The use of property guardians on developments is increasing. Although there is no legal definition of a property guardian, the term is generally understood to relate to an arrangement whereby a property owner enters into a contractual relationship with a guardian service company, and that service company organises for individuals to live at empty properties as licensees, in order to protect the property from arson, vandalism or trespassers.
From a tenancy perspective, the primary risk to the property owner is that the individuals living at the property may be tenants rather than licensees, and may therefore be more difficult to move on when the property is required to enable development to commence. Indeed, the Courts have found property guardians to be tenants with the protection of the Housing Act 1988.
Generally under these arrangements, the occupation of the property is managed on a day-to-day level by the service company, so the property owner cannot directly control how the occupancies are managed. While the owner can approve, a form of residential license to be issued to occupants (as part of its contractual arrangement with the service company), ultimately whether a license exists is not simply a matter of what is written on the occupancy document. The context and surrounding circumstances feed into whether a license or a tenancy has been created.
License or tenancy?
A court could look at:
● Whether occupants have exclusive possession of the property, or any part of it, and can exclude the landlord or its agents. Does the occupier have the only set of keys, for example, and is their residence without interruption? This should be avoided. Licensees should be subject to frequent landlord/agent inspections and visits (whether or not the occupant is themselves present), and should be moved around the property as appropriate to its use – for example as it is being redeveloped, refurbished or redecorated. Where there are works being undertaken, it will be easier to show exclusive possession has not been granted, as the works access will be ongoing and frequent.
● What type of property the occupier is living in. It is easier for exclusive possession to be found where the occupier is living in a single self-contained dwelling, as opposed to a commercial property where the primary purpose is manifestly not housing.
● How are occupants are selected. If, for example, groups of people who know each other enter into the occupancy agreements at the same time and then live in the same property this could be more akin to a tenancy (subject to an analysis of other relevant circumstances).
● Whether the occupant is paying something akin to rent (even if this is described as a license fee or accommodation charge)
What if it goes wrong?
If the court finds that an occupant has an Assured Shorthold Tenancy (AST) rather than a license, the primary outcome will likely be a delay in obtaining possession of the property. An AST can only be ended using the processes in the Housing Act 1988, the most likely of which will be the mandatory possession procedure under Section 21 of the Act.
Section 21 possession orders however, are only available where the landlord has complied with various obligations, for example, relating to the provision of tenancy and property information and the protection of any deposit monies. The property owner is unlikely to have complied with these requirements because the intention was not to create a tenancy.
Practical considerations:
Developers looking at these arrangements should:
Assess whether property guardian services are appropriate for a particular building. The courts will look for sham arrangements trying to avoid granting security of tenure. If a building is subject to phased works, then guardian services may be a practical solution for minimising risk of property damage. If on the other hand, a self-contained dwelling is simply empty for a period of time and there is no real need for repeated landlord access, then perhaps guardianship is not appropriate.
Given that the property owner is not in day-to-day control of the occupancy of the building, the contractual arrangement with the service company should place the burden of obtaining vacant possession of the property on the service company. This will include arranging for legal actions in its capacity as agent for the owner, and covering associated costs. This is not a magic pill however – while it limits the owner’s exposure to the inconvenience and cost associated with possession actions, it will still need to adapt to the delayed timetable – this could be particularly costly where redevelopment works have been scheduled and the owner has entered into time critical legal arrangements with third-party contractors.
Many property guardian service companies promise that they can deliver up vacant possession within a matter of days of receiving notice from the property owner. In reality, this claim is founded on a relationship of trust between the company and its guardians, rather than any legal right. Many established, long-term guardians will move on when asked to do so and are reliant on maintaining a good relationship with the company to ensure they are offered a new home. However, if the relationship breaks down, it could take many months for the company to recover vacant possession.
