Housing Law – B&B or not B&B? – that is the question

By : Brendan Mullee

Local authorities, and in particular those within the Greater London area are increasingly under pressure to secure that suitable accomodation is available for their ever increasing homeless applicants. In many instances the authority is compelled, given the lack of available housing stock, to place applicants and their families in accommodation secured from the private sector. By way of a cautionary tale I will recite the circumstances and eventual outcome of a matter in which I was instructed by a large London local authourity. I have decided to make the parties anonymous but I am confident the principles involved will be of interest to members of the profession and those employed within the relevant sections of local authorities.

Part 7 of the Housing Act 1996 makes provision for local housing authorities to give housing assistance to homeless persons. The provisions apply where a person applies to an authority for accommodation, or for assistance in obtaining accommodation, and the authority have reason to believe that he is, or may be homeless, or threatened with homelessness: s. 183(1). Upon accepting a homelessness application, where the authority has reason to believe that an applicant may be eligible for assistance, may be homeless and may have a priority need, it comes under a duty to secure that interim accommodation is made available for the applicant, pending the decision on his application: s. 188(1). Where an authority decides that the applicant is eligible for assistance, homeless, has a priority need and did not become homeless intentionally, it must secure that accommodation is made available for his occupation: s.193(2). An authority may discharge its housing functions in the following ways: (a) by securing that suitable accommodation provided by them is available; (b) by securing that the applicant obtains suitable accommodation from some other person; or (c) by giving the applicant such advice and assistance as will secure that suitable accommodation is available from some other person: s.206(1).

The background

In May 2005 the Claimant, his wife and their five dependent children applied to the Council for housing assistance as homeless persons. He originally came to the United Kingdom as an asylum seeker. His claim for asylum failed but, upon the accession of his native Poland to the European Union, he became entitled to stay in the UK and apply for assistance.

The Tripartite Agreement

One restriction on the type of property which can be offered is that no family with children under 16 could remain in bed and breakfast accommodation where they have to share domestic facilities for longer than six weeks. This direction led to the use of what are called in local authority jargon “annexes”, which comprise bed and breakfast accommodation with en suite domestic facilities for the use of the guests occupying the annex. The payment for bed and breakfast accommodation was made by the Council directly to the property owner from the Council’s General Fund. The payment was made following receipt of an invoice from the property owner. The Council recouped the expenditure in part from any contribution which it assessed the homeless personas  obliged to pay  in part from funds from central government. The sums to be paid by the homeless person were paid to the Council and not direct to the property owner. Any shortfall wasprovided by the Council from its own funds.

In respect of ‘bed and breakfast’ accommodation used as emergency accommodation the Council worked to the Bed and Breakfast Information Exchange Agreement (“BABIE) to which all London Boroughs adhere. Pending a determination as to whether they owed the Claimant and his wife a homelessness duty the Council secured accommodation for them, pursuant to s.188. Housing Act 1996, at a property (“the property”) which comprised a 3 bedroom semi-detached house situated in a resdiential area in West London. The Council had an informal arrangement with a substantial number of property owners who complied with the criteria of BABIE. Accommodation was obtained via one of those property owners, thus creating what is frequently refered to as a tripartite agreement. In this particular case the subject property was owned by a private company which had licensed it to a private individual who in turn had sub-licensed it to the Council. The arrangement provided that when a person was to be offered bed and breakfast accommodation and a willing property owner had been found, the Council then provided a letter of introduction, entitled ‘Bed and Breakfast Agreement’ addressed to the appropriate person, in this case to the ‘Manager’ of the ‘B&B’ and provided an explanatory letter to the homeless person. The letter to “The Manager” stated it was to introduce the Claimant and his wife “who will be staying at your hotel, as arranged recently on the telephone.” The letter described the composition of the household and confirmed that “this council will meet the total cost for the following rooms”: three room numbers (1,2 and 3) are then given and an overall price of £68 per night.” The following  paragraph stated, “The Council may terminate this arrangement at any time. Normally cancellations are made by telephone and then confirmed in writing. Once the cancellations are made by the Council, the Council will cease payment from the cancellation date irrespective of whether the household is still occupying the room(s).”

