “a complete one-off transaction”.

These points, and in particular the third (although it was not the basis of the decision), support the view I take that a payment made to an agent of the landlord whose only function is to let the property in question and who thereafter has no involvement in the continuing management, is not a payment within the scope of section 263(3). For that reason, the Company was not a person managing the HMO and Mr Cetin did not commit an offence when the Company received the payment of rent from Ms Weir-Clarke.