The Act applies to both England and Wales and will come into force on a date to be appointed.
In Protecting the Public Purse 2012, the Audit Commission estimated that 98,000 properties were subject to housing fraud (whether by unlawful sub-letting, the provision of false information when applying for housing, wrongful assignment, or non-occupation as a principal home). This is almost twice its 2009 estimated figure of 50,000 properties which the National Fraud Association estimated cost councils £900m per year. Despite the extent of the problem, however, the Audit Commission noted that housing associations had expressed the view that they had no financial incentive to tackle the problem.
The Act does not cover providing false information, which is already an offence both under Part 7, Housing Act 1996 and in criminal law.
Two new criminal offences will be created by the new Act. The first will arise when the secure or assured tenant of a private registered provider of social housing sublets the whole or part of the property, ceases to occupy the property as an only or principal home and does so knowing that to do so is contrary to the express or implied terms of the tenancy. The second will arise if the tenant dishonestly and in breach of an express or implied term of the tenancy sublets or parts with possession of the whole or part of the property and ceases to occupy it as his only or principal home. The – elusive – distinction is that it is sufficient for the first offence to know that the subletting is in breach, while the second offence is if the act is done dishonestly.
It will be a defence to the first of these offences if the tenant can show that the action resulted from actual or threatened violence towards the tenant of a member of the tenant’s family residing with the tenant immediately before the tenant ceased to occupy the property, if the violence was from a person residing in, or in the locality of, the property. Nor is the offence committed if the landlord has consented in writing to the subletting of part of the property or if the person in occupation is someone who is entitled to apply to the court for an order giving him or her a right to occupy the dwelling-house (e.g. an occupation order under the Family Law Act 1996) or to have the tenancy transferred to him or her (e.g. under Family Law Act 1996, Sch.7), or a person in respect of whom an application may be made to have the tenancy transferred to him or to someone else for his benefit (e.g. under Children Act 1989). Presumably, reliance can be placed on the law of duress in relation to the second offence.
Prosecutions will be by the local authority, whether or not it is the landlord. The criminal court has power to make an “unlawful profit order” according to a formula set out in the Act; an unlawful profit order can also be sought in civil proceedings; the effect of either type of order is intended to require the defendant to repay the profit made as a result of the offence.
During consultation (Social Housing Fraud Summary of Responses and Next Steps DCLG July 2012), a small minority of landlords indicated that they would pursue criminal proceedings wherever possible, whilst “many more” indicated that they would do so only in a minority of cases, responses which suggest that there will be no consistency of approach in tackling this matter (an outcome that possibly may have been better avoided if the matter were dealt with by the police).
Concern was also expressed about the ability of – already overstretched – local authorities to meet the strictures of the criminal rules on procedure and evidence.
Other points to emerge from consultation included the view – consistent with the Audit Commission report – that many landlords believed that non-criminal sanctions were “adequate and effective” in relation to unlawful sub-letting; there was also some doubt expressed about the extent to which money would, in practice, be recoverable from the defendant.
It’s one of those bodies of law that no one – political party or otherwise – wants to be seen opposing. Subletting social housing at a profit is clearly wrong in anyone’s terms and there can be no objection to steps to eradicate it. For example, given that it is unlawful subletting – therefore, in breach of the terms of the tenancy – that is in issue, it is difficult to think that any exception could or would have been taken to, say, a fast-track county court procedure to recover possession; likewise, the provisions for recovering the profit in the civil courts is plainly sensible and appropriate.
There are, we think, three ways in which the legislation may, however, not be so welcome. First, it is yet another example of the use of the criminal law to govern the conduct of social housing tenants: it is only social housing tenants who can commit the offence. Secondly, the Act offers nothing by way of practical assistance – detecting and resolving the problem will remain as difficult as ever therefore. Lastly, it seems to us that there is a real risk of inappropriate use of the legislation against, e.g., immigrants whose only way of maintaining relations with their families in their countries of origin is by way of infrequent but lengthy stays of exactly the order that have given rise to findings of intentional homelessness on their return. If, to guard against loss of the home, the tenant allows friends or family to take over the property, possibly with a small uplift on the rent to cover utilities, facilities and so on, he or she will also be vulnerable to prosecution, at least at the hands of those authorities who are least tuned in to these or similar patterns of behaviour.
Of course, the tenant will be able to raise defences – not least, the distinction between tenancy and licence, but this is a notoriously difficult area of law, not only one lost on most occupiers and many advisers but one that is not best addressed in the criminal courts!