When the Claimant and his family moved in they had the use of the whole property, not just the rooms for which the Council was paying. No one else resided there. The house was also fully furnished. The Claimant had at least one key to the house. The property owner also retained keys gaining access whenever they wished particularly if repairs were necessary. Furthermore, when the Claimant and his family took up occupation there were a number of notices on the notice board immediately inside the front door. These comprised (1) a notice reminding the occupiers to sign the register each day, (2) a set of house rules and regulations, (3) a fire action notice, and (4) a notice giving contact numbers for property owner, described as the “landlord” (24 hours a day). There was also a register which was left alongside the noticeboard for daily signing and was collected either once or twice a week. In addition some breakfast items and toilet rolls were delivered to the property by the owners on a weekly basis.

The signing of the register was a requirement of the owner, as it was of the Council. Without the signed register he could not raise his invoice to the Council. It was also necessary to the Council to demonstrate that the occupants were still occupying the accommodation which had been provided. The Council were paying for expensive accommodation in order to fulfil their statutory obligations and were extremely unwilling to pay unnecessarily.One curious and worrying aspect of this particular case was the complete absence of any from of written agreement betwen the Claimant and the owner of the property.   

In due course, the Claimant contended that the property was in a poor state of repair. In those circumstances the Claimant issued disrepair proceedings for damages, specific performance and an injunction on the ground that the Council were in breach of their repairing obligations on the basis that he was their tenant and they were in breach of the covenant to repair. The Council took the point that they were not his landlord for two reasons: first, he was not a tenant, but a licensee, of the premises; secondly, whether he was a tenant or a licensee, his landlord or, as the case may be, his licensor, was not the Council

The Claim

The Claimant claimed that he was from May 2005 for approximately 1 year the secure tenant of the Council. He claimed that the Council was in breach of its repairing obligations to him and that he was therefore entitled to damages. His pleaded case was that the tenancy was a secure tenancy, but the authority resiled from that proposition and the nature of the tenancy supposedly granted is now obscure. The Claimant asserted that the property was in serious disrepair. The council contend that the Claimant’s claim was, in effect, an attempt to pressurise the Council into providing other accommodation. The court heard no detailed evidence on the subject and made no findings as to the rights and wrongs of the alleged state of repair.

The object of the preliminary issue was to determine whether he was a tenant of the Council or not. If he was not, that would be an end of the case. If he was, then the second stage would be to determine whether the Council was in breach of its repairing obligations as landlord.

The Claimant’s contention

The argument of the Claimant was in brief (1) there was a contractual relationship between the Council and the Claimant; (2) the Council provided the Claimant with accommodation; (3) the terms on which the accommodation was provided, when one looked at the reality and stripped away the verbiage and pretence, were such that the contractual relationship created a tenancy, it being immaterial that the Council had no rights in the property. In essence, the Claimant’s major substantive points concerned the “Bed and Breakfast Agreement” and the fact that no payments passed direct from the Claimant to the owner of the property. The Claimant relied upon the manner in which he was paying an assessed contribution directly to the Council. These factors were, it was said sufficient to show that, when taken with his occupation of the premises, the Council had granted him a tenancy. It was suggested that the tenancy was a weekly secure tenancy at a rent of £346.99 per week, but no other terms were suggested.

Counsel for the Claimant submitted the “Bed and breakfast agreement” was clearly a contractual document. The second point, he said, was self-evident and as to the third, he referred to the well-known passages in Street v Mountford [1985] AC 809, HL, Lord Templeman said, at 817H-818D: “In the case of residential accommodation there is no difficulty in deciding whether the grant confers exclusive possession on an occupier of residential accommodation at a rent for a term is either a lodger or a tenant. The occupier is a lodger if the landlord provides attendance or services which require the landlord or his servants to exercise unrestricted access to and use of the premises…. If on the other hand residential accommodation is granted for a term at a rent with exclusive possession, the landlord providing neither attendance or services, the grant is a tenancy? “

