Property Guardian Companies and HMOs - considerations for freeholders

Last week, the Court of Appeal decision in Global 100 Ltd v Jimenez and Global Guardians Management Ltd v LB Hounslow and others [2023] EWCA Civ 1243  provided some helpful clarity in terms of a Property Guardian Company (PGC)'s duties towards the occupying Guardians who live in the empty properties that it promises freeholders it will protect.  For larger buildings with multiple Guardians these properties are likely to be considered Houses of Multiple Occupation ("HMOs").   

For freeholders there are two main considerations when using a PGC to protect an empty building. Firstly, if there are multiple occupiers or “households” living in the property and they are not in self contained units, there is a good chance the building will be considered a HMO and it will need to be licenced.  The fact that part of the occupying Guardians' role is to deter trespassers does not negate them being considered occupiers under the standard test for a HMO as they were occupying as their main residence.  The PGC, as the person managing the Building, will be most likely be responsible for ensuring the HMO is licenced, but freeholder as a responsible landowner and potentially head landlord would be well advised to check the agreement they have in place with the PGC to ensure that the HMO licencing requirements are complied with by the PGC.

In this case the PGC challenged the basis of whether they could be considered the “persons managing” the property.  The Court of Appeal found that they were managing the property as they had exclusive possession under the terms of the agreement they had with the freeholder. The Court of Appeal determined that they were effectively occupying under a tenancy agreement, even where it was couched in the terms of a service agreement.  As such a second consideration for freeholders is to ensure that the wording of the agreements with the PGC carefully to ensure the agreement accurately reflects the intentions of the parties.

Whilst the use of a Guardianship arrangements may seem attractive in terms of the potential to deter trespassers or vandalism as a short term arrangement where buildings may otherwise remain empty, sometimes these agreements can fall short for both the freeholder and the occupying Guardians.  Freeholders are advised to seek legal advice as to effects of any contract or service agreement that it looks to enter into with a PGC.