By Ian Craig, partner, and Louise Kellaway, professional support lawyer at Stevens & Bolton LLP
Do you have a vacant property which you need to secure, but don’t want to let? Property guardian schemes have become popular as a way of protecting empty property. However, a recent court case and surrounding publicity highlights that owners should consider carefully the agreements they enter into with guardian companies and how guardian arrangements operate in practice.
Landowners sometimes leave properties empty while, for example, arranging a sale or redevelopment. Such empty properties may be at risk of vandalism, theft and occupation by squatters. They can also be an expensive liability, with no income from tenants to offset expenditure on security and business rates. However, owners may be wary of granting short term lets if they want to ensure they have possession of the property when they need it. They may also not want to spend money or management time on works to the property or marketing to attract tenants.
Property guardian schemes have developed, to deal with these issues. In the ideal scenario:
• owners enter into an agreement with a guardian company which arranges for vetted individuals, meeting the guardian company’s selection criteria, to live in the property on a short term basis. This reduces the owner’s expenditure (for example on security) and reduces risks to the property while providing an income. The owners also get back possession of the property when they need it;
• lower costs and the opportunity to perhaps live in desirable areas of town or unusual buildings are often enough to tempt individuals struggling to find affordable accommodation to agree to shared and short term occupation of otherwise empty property. Demand is booming, despite the potentially less comfortable conditions and a requirement to be able to move from the property at relatively short notice.
However, the recent county court case of (1) Camelot Property Management Limited (2) Camelot Guardian Management Limited v Greg Roynon highlights that the reality of guardian schemes may be far removed from this ideal of mutual benefit.
In this case, Bristol City Council owned a property that had been used as an elderly persons’ home, but had become empty. The Council contracted with Camelot which arranged for individual “guardians” to occupy the property. One of these was Greg Roynon, who in January 2014 signed a written “licence” with Camelot and moved into two rooms, with shared use of the living area, bathroom and kitchen. Camelot served Mr Roynon with a notice to quit in May 2016, but he refused to leave, claiming that he was an assured shorthold tenant with a five year tenancy.
The court looked beyond the agreement’s label of “licence” and concluded that the way the arrangement worked in practice meant that Mr Roynon was granted exclusive occupation and he was therefore an assured shorthold tenant, not a licensee. This meant that a longer (and most likely more expensive) statutory process had to be followed to remove Mr Roynon from the property. There had also been some adverse publicity with guardians at the property reported to have complained about their living conditions.
The court accepted that the “licence” agreement imposed strict restrictions on Mr Roynon’s use of his rooms, particularly in relation to guests. However Mr Roynon chose which rooms would be his and the agreement did not allow Camelot to move Mr Roynon from room to room. Although Camelot retained keys and carried out occasional room inspections, the court decided in practice Mr Roynon had exclusive possession. He therefore had an assured shorthold tenancy, albeit a monthly one, rather than the five year tenancy he claimed.
Learning from this case, practical points to bear in mind if you are considering entering into a property guardian arrangement include:
• Who are you dealing with? Does the property guardian company have a good market reputation, is it aware of the issues highlighted by the Roynon case and does it have the resources (itself or through a parent company guarantee) to pay you compensation if things go wrong?
• What agreement are you entering into? The agreement should cover key areas such as payments between the parties and responsibility for upkeep, insurance and other outgoings. Moreover, you will want the guardian company to agree to give you back possession on a fixed date or on giving a specified period of notice. You may want to obtain legal advice before signing up.
• What form of agreement does the guardian company offer individual guardians? If it is to be a genuine licence, it should not only be labelled a “licence” but include provisions, for example, allowing the guardian company to move the individual to a different room from time to time. Other features that make it more likely that a court will view an arrangement as a licence rather than a tenancy include the guardian company having staff at the building who regularly access occupiers’ rooms, and supplying services such as cleaning and the provision of clean bedlinen to the occupiers.
• Corporate social responsibility and reputational risks – are you satisfied that the living conditions offered to resident “guardians” are acceptable in terms of your company’s ethics and that your company’s reputation is not at risk.
With these lessons in mind, the use of property guardians could well realise the ambition of mutual benefit – rather than resulting in costly and time-consuming disputes.
Ian Craig is a partner and Louise Kellaway is a professional support lawyer in the Real Estate department of Stevens & Bolton LLP.
This information is necessarily brief and is not intended to be an exhaustive statement of the law. It is essential that professional advice is sought before any decision is taken.
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