Reference was made to the secision in Crancour Limited v Da Silvaesa (1986) 18 HLR 265, 273, CA, whereby Ralph Gibson LJ held that “‘unrestricted access” as used by Lord Templeman, above, was: “…primarily concerned with the landlord’s need to go into and out of the lodger’s rooms at the convenience of the landlord and without the lodger being there to let the landlord in. The amount and frequency of the attendance and services agreed to be provided are relevant but the question to be answered is whether, in all the circumstances, having regard to the landlord’s obligations, it is clear that the landlord requires unrestricted access and has reserved the right to exercise such access in order to look after the house and the furniture. ” He went on to refer to Bruton v London & Quadrant Housing Trust [2000] 1 AC 406, and submitted that the case re-affirmed that (a) a “lease” or “tenancy” is a contractually binding agreement, not referable to any other relationship between the parties, by which one person gives another the right to exclusive occupation of land for a fixed or renewable period or periods of time, usually in return for a periodic payment in money; an agreement having these characteristics creates a relationship of landlord and tenant to which the common law or statute may then attach various incidents: per Lord Hoffmann at 413E-F; (b) the fact that the parties use language more appropriate to a different kind of agreement, such as a licence, is irrelevant if on its true construction it has the identifying characteristics of a lease; (c) the meaning of the agreement depends upon the intention of the parties, objectively ascertained by reference to the language and relevant background; and (d) the classification of the agreement as a lease does not depend upon any intention additional to that expressed in the choice of terms; it is simply a question of characterising the terms which the parties have agreed, which is a question of law: per Lord Hoffmann at 413F-H; and (e) the term “lease” or “tenancy” describes a relationship between two parties who are designated landlord and tenant; it is not concerned with the question of whether the agreement creates an estate or other proprietary interest which may be binding on third parties.

He also pointed out that in A G Securities v Vaughan, Antoniades v Villiers [1990] 1 AC 417; HL it was held that a written agreement is not necessarily conclusive as to the nature of the rights and obligations and it must be construed in the light of: (a) the surrounding circumstances including any relationship between the prospective occupants; (b) the course of negotiations; (c) the nature and the extent of the accommodation; and (d) the intended and actual mode of occupation: per Lord Templeman at 458G-H. He referred to the regularly cited authorities that a sham is a transaction where all the parties have a common intention not to create the legal rights and obligations which it appears to create: Snook v London and West Riding Investments Ltd [I 967]2QB 786,CA and a pretence is a transaction which appears to be one thing but in reality is something different regardless of the lack of common intention to deceive: A G Securities: per Lord Templeman at 462G 11 465 H, per Lord Oliver at 469B-C, 470A and that the courts should be astute to detect and frustrate sham devices and artificial transactions and endeavour to find the true nature or the substance and reality of the agreement. He submitted that the arrangement created by the Council was a sham in that the accommodation was not “bed and breakfast”. The provision of ingredients from which breakfast could be prepared was not the same as providing breakfast and the connotation of “bed and breakfast” being a place for overnight accommodation rather than a fixed home. He asserted that the description of the property as an hotel was a sham: suggesting it was intended to give an ordinary house the appearance of an hotel. It was also submitted that there were other indicia of a sham The reality, he asserted, was that there was a landlord and tenant relationship between the Council and the Claimant.

The County Court’s Court’s determination

In his judgement, the District Judge held that the arguments relied upon by the Claimant were ‘hopelessly flawed, depending as it did upon the idea that there was a relationship between the Council and the Claimant by which the Council let the property to the Claimant, having first obtained the property from the company which were the legal owners, which was patently not the case. The learned judge continued, ‘The Council had a statutory obligation to provide accommodation for the Claimant and his family. One of the ways in which it could fulfil that obligation was by securing that the Claimant obtained suitable accommodation from some other person. It did so by contacting with the property owners and procuring that they provided suitable accommodation. Whether the resulting relationship between the property owners and the Council was that of licensor and licensee or landlord and tenant, the relationship in respect of the occupation of the property was between the propery ownres and Claimant and not between the Council and the Claimant.

‘That this was the reality of the situation can be seen from what actually happened. The property owner had the choice whether it would accept the Claimant’s family or not. The Council provided the Claimant with a letter of introduction. The owner provided the Claimant with keys: the Council had no keys to the property. The owner furnished the property and provided linen and such things as lavatory paper. The owner provided the materials for breakfast. The owner came round weekly to the property. It was to the owner that the Claimant went with any demands for repairs and with his complaints about the fragility of the furniture and it was the owner that did the repairs and replaced damaged furniture. When the Claimant and his family had to move out for a few days for repairs, it was a matter arranged between the owner and the Claimant with no reference to the Council. It was the owner’s register that the Claimant had to sign daily and the owner who collected and provided the register sheets. Contrary to the submission for the Claimant this was no sham. The registers were a vital tool for the owner in showing that the premises were occupied by the person for whom the Council had agreed to pay. The requirement to notify the “hotel manager” and the housing officer of any absence of more than one night similarly was not a sham. It was vital to the Council in keeping track of the housing stock it was booking and paying for by the night and in determining whether a person truly continued to be homeless. It was also important to the manager who had to keep track of entitlement to payment. If (which was not established) the Claimant did commit any substantial breach of this regulation, it does not establish that the regulation was a sham: merely that the Claimant chose not to abide by his obligations.’
In relation to the Claimant’s contention that the payment of a contribution towards rent paid directly to the Council supported his contention as to the creation of a tenancy, the learned judge concluded, ‘In my judgment this argument fails. The Council was complying with its statutory duty by securing that the Claimant obtained suitable accommodation from the owner. In order to induce the owner  to offer the accommodation it was necessary for Council to undertake the payment of the charges for the accommodation. That was the only basis on which the Council could discharge its duty. In theory, no doubt, it could have paid out that part of the money due to the owner to be funded by the Council to the Claimant for onward transmission. But that would obviously be hopelessly unrealistic. For one thing there would be no guarantee of prompt onward transmission and for another there would be no guarantee of the Claimant paying the amount due to come from his own pocket, whereas if the payment came via the Council, it could pay and then try to recoup later.’

