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Property Guardians - A Legal Update

Property guardianship is an arrangement by which people are granted accommodation within a property at a below market rent in exchange for keeping the property under observation and in good condition. The guardian's continued occupation provides a disincentive for the property to be occupied by squatters. The occupation agreement, often labelled as 'licence for non-exclusive shared occupation of premises', is a sub-licence granted by a guardian agency who have been granted a licence by the property owner.

The big challenge to guardian agencies is ensuring that the licences are considered licences and do not create a tenancy, which would otherwise provide the property guardians with security of tenure. It has long been established that the 'label' on an occupation agreement does not decide the real status of the occupiers and it is crucial to look at the terms of the agreement itself (Street v Mountford (1984) 16 HLR 27). That case held that an agreement which confers exclusive possession of premises for a fixed or periodic term in consideration of rent, will usually be considered a tenancy.

This is an issue which arose in the recent case of Camelot Guardian Management Ltd v Khoo [2018] EWHC 2296 (QB).

In 2015, the freehold owner of an office unit entered into an agreement with the Claimant, Camelot, granting a right of possession for the purpose of securing the property by arranging guardians to occupy it under licences. Camelot found a number of individuals to occupy the building, including the Defendant, Mr Khoo. It granted him a licence entitling him to 'share living space' in the building with others whom Camelot permitted to enter, in consideration of modest rent payments. It was a term of the licence that he was not to have exclusive possession and would vacate the building immediately once directed to do so by Camelot.

Camelot purported to terminate the licence by giving a month (less one day's) notice on Mr Khoo. Mr Khoo contended that he had an assured shorthold tenancy and Camelot subsequently issued possession proceedings. The first instance court held that Mr Khoo was a licensee and made a possession order. The High Court considered the tests in Street v Mountford and dismissed an appeal on the basis there was no suggestion of sham or pretence. The agreement was a typical licence agreement, which operated as a licence and did not confer exclusive possession on Mr Khoo. The purpose of the agreement was to secure the building against potential trespassers, not to create a tenancy.

This case provides quite a significant judgment on the issue of property guardians and the licence/tenancy distinction. The Court did not just give attention to the construction of the licence agreement but also placed a lot of weight on the purpose of the guardianship. There do however remain many grey areas of property guardianship such as variable charging, although if these schemes continue to become more popular, we may not be waiting long for the courts to provide us with further clarity on those issues.

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