18 July, 2014
Since the Prevention of Social Housing Fraud Act 2013 ('the Act') came into force in October 2013, social landlords have been able to apply for an unlawful profit order, requiring a tenant to repay any profit they made from unlawfully subletting their property.
We are now beginning to see the impact the new legislation is having in helping social landlords clamp down on unlawful subletting. In March this year it was reported that Viridian won a judgment of £31,000 plus costs against a tenant who was living abroad and subletting their property. Additionally, earlier this month a tenant was ordered to pay back more than £10,000 to Greenwich Borough Council plus interest, expenses and legal costs after the Council commenced a claim in the County Court to recover the money.
Under the Act, an unlawful profit order can be obtained where a landlord can show that a tenant breached a term of their tenancy agreement by subletting the property, that the tenant no longer occupied the property as their only or principal home, and the tenant received money as a result of subletting the property.
Although it can seem a daunting task to gather the evidence required to prove the above elements, we have seen a number of our clients prove that their tenants were unlawfully subletting their properties in County Court proceedings.
We would strongly advise social landlords who wish to clamp down on unlawful subletting to have comprehensive tenancy terms forbidding the subletting of the whole of the property, requiring the written consent from the landlord to sublet part of the property, and prohibiting the tenant from running a business from the property. Additionally, social landlords should embrace the use of social networking sites such as Airbnb, where people can advertise spare rooms or entire homes for people to rent. The advertisement will often contain photographs of the property and the amount of money the property is being sublet for which can provide useful evidence in any proceedings. Similarly, the local press should be monitored for subletting adverts which can also be presented as circumstantial evidence in civil proceedings. Neighbouring residents may also be able to provide invaluable evidence in proving that a property has been sublet and/or a tenant is not using the property as their only or principal home.
Given the ever increasing demand for social housing and that the cost of tenancy fraud is estimated to cost the public £1.8 billion per year, it is likely that we are going to see an increase in social landlords cracking down on unlawful subletting. The Act is another tool social landlords have in order to prosecute guilty tenants and recover the profits that are made, enabling social landlords to recover possession of scarce social housing and use it for those in housing need.