Housing fraud act may make criminals out of sub-tenants
The government claim that as of 2012 there were some 100,000 Council and Housing Association properties that were unlawfully sublet. There is an acute housing shortage. Many tenants may have been pushed into accommodation which, because of the new law, could lead to criminal charges.
The Prevention of Social Housing Fraud Act 2013 became law on 15th October 2013. It creates two new criminal offences. It provides for substantial penalties of up to two years imprisonment, Unlawful Profit Orders and fines. There are associated and related offences whereby persons connected with an unlawful subletting, whether as sub-tenant, advertiser, introducer, rent collector or agent can also be prosecuted for housing fraud. Offences include aiding and abetting, conspiracy to unlawfully sublet and an offence under Part 2 of the Serious Crime Act 2007 (encouraging or assisting crime).
The whole subletting market is being targeted. Sub-tenants and agents are as likely to find themselves in court for housing fraud as the landlord.
Spreading the net so wide will make investigation and prosecution of housing fraud easier. The possibility of being charged with an associated offence will persuade sub tenants to assist. They will be more likely to give prosecutors a statement against their landlord. This will be the gold standard for prosecutors. Defending any housing fraud case where the sub-tenant says they pay rent and there is evidence of payment will be hard.
There are two levels of offence:
- Knowingly sub letting or parting with possession of part or all of a property let under a secure or assured tenancy
- Dishonestly sub letting or parting with possession of part or all of a property let under a secure or assured tenancy
The first offence can only be tried by Magistrates. It carries a maximum penalty of 6 months, a fine and an Unlawful Profit Order (UPO).
The second more serious offence requires dishonesty. It can be heard in either the Magistrates or Crown Court. The maximum penalty is 2 years imprisonment, a fine and a UPO. Dishonesty will be defined as set out in R v Ghosh 1982:
“Whether according to the ordinary standards of reasonable and honest people what was done was dishonest”.
As criminal defence and housing lawyers our first question has to be what must the prosecution prove? Our second what are the available defences?
Defendants and their lawyers should ask::
- Is there evidence that the premises are owned by “a registered social landlord”?
- Is there evidence that the tenant is an assured or secure tenant?
- Has the original signed tenancy agreement been produced? Some tenancies will be old and it is our experience that key documents are often not available. In that case it might be arguable that the premises are not held on an assured or secure tenancy at all.
- What is the evidence that the defendant has parted with part or all of the premises? Allowing a caretaker to stay whilst working away may be not enough to satisfy the requirement under paragraph 1(b). This says that the tenant must cease to occupy the dwelling-house as their only or principal home. For premises to be a ‘home’ the tenant does not have to be physically resident if there is an intention to return after a temporary absence and some indication of occupation. In Crawley BC v Sawyer (1988) 20 HLR 98, CA it was held that two houses could be occupied at the same time.
- Whether the defendant has parted with possession will have to be tested under cross-examination. Some sub-tenants may give an initial statement but then decide to relocate to less tenuous accommodation.
- Do any of the statutory defences under s 4(a) and (b) apply? These relate to fear of violence or the right to transfer to some family members.
It is now 4 years since the act and Local Authorities have been armed with £19m to use for investigation and prosecution of housing fraud. We have dealt with many cases over the last four years and most recently had a hard fought case against Southwark Council, which we won Tenancy fraud actions are becoming more and more common as the councils start to use their powers.
We have defended many cases where social landlords have sought possession in the civil courts and now it seems our skill will be required to defend landlords and their tenants accused of criminal offences under the Housing Fraud Act.