It was when Paolo Sanchez* needed to find affordable accommodation in London that he was lured by a Facebook ad offering a large, attractive room for a reasonable rate. Cleaning, utilities, broadband and council tax were thrown in. He applied, and moved into a eight-bedroom house-share in Hackney for £900 a month. Only then did he realise what he had let himself in for.

“The agent can come and go without notice and make a judgment on how tidy it is and, if they don’t like it, can fine all the occupants,” he says. “Three times people have been in our property. Most worrying, they can terminate the contract at any point giving us seven days to move out.”

The company, Lifestyle Club LSC Limited, trading as Lifestyle Club London, is a lettings agency calling itself a “membership club”. Those who sign up are, it claims, able to make the property they choose a principal residence for as long as they wish, or move between any other of its properties with 24 hours’ notice.

Instead of a deposit, it requires a nonrefundable £200 joining fee and a refundable membership fee, worth one month’s rent, which is, essentially, a deposit. “Members” then pay a monthly rate. The company compares itself to gig-economy firms such as Airbnb and Uber, which skirt around the usual rules to offer flexibility.

The catch is hidden in the terms and conditions, which make extraordinary reading. Tenants, or “members”, must maintain and replace white goods at their own expense and leave them in situ when they leave. If they require extra furniture they must pay half the cost and leave it for club use. Club staff are entitled to inspect rooms unannounced at any time and if “gross breaches” are identified the membership fee is withheld. “Gross breaches” can include the inevitable consequences of a large household. Sanchez, 22, and his eight housemates were fined £90 for leaving dirty dishes in the kitchen sink and £225 for removing graphic print-outs taped to the fridge warning of penalties for drug taking and dirty kitchens.

“We’re struggling to understand our position,” he says. “They have the power to create new fines essentially from nothing, and when one of the housemates moved out, the club refused to return his £600 deposit. We fear they intend to do that with all of us.”

Ever since the 1977 Protection from Eviction Act, landlords and lettings agents have sought ways around laws enshrining the rights of tenants. Many blur the legal distinction between “assured shorthold tenants”, who have exclusive rights to the accommodation and cannot be evicted without a court order, and “licensees” who typically occupy a hostel run by a registered social landlord, a holiday let or spare bedroom in a family home. They have fewer legal rights and can be evicted without a court order.

Lifestyle Club London appears to be an example of a lettings agent exploiting a legal grey area. Set up last August by 30-year-old Estonian Tiina Lehtla with capital assets of just £1, it seeks to imply its “members” are licensees, rather than tenants. Its Companies House registration – Lifestyle Club LSC Ltd – says it operates “housing association” real estate. But it is not a registered housing association and its website invites private landlords to add properties to its portfolio.

The penalties, right to unannounced access, “membership fee” and “monthly contributions” rather than rent create the impression residents do not have exclusive rights over the rooms they rent. At a stroke, this removes any of the rights of an assured shorthold tenancy, such as government-backed deposit protection and protection from eviction.

According to Robert Bolwell, a specialist in landlord and tenant law with Dutton Gregory LLP: “Even if someone renting a room does not have a formal tenancy agreement, since Lifestyle Club LSC is not a registered social landlord, it is difficult to see how the company can avoid the provisions of the Protection from Eviction Act and simply terminate their right to accommodation. The courts have long said that one should not look at labels when determining the nature of a contract. If the arrangement looks like a tenancy and smells like a tenancy, you may well have a ‘tenancy’, no matter what a landlord decides to call the arrangement.”

Lifestyle Club London trades from an address in the London borough of Islington. Last August, Islington trading standards successfully prosecuted a lettings agent, Green Live, for stating two of its tenants were “licensees” and refusing to register their deposits with a protected scheme, or allow them to challenge an eviction notice.

In what is thought to be the first case of its kind in the country, the agent was fined £11,000 under the Unfair Trading Regulations 2008 for issuing two sham licences. Trading standards says it is aware of Lifestyle Club London, but declines to confirm whether it is investigating.

Lifestyle Club London says that the flexibility it offers members outweighs what it admits are “disadvantages”. “It is true that under our agreements you are not under statutory protections, but on the other side you have much more flexibility.

“You can upgrade, downgrade, move in and out or relocate between club properties on your own terms and with very short notice without having the liability of a tenancy agreement. We simply came up with a new concept which some might call questionable but, likewise, so could the practices of Airbnb and Uber.”

It claims that members share properties with a resident landlord, which makes them licensees. Sanchez says there is not one in his house. Moreover, he says his requests to transfer to another club property have been stalled and there are no properties listed on the website or anywhere else, for “members” to choose from.

According to housing charity Shelter, Sanchez’s predicament is symptomatic of an overheated property market and official inertia has left young people on tight budgets particularly vulnerable.

Lifestyle Club London may not be breaking the law but mayor Sadiq Khan has committed to cracking down on lettings agents who do, last year releasing a “rogue landlord and agent checker” to name and shame private landlords and letting agents who have been prosecuted or fined.

Legislation in 2014 made it mandatory for lettings agents and property management firms to register with an approved arbitration scheme. Lifestyle Club London directs complainants to the Shared Accommodation Providers Association, a dormant company whose phone number and email address are out of service.

However, it’s also signed up to the officially approved Property Redress Scheme (PRS) which can expel members who do not comply with its rulings when a complaint is upheld. But it does not check their terms and conditions comply with its code of practice before accepting their membership. An expelled company can no longer trade legitimately.

Sanchez and his housemates can complain to PRS, but ultimately their contract would have to be tested in court. As he says: “Lifestyle Club holds all the cards. I’m actually happy with the accommodation, but the instability is very worrying.

“Many of us are students and to lose our home and a month’s rent would leave us struggling to survive.”

*His name has been changed

• The company name Lifestyle Club LSC Limited was added to this article on 30 May 2018.

