Renting rights of property guardians

Property guardianship a means of occupying property. Vacant residential or commercial premises are let to individuals as 'property guardians' at a below market rent.

The property owner grants a licence to the guardian agency, which contains permission to grant a sub-licence to the property guardian.

There is no relationship between the owner of the property and the guardian. The agency is the guardian's landlord and keeps the rent, plus all other sums paid by the guardian for the right to live in the property.

The occupation agreements that the property guardians enter into often contain terms that may be unenforceable when considered under principles of housing, landlord and tenant, and consumer law.

Gov.uk has non-statutory guidance for current and potential property guardians.

A property guardian lives in vacant commercial, industrial or residential accommodation under an occupation agreement. This is often labelled as 'licence for non-exclusive shared occupation of premises'. 

It is granted by a guardian agency for a below market rent.

The agreement typically requires the property guardian to pay any of the following:

• licence fee (usually weekly)

• utility fee  for gas, electricity and water (usually weekly)

• damage security payment

• administration fee

• safety pack fee

• an amount towards council tax.

It has long been established that the 'label' on an occupation agreement does not decide the real status of the occupiers.[1] Instead, it is necessary to look at the agreement itself, whether or not it is termed a 'licence for non-exclusive shared occupation of premises', together with the practical arrangements surrounding the property guardian's occupation of the property.

The main indicators of a tenancy are that the occupier has:

• exclusive possession of the premises

• for a term

• at a rent

There also needs to be an intention to enter into legal relations.

Exclusive possession is the right of the occupier to exclude all persons, including the landlord, from the premises. The term 'premises' does not mean the whole property/building but can refer to a single room within it. The fact that the landlord has reserved the right to enter in given circumstances, for example to carry out inspections, does not deprive the occupier of exclusive possession.

Although many property guardianship arrangements are genuine licences,[2] it is arguable that some meet the requirements for a tenancy. This will be the case especially if, in practice, the guardian lives in the premises alone (they have exclusive occupation of any part or room in the property) for a considerable period of time (not just for a few nights). In these cases it is strongly arguable that they are occupying the premises as a 'dwelling'.

Each arrangement will have to be judged on its own facts. For example, in a County Court case, it was held that the guardian had exclusive possession of the premises and was therefore an assured shorthold tenant, rather than a licensee, where the guardian:[3]

• was offered the choice of a room in the property by the property agency at the start of the agreement without any involvement of the other guardians living in the property

• was given the key to that room and the other guardians in the property did not have access to it

• had remained in occupation of the same premises for over three years, and had never been asked to move to alternative rooms

A landlord might label an occupier as a property guardian but if the key elements of a tenancy are present, this could indicate that it is a sham agreement. Find out more about sham tenancy agreements.

Find out more about where tenancy rights come from and what is a licence.

A property guardian's agreement usually provides that the agency can require the guardian to vacate the property at very short notice, often two weeks, and without a court order. It is strongly arguable that such notice is invalid.

A property guardian occupies the premises as a home so would qualify as a 'residential occupier' for the purposes of the Protection from Eviction Act 1977, particularly when occupying residential premises. 

If the property guardian occupies commercial or industrial premises, the landlord/guardian agency may try to argue that the guardian is not a 'residential occupier' because the planning use of the premises is for business purposes and not for residential occupation.

However, it has been held that the 1977 Act applies when premises are let for mixed residential and business purposes. See Harassment of occupiers by a landlord or agent for more on the Act.[4]

A residential occupier is defined as a person who occupies premises as a residence.[5] As such, regardless of whether the property guardian is a licensee or a tenant, they might be entitled to a minimum of four weeks' notice to quit and have the right to remain until the guardian agency obtains a court order. The only exception would be if the property guardian was an excluded occupier, which is unlikely. See excluded occupiers for more on this.

When the occupation agreement is, in effect, an assured shorthold tenancy all the requirements for termination of such tenancies will apply. 

If the landlord/guardian agency lets premises which contain a hazard under the Housing Health and Safety Rating System (HHSRS), they may be required by the local authority to remedy the defect.

The property is likely to be subject to mandatory or selective licensing requirements for houses in multiple occupation (HMOs) if the property guardian lives with other people who are not their spouse, partner or relative.[6]

The Court of Appeal dismissed the argument that a property should not be licensed for HMO purposes because the property guardian's purpose was not primarily for occupation. The court held that the actual use of the property was occupation and so the property should be licensed as an HMO.[7]

The landlord or guardian agency can be prosecuted by the local authority and liable to a rent repayment order.

Find out more about Houses in multiple occupation and Selective licensing.

The Court of Appeal has held that an office building occupied by property guardians was correctly included in a non-domestic rating list, and that the building was not subject to domestic council tax regime.[8] The judgment reversed a previous decision of the Upper Tribunal which found that the property guardians were in rateable occupation of their individual rooms.

Arguably, property guardians are consumers dealing with a business, as such consumer protection legislation will apply to their dealings with the guardian agency.

Under consumer law, guardian agencies should use an appropriate set of standard terms and other contractual documentation in their dealings with property guardians. A failure to do so could result in unfair contractual terms being unenforceable and not binding on the property guardian.

Unfair Contract Terms Act 1977

The Unfair Contract Terms Act 1977 applies to agreements between a consumer and a business, especially when the business uses written standard agreements where the consumer does not negotiate individual terms. The main relevant provision prevents a business from relying on a term which unreasonably either:[9]

• excludes or restricts its liability for breach of contract

• provides substantially different performance to that reasonably expected, or

• provides no performance at all.

The reasonableness of a term is to be assessed by reference to the circumstances and knowledge of the parties when the agreement was made.[10]

Consumer Rights Act 2015

With effect from 1 October 2015, the Consumer Rights Act 2015 repealed and replaced the Unfair Terms in Consumer Contracts Regulations 1999.

Chapter 4 of Part 1 of the Consumer Rights Act 2015 applies to consumer contracts for the provisions of services - that is contracts where a trader/business supplies a service to a consumer. Part 2 of the Act contains rules about unfair terms, and Schedule 2 to the Act contains an indicative and non-exhaustive list of terms which may be unfair. 

Examples of unfair terms that could apply to property guardians include:

• requiring a property guardian who fails to fulfil his obligation to pay rent on a certain date to pay a disproportionately high sum in compensation

• enabling the guardian agency to terminate a property guardian's periodical occupation agreement without reasonable notice

• enabling the property agency to alter the terms of the guardian's occupation agreement unilaterally, without a valid reason specified in the agreement.

It is for the courts to determine if a term is unfair. If the term is held to be unfair, the remainder of the contract is enforceable as though that term does not exist. 

Guidance on unfair terms

Guidance on unfair contract terms analyses how to apply the test of fairness and why some standard contract terms may be considered unfair.

See also Unfair terms and implied conditions for more on unfair contract terms.