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Property Guardians - PG Agreements Down to a Tee

About The Author

Thomas Horton (Former Writer)

Thomas studied Law at the University of Birmingham, and graduated with a 2:1 in July 2013. In the elapsed time, Thomas has worked for law firm HowardKennedyFsi LLP as a paralegal in the property department. Thomas has also been awarded a Major Scholarship by the Honourable Society of the Inner Temple and will begin the BPTC with City Law School in September 2014.

Property guardians are individuals that register with an agency, such as Ad Hoc or Camelot, which manages vacant properties. The properties managed by the agency can be houses, converted old public amenities or commercial premises. These registered property guardians are then allocated accommodation in these properties at a low rent by the agency. With ongoing housing problems, such as extortionate rent in London (which I know of personally) and a nationwide lack of housing, the concept of property guardians demonstrates a pragmatic use of vacant properties. Moreover, property guardians act as a deterrent to burglary and squatters.

Following growth in this business model, questions have arisen as to what rights these property guardians have. In other words: what is the legal status of a property guardian? In discussion of this question, it will be considered what protection from eviction is afforded to a property guardian, and what other rights, if any, they have against the agency and the property owner. Conclusively, this article will seek to determine how pragmatic the model of ‘property guardians’ is.

Legal Structure

According to Ad Hoc, the legal structure of the property guardian (“PG”) model is straightforward:

The owner of the building grants Ad Hoc an Authorisation Agreement for the premises, we in turn grant a Licence to Occupy a unit to the guardian.

This differs from a tenancy as we are supplying a service and the guardians are helping us to fulfil it and as such no tenancy rights are granted to either Ad Hoc or the guardians. 

The result of such earnestness: an agreement that apparently confers no tenancy rights, and a contract that can be terminated on 28 days’ notice. As a preliminary point: this ‘Authorisation Agreement,’ in my understanding, simply grants the agency the power to make the PG agreements with the prospective PGs on behalf od the property owner. (Any feedback or comments from our readers with further information on this point would be welcome).

The determination between a tenancy and a licence to occupy will be fresh in the minds of many law students having just finished their property law exams. An analysis of the validity of the agencies’ assurances that what they offer to PGs is simply a licence will be useful in determining what rights the PGs have dependent upon whether they are classified as tenants or licencees.

The creation of a tenancy, where a landlord carves out an interest in their freehold title that is given to the tenant through a lease, is readily determined by following the three-pronged test provided by Lord Templeman in Street v Mountford:

If exclusive possession at a rent for a term does not
 constitute a tenancy then the distinction between a contractual 
tenancy and a contractual licence of land becomes wholly
unidentifiable. (Emphasis added).

Would a PG have exclusive possession of the property they are in? Following a perusal of agencies’ websites, it is not readily evident whether or not the agencies provide PGs with any services whilst they are living in the property they have been allocated. For the avoidance of doubt, an example of services is cleaning of the property:

If on the other hand residential accommodation is granted for a term at a rent with exclusive possession, the landlord providing neither attendance nor services, the grant is a tenancy; any express reservation to the landlord of limited rights to enter and view the state of the premises and to repair and maintain the premises only serves to emphasise the fact that the grantee is entitled to exclusive possession and is a tenant.

Such considerations are relevant to the determination of exclusive possession; in Street v Mountford, Lord Templeman highlighted the need to look at the substance rather than the form of the agreement to determine whether or not exclusive possession had been granted to the occupier. Exclusive position is the “talisman” of the three pronged test: with exclusive possession it usually follows that a tenancy is in existence.

The agencies’ websites refer to the likelihood of there being several PGs in a property at any one time. There could be no determination of there being exclusive possession in such a scenario; the Court of Appeal in AG Securities v Vaughan [1990] 1 AC 417 held that for there to be exclusive possession in such a scenario, all parties must be present at the signing of an agreement on the same terms in order to create a joint tenancy.

As has previously been noted, PGs pay a rent to the agency managing the property they have been allocated. Despite this rent being at a rate lower than what would be expected of standardly rented properties, this is of no material difference. Whilst a payment of rent is not, strictly speaking, necessary for the formation of a tenancy (s. 205(1)(xxvii) of the Law of Property Act 1925), rent is necessary for a tenant to be afforded protections under the Rent Acts and Housing Acts (i.e. the purpose of this analysis).

One essential ingredient for the creation of a tenancy that appears to be missing is a specified term of a PG’s occupation of the premises they have been allocated. Indeed, interviews with PGs demonstrate the uneasiness caused by the unknown period for which they are to be situated within an allocated building. The House of Lords’ decision in Prudential Assurance v London Residuary Body [1992] AC 386 confirmed that a leasehold term must be certain (despite Lord Browne-Wilkinson’s dismay in agreeing with Lord Templeman’s decision!).

Based on this simple analysis of the PG structure, it would appear that PG agreements do not create a tenancy. Whilst it is arguable that exclusive possession could be found, if, for example, there was just one PG in an allocated property, the absence of a fixed term of the agreement would fail to satisfy the “tenancy test” posited in Street v Mountford.

Charity?

The property guardian structure is not overly dissimilar to the situation witnessed in Gray v Taylor [1998] 1 WLR 1093. The appellant in that case, Taylor (T), was permitted to occupy a flat in one of the almshouses owned by a charity. (An almshouse is a house built by a charitable organization for a person, usually of little means, to live in). The charity sought to terminate T’s appointment as an almsperson. T submitted that, upon her appointment as an almsperson, she had been granted exclusive possession of the flat for a term at a rent, which rendered her an assured tenant whose tenancy could only be terminated by an order of the court (see s. 5 of the Housing Act 1988). The Court of Appeal (Sir John Vinelott delivering the judgment of the court), in determining whether T was a tenant or a licencee, referred to Lord Templeman’s judgment in Street v Mountford, where his lordship stated several exceptional situations where, despite there being exclusive possession, a lease will not exist:

… [A]n occupier who enjoys exclusive possession is not necessarily a tenant. He may be owner in fee simple, a trespasser, a mortgagee in possession, an object of charity or a service occupier.