The judge further concluded that the Council was not taking a tenancy or licence from the property owner and then granting a tenancy or licence to the Claimant. The bed and breakfast charge agreement, he concluded, was not a grant of anything by the Council to the Claimant, it was merely an acknowledgement by the Claimant of his obligation to pay for the accommodation provided to him by the property owner and of the consequences of not doing so. The court held that, in relation to letter of introduction to the ‘Manager’ it simply clarified the position so far as the Council was concerned. It could terminate the arrangement by which it paid the “agreed total cost” at any time. Thereafter the owner would have to look direct to the Claimant for any further payment if it permitted him and his family to continue to occupy the rooms.

In so concluding the learned judge disposed of the preliminary point stating, ‘Whatever the relationship between the owner of the property and the Claimant, the answer to the preliminary point is “No: the Claimant is not and has not been a tenant of the Council at the property.’

The Court of Appeal’s view

The Claimant sought permission to appeal before the Circuit Judge. Permission was refused. His subsequent application to the High Court was also refused. On the renewed application before Ward LJ and Neuberger LJ, sitting in the Court of Appeal, the application for permission to appeal was based on the proposition that there was an arguable case for saying that the Council was the landlord or the licensor of the Calimant. It is was also submitted that the point raised on the prospective appeal was of general importance and even if the court would not otherwise give permission to appeal on the merits, it should give permission to appeal because the point’s importance. The Claimants’ case was that it was the ‘Bed and Breakfast Agreement’ which governed the relationship between the parties, that it establishes at least an arguable case that the Council was the landlord and that the judge erred in law in wrongly construing this letter and in taking into account a whole lot of factors which occurred after the letter was provided and signed, and that was an error of principle. Secondly, it is said that these tripartite arrangements between a property owner, a housing authority, acting under Part VII of the 1996 Act, particularly when providing temporary accommodation, and an allegedly homeless applicant, are regularly used because housing authorities frequently provide accommodation for applicants in a property not owned by the local authority. It was therefore said that the question as to whether it is the local authority or the property owner who should be treated as the landlord or the actual owner of the property, is a frequently encountered problem.

The Court of Appeal, re-affirming the lower court’s refusal, held that the Claimant was not the Council’s tenant. The court held that, in the instant case the terms of the letter did not indicate that there was a landlord and tenant relationship between the Council and the Claimant, accordingly, there was no real prospect of any appeal succeeding. Neuberger LJ sought to encapsulate the instant scenario in the following terms; ‘A can provide B with accommodation by arranging with C (in this case the owner) that C grants a tenancy or a licence to B, to whom I have committed myself to providing accommodation. The fact that A has agreed to provide accommodation for B does not mean that A is creating a tenancy between himself and B.’ He further held that that the language of the first two paragraphs of the ‘Bed and Breakfast Agreement’ letter could not, in all the circumstances, be said to indicate that there was a landlord and tenant relationship between the Council and the Claimant, ‘or, to put it another way, that a tenancy is being granted.’

Conclusion

In all the circumstances of this matter, it would be wise for those local authorities engaging in the aforementioned tripartite agreements, to closely scrutinise the precise wording and form of any such agreements and ensure that ambiguity is avoided. I would suggest that a useful initial step would be to require that all owners of private accommodation, used for these purposes, are in possession of formal written agreements, duly signed by the relevant parties, clearly identifying the relationship envisaged and in so doing avoid potential traps for the unwary, which, given the court’s allusion to the ‘fact sensitive’ approach, may result in potential catastrophe for local authorities.