Cabo v Dezotti [2024] EWCA Civ 1358
Case summary
The Court of Appeal has upheld a rent repayment order against Margaret Cabo, the freehold owner of a six-bedroom property in West Kensington, despite her attempts to distance herself from the day-to-day management.
Ms Cabo, who had owned the property since 2005, entered into a management agreement in January 2016 with Top Holdings Limited, a company solely owned and directed by her husband, Francesco Grasso. Under this arrangement, Ms Cabo ceded all management rights to Top Holdings for five years, with the company permitted to retain all income from the property "with no recourse or accountability" to Ms Cabo, whilst she remained responsible for mortgage payments, council tax, and insurance totalling around £2,000 per month.
In September 2016, Ms Dezotti responded to an advertisement for accommodation and entered into what was described as a "holiday let" agreement with Top Holdings, paying £867 per month for a room. However, despite the agreement's holiday let terminology, Mr Grasso had told Ms Dezotti he catered to "young professionals" who needed "a peaceful and tranquil home" where they could "retire after a long day at work".
Ms Dezotti applied for a rent repayment order after discovering the property was operating as an unlicensed House in Multiple Occupation (HMO), seeking repayment of £9,600 representing her final year's payments.
The Court's findings
The Tribunal found the holiday let agreements were "something of a sham" and that the property constituted a mandatory HMO requiring licensing. Crucially, the tribunal found it "unrealistic to accept that Ms Cabo would pay the mortgage, council tax and insurance, at a total of around £2,000 per month and allow her allegedly estranged husband to receive and retain the totality of the rent, which could be in the region of £60,000 per annum without her having some benefit".
The Tribunal was particularly influenced by social media evidence contradicting Ms Cabo's claims of separation from her husband, including posts celebrating their wedding anniversary and declarations of love.
The Tribunal concluded that Ms Cabo was an "undisclosed principal" behind Top Holdings' actions, finding that either the "no accountability" clause was a sham never intended to be acted upon, or the parties had subsequently agreed to deal with letting income for Ms Cabo's benefit.
Ms Cabo appealed the judgment on the basis that she was not Ms Dezotti's landlord for the purposes of the Housing and Planning Act 2016. The Court of Appeal unanimously dismissed Ms Cabo's appeal, confirming she was the true landlord liable for the rent repayment order.
Our comment
Property owners considering ownership and management structures should ensure they are properly and accurately documented, serve genuine commercial purposes, maintain arm's length relationships, and cannot be characterised as devices to avoid regulatory obligations. The Cabo case demonstrates that courts will look beyond legal formalities to determine the true substance of ownership, management and leasing arrangements.