Elaborating upon this point, Vinelott then referred to the judgment of Denning LJ in Errington v Errington and Woods [1952] 1 KB 290, where his lordship stated:

Parties cannot turn a tenancy into a licence merely by calling it one. But if the circumstances and the conduct of the parties show that all that was intended was that the occupier should be granted a personal privilege, with no interest in the land, he will be held to be a licensee only.

This was pivotal in the Court of Appeal dismissing T’s appeal. The concept of an almsperson being granted accommodation in the almshouse for a very minor rent to assist in their financial hardship was the only intention of the charity. This is readily identifiable within Vinelott’s concept of an almsperson winning the lottery:

For instance, an almsperson who inherited a substantial legacy or won a prize in a national lottery would no longer be a poor person and a proper object of charity.

Of course, this encapsulates who the beneficiaries of the charity are, yet the principle of the intention of the arrangement for T’s use of the flat makes it clear that the charity did not intend to create a tenancy with T. In relation to the structure of an agreement with a PG, the ratio of Gray v Taylor can similarly be applied to determine that a tenancy has not been created. This understanding, naturally, smacks in the face of the determination of a tenancy, yet so many common law tests have similar diversions that it is hardly surprising. On a side note, it would be wise to remember Lord Hoffman’s obiter comments in Bruton v London and Quadrant Housing Trust [1999] UKHL 26:

The character of the landlord is irrelevant because although the Rent Acts and other Landlord and Tenant Acts do make distinctions between different kinds of landlords, it is not by saying that what would be a tenancy if granted by one landlord will be something else if granted by another.

Protection from Eviction

Based on the previous analysis, it can be said with some confidence that a PG would be seen simply as a licencee. Summarily, this is where a personal permission from the landowner (licensor) has been granted to another (the licencee) to use the land (Thomas v Sorrell (1672) Vaughan 330). Without such permission the use of the land by another would amount to trespass.

In particular, the PG agreement amounts to a contractual licence: the PG pays rent and gives the property owner the benefit of not having an empty property, and in return the property owner provides the PG with accommodation. One factor of the particular contract, or “PG Agreement”, that is significant for the agencies is that the contract does not refer to a specific term. If the contract referred to a term, rather than simply being a contractual relationship between the agency/property owner and the PG, it would then have to be questioned whether the PG could enforce that contract for its duration, say, if the property was sold on. In other words, the absence of a specific term appears crucial in preventing the creation of any proprietary interest for the PG, which could be enforceable against third parties (see the decision of Lord Denning in Errington v Errington and Woods [1952] 1 KB 290). The hallmark dicta of Lord Wilberforce in Provincial Bank v Ainsworth [1965] UKHL 1 encapsulates this position and correlates with Ad Hoc’s legal structure quoted above:

Before a right or 
an interest can be admitted into the category of property, or of a right
affecting property, it must be definable, identifiable by third parties, capable
in its nature of assumption by third parties, and have some degree of permanence or stability.

The absence of a specific term would prevent any ability of the PG claiming possession of the property they have been allocated in order to protect their contractual rights granted by the licence (Manchester Airport Plc. v Dutton [1999] WLR 254).

Accordingly, what, if any, rights are afforded to PGs? They are not, as a result of being mere licencees, covered by the protections afforded under the Housing Acts and Rent Acts as referred to above. Moreover, the owner of the property is not liable to the duties of a landlord imposed by statute and common law.

The main instance of protection being afforded to PGs appears to be at the point of when they are requested to leave the property following the serving of a notice by the agency to the PG. A perusal of the agencies’ websites reveals that 28 days’ notice is what is afforded to the PGs in order for them to vacate the property. The agencies additionally refer to their willingness to relocate PGs into an alternative property on their books following their serving of the notice to quit upon the PG. It is questionable as to whether the relocation availability is something that works to the benefit of the PG; there could be severe disruption to the PG should they have to be relocated somewhere far away from their place of work, for example.

Nevertheless, despite the assurance from the agencies of their provision of 28 days’ notice for serving a notice to quit upon the PG, this notice period is statutorily protected. The Protection From Eviction Act 1977 applies, following s. 1, to a residential occupier: ‘a person occupying the premises as a residence, whether under a contract or by virtue of any enactment or rule of law giving him the right to remain in occupation or restricting the right of any other person to recover possession of the premises.’ Accordingly, the PG would be able ensure that 28 days’ notice is given by the notice to quit, as is provided for by s. 5 of the 1977 Act.

Conclusion

The use of the PG model allows for the use of a property in the same way that a freeholder allows a tenant to use the land, that is: receiving a benefit from having an individual occupying the property in return for a payment of rent. The mechanism of the PG agreement, however, seems to provide a method by which the freeholder/agent, can avoid incurring the duties usually incurred in a landlord and tenant scenario. The absence of any proprietary right, as asserted in the agencies’ legal structures, appears to withstand scrutiny, and, accordingly, has created a unique business opportunity for those with vacant properties. Contrastingly, the absence of any sufficient protection being afforded to a tenant may be something that needs to be addressed should this business model continue to expand.

Further Reading

Landlord Law Blog - Property Guardians - Risky Business

Landlord Law Blog - Property Guardians - What is the Law?

Anthony Gold Solicitors - Who Guards the Guardians (Giles Parker)

Nearly Legal - Quis Custodiet Ipsos Custodes 

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Tagged: Commercial Law, Contract Law, Housing Law, Property Law

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