Article by Sonia Rai, barrister, 5 Paper Buildings
Under current legislation (Housing Act 1985 (for secure tenants) and Housing Act 1988 (for assured tenants)), the tenant has security of tenure under the relevant legislation if they use the property as their only or principal home. However, if the tenant parts with possession (wholly or partly) of the property without permission of the landlord, security of tenure may be lost, and thus the relevant landlord may end the subsequent contractual tenancy. According to the Audit Commission, there are 98, 000 social homes of 4, 000,000, which are being unlawfully occupied. The rationale for the need of the legislation is to ensure social housing is being occupied by tenants who have been allocated such housing stock. By creating a criminal offence of sub-letting, it is hoped that the possibility of a criminal conviction is a deterrent to social housing tenants not to sub-let or part with possession unlawfully. Further, it was considered that local authorities did not have sufficient access to information to detect fraud in the social housing stock.
The Powers given to social landlords under the Prevention of Social Housing Fraud Act 2013 (“the Act”)
Two criminal offences are created in relation to both secure tenants and assured tenants of privately registered providers of social housing ("PRP").
(1) A secure or assured tenant will commit an offence, if in breach of an express or implied term of their tenancy agreement; they sub-let or part with possession of the whole or part of the property and know that the action is in breach of their tenancy agreement.
(2) A secure or assured tenant will commit an additional offence where the tenant has acted dishonestly. Dishonesty is defined in the explanatory notes of the Act as "… knowledge that a reasonable person would consider the action in question to be dishonest”. However, tenants will not have committed an offence if they ceased to occupy the dwelling-house and sub-let or parted with possession of it because of violence or threats of violence towards them or their family; or if the person occupying the property would be entitled to a tenancy of the property under other legislation.
A local authority has been given power to prosecute in regard to property owned by them; and PRPs. However PRPs do not have the power to prosecute in regard to properties that they own.
A prosecution must be brought within six months of the date of the offence, or the date on which evidence sufficient to warrant the prosecution came to the knowledge of the prosecutor. However, in this case, the prosecution must take place within three years after the date on which the last date of the offence was committed.
A person on summary conviction (with no dishonesty) is liable to a fine not exceeding level 5 on the standard scale. However, if the person is found, on summary conviction, to have acted dishonestly he/she is liable, on summary conviction, to imprisonment for a term not exceeding six months and/or a fine not exceeding the statutory maximum; or on conviction on indictment, to imprisonment for a term not exceeding two years and/or a fine.
Upon conviction, the prosecutor can make an application for an ‘Unlawful Profit Order’. An ‘Unlawful Profit Order’ is an order requiring the offender to pay the landlord an amount, which represents the profit that the offender made as a result of the unlawful sub-letting or parting with possession.
A PRP may make an application for an ‘Unlawful Profit Order’ to a county court provided that the tenancy is not a shared ownership lease.
What evidence will be required?
In practice, cogent evidence will be required before a prosecution takes place, and it should be remembered that the offence will need to be proved to the criminal standard. In my opinion, such evidence will probably require direct evidence that the property has been sub-let or parted with possession unlawfully, such as evidence from the sub-tenant and/or a written agreement between the sub-tenant and the tenant. Circumstantial evidence such as utility bills, payments of benefits and any other documentary evidence to show that the tenant has parted with possession unlawfully may suffice if such evidence is cogent. I consider that there will be difficulty in obtaining sufficient evidence to prove ‘beyond reasonable doubt’ that the tenant has sub-let or parted with possession unlawfully. In my experience, it is rare for a sub-tenant to attend court in support of possession proceedings by the social landlord in cases where it is alleged that the tenant has sub-let or parted with possession unlawfully, predominantly because they themselves are evicted by the tenant prior to the case being heard in Court, and thus the social landlord does not have contact details for the sub-tenant Therefore, I do not envisage that a prosecutor will have significant direct evidence in most cases.
PRPs will be reliant upon local authorities to bring prosecutions in regards to properties that they own, which may involve funding arrangements between local authorities and PRPs.
In my opinion, relying upon local authorities to bring prosecutions on behalf of PRPs, will mean that the majority of prosecutions will be in regard to secure tenancies, where the landlord is the local authority, unless PRPs have a good relationship with the local authority where their properties are situated.
Unlawful Profit Orders
Unlawful Profit Orders can be obtained in both the criminal court (upon conviction) by a local authority or in the county court, by way of application.
The hurdle in obtaining an Unlawful Profit Order will be proving the extent of the sub-letting or parting with possession, as well as proving the amount the tenant has profited by. In my experience, very often the occupier pays the tenant rent in cash, and there is rarely a written document to show the duration of the sub-letting or parting with possession unlawfully, and how much rent the sub-tenant has been paying. One can rely on evidence by neighbours as to who is seen at the property in question, but such evidence can vary in quality.
While in a Civil Court, the standard of proof is on the balance of probabilities, cogent evidence will still be required as the allegation of sub-letting is a serious allegation and the potential ramifications (the loss of social housing tenancy) is serious.
If sub-letting is proved, then the assured tenancy comes to an end, and cannot be revived. This change is to be welcomed by PRPs, as it means that tenants cannot regain security by simply evicting the sub-tenant and taking possession of the property.
The Act allows the Secretary of State and the Welsh Ministers to make regulations, for England and Wales respectively, providing powers for persons to require the provision of information. These powers can only be used for housing fraud investigations purposes, which are defined in the Act.
What should social landlords and lawyers representing social landlords do?
Firstly, local authorities and PRPs should be careful not to use the threat of a prosecution (and the possibility of a criminal conviction) as a means to regain possession of the property in question. However, the legislation may be a useful tool.
Persons working in social housing will need to be familiar with the evidence that is required to prove sub-letting or parting with possession unlawfully, and consider whether the potential defences apply.
It is worthwhile for all persons to be given training as to what evidence is required to obtain a conviction and how such evidence may be obtained. Information sharing will be vital.
Any PRP, who wish to consider asking a local authority to prosecute in relation to their property, should ensure that they have procedures in place setting out information sharing and each party’s role in any prosecution.
Local authorities and PRPs will also have to consider as to whether they want to attempt to obtain a conviction before they commence possession proceedings in light of the point that if a conviction is secured against a tenant, security of tenure is permanently lost, albeit any local authority and PRP will still need to consider proportionality before commencing possession proceedings.
In summary, the author anticipates that the possibility of a criminal offence is likely to have a deterrent effect on tenants unlawfully sub-letting, coupled with the possibility that any profits made, may be recouped by the social landlord. However, any conviction will be difficult to obtain due to the level of evidence required. Evidence-gathering will be key to obtaining such a conviction. Any investigation may be time-consuming and, of course, expensive. Such legislation will play a role in ensuring that social housing is occupied by people to whom it has been allocated but, it is unlikely to have a large impact on the reduction of unlawfully occupied social housing due to the evidential burden in proving that the tenant has sub-let or parted with possession unlawfully
page 15 of “Protecting the Public Purse 2012 – Fighting fraud against local government and local taxpayers” Audit Commission, November
2012. The 98k figure is based on 4% of stock in London and 2% of stock elsewhere