Q&A: Property guardians and ASTs

Question

I own a portfolio of commercial premises. One of the properties is a former office block. I have recently obtained planning permission to convert the block into residential flats. While the application was being processed, I granted a number of licences to property guardians to protect the property. As we are ready to proceed with the development, I have sought to terminate the licences, but two of the licensees have e-mailed me to say that they will defend any possession proceedings on grounds that they have assured shorthold tenancies. Am I likely to obtain possession at a first possession hearing?

Answer

If any possession proceedings are defended on grounds that the licensees have in fact been granted ASTs, much will turn on the precise terms of the agreements entered into and the surrounding circumstances at the inception of the agreements. If the occupants file defences, then the court, at the first possession hearing, may decide the claim or give case management directions. The test which the court will apply is whether the defences have a real prospect of success.

Explanation

The grant of a licence to occupy does not create an interest in land and amounts to permission for the licensee to occupy land. The label on the face of the agreement is not necessarily determinative of the nature of the agreement, and a document headed “licence” can in fact amount to a tenancy, including an AST.

It has long been established that the hallmarks of a tenancy are the grant of exclusive possession, for a term at a rent. So, the terms of the agreement will be relevant and you may wish to seek advice as to the nature of the particular agreement which you entered into with the occupants.

Decisions in the courts have turned on their particular facts. In Camelot Property Management Ltd and another v Roynon (unreported, Bristol County Court, 24 February 2017), Roynon had exclusive use of two rooms within a former care home. No services were provided by the management company. However, the court held that Roynon had an AST. In Camelot Guardian Management Ltd v Khoo [2018] EWHC 2296 (QB), none of the guardians had exclusive possession of any part of a vacant office space and all areas were shared with other guardians. The court held that the guardians were licensees.

However, the Court of Appeal has recently heard a case involving property guardians. In Global 100 Ltd v Laleva [2021] EWCA Civ 1835; [2021] PLSCS 207, the court considered the strength of Maria Laleva’s defence that she had an AST and was not a licensee. As well as reviewing whether Laleva had exclusive occupation of any areas, the court also considered the surrounding circumstances about why she had been let into occupation.

The court found that the fact that Laleva had occupied the property in order to provide guardian services and had been selected by the licensor, Global 100, to do that, was highly material. It drew analogies with cases concerning service occupancies where a person who lives in a house does not have exclusive possession of it if it is essential to the performance of their duties to occupy that house or they are contractually required to occupy the house and this enables them to better perform their duties to a material degree. The Court of Appeal held that it was necessary for the provision of guardian services (to prevent intruders, antisocial behaviour and metal theft) that Laleva should occupy the property.

The terms of the agreement were also relevant as Laleva had non-exclusive occupation of the whole, not any particular part, of the property. The court concluded that, in light of the surrounding circumstances, her defence – that she had an AST – had no prospect of success.

Turning to the question of whether the court is likely to make a possession order at the first possession hearing, if the licensees file defences, it is certainly open to the court to do so.

Under rule 55.8(1) of the Civil Procedure Rules 1998, at the first possession hearing the court may decide the claim or give case management directions. CPR 55.8(2) provides that, where the claim is “genuinely disputed on grounds which appear to be substantial”, the court may make case management directions.

In Global 100, the Court of Appeal considered how CPR 55.8(2) is to be applied. It held that the test was that the defence must have a real prospect of success. This is the same test as currently exists for summary judgment applications under CPR 24, and so there are many cases on the application of that test. In Global 100, the Court of Appeal found, on the facts, that Laleva’s defences, that she had an AST or that the agreement was a sham, had no real prospect of success and a possession order was appropriate.

This content was first published in Estate Gazette. For more information on the above, please contact Laura Bushaway or your usual Charles Russell Speechlys contact.