Penalties for unauthorised subletting of social housing

The Prevention of Social Housing Fraud Act 2013 criminalises the unauthorised subletting of a dwelling-house (which may include a house or a part of a house)[1] by secure/flexible and assured/assured shorthold tenants of local authorities and private registered providers of social housing (PRPSHs).

Shared ownership leases are excluded.[2]

The Act came into force on 15 October 2013.[3] Its provisions apply only to unauthorised subletting taking place on or after that date.

People facing prosecution should be referred to a solicitor for advice about criminal law without delay.

There are two separate offences depending on whether the tenant committed it with 'knowledge only' or 'dishonestly'.

The 'knowledge only' offence is tried in the magistrates' court. The tenant can rely on two special defences and the punishment is limited to payment of a fine and an unlawful profit order. Prosecution of this offence must start within six months of the date in which sufficient evidence to satisfy the criminal burden of proof came to the knowledge of the prosecutor (either a local authority or the police), but no later than three years after the dwelling-house was unlawfully sublet.

The 'dishonestly' offence is tried in the Crown Court where the tenant can not rely on the special defences and the punishment may involve a prison sentence in addition to a fine and an unlawful profit order. Prosecution of this offence can start at any time.

Regulations may specify additional offences relating to the refusal or failure to provide relevant information when required, and other associated offences by third parties in helping with or facilitating the unlawful subletting.

The offences are slightly different for secure/flexible tenants and assured/assured shorthold tenancies.

Secure and flexible tenants

A secure or flexible tenant commits an offence if, in breach of an express or implied term of their tenancy, they sublet (or part with possession of) the whole of their social dwelling-house, or of part only without the written consent of their landlord, and ceases to occupy it as their only or principal home knowing that this is done in breach of the tenancy agreement, or dishonestly.[4]

Secure/flexible tenants have otherwise an absolute right to take in lodgers and a qualified right to sublet part of their dwelling-house.[5] See Subtenancy granted by secure tenant for more on this.

Assured and assured shorthold tenancies

An assured or assured shorthold tenant commits an offence if, in breach of an express or implied term of their tenancy, they sublet (or part with possession of) the whole or part of their social accommodation and cease to occupy it as their only or principal home knowing that this is done in breach of the tenancy agreement, or dishonestly.[6]

With exceptions, it is an implied term in all periodic assured/assured shorthold tenancies that subletting all or part of the premises without the landlord's consent is prohibited.[7]

There are two special complete defences to the 'knowledge only' offence:

Threatened or actual violence

A tenant has a complete defence if their subletting or parting with possession was caused by threatened or actual violence towards them or a member of their family who was living with them in the social accommodation immediately before their subletting or parting with possession.[8]

Permitted assignments

A tenant has a complete defence if they sublet or parted with possession in favour of a person who is entitled to apply to court for a right to occupy the accommodation or to have the tenancy transferred to them (for example under the Matrimonial Causes Act 1973, the Civil Partnership Act 2004, the Family Law Act 1996, the Children Act 1989, or the Trusts of Land and Appointment of Trustees Act 1996).[9] In practice includes the tenant's current or former spouse, civil partner or cohabitant, or a minor for whose benefit the tenancy could be transferred.

Following a Supreme Court judgment in 2017, the civil and criminal tests of dishonesty are the same. Whether a tenant acted dishonestly is to be determined by ascertaining the state of their knowledge or belief as to the facts and then determine whether their conduct was dishonest by the objective standards of 'ordinary decent people’. The tenant’s belief as to whether ordinary people would regard their behaviour was dishonest is irrelevant.[10]

Secure/flexible and assured/assured shorthold tenants subletting their social dwelling-house without authorisation  incur one or more of the following penalties and sanctions.

Permanent loss of security of tenure

As a result of the unauthorised subletting, both secure/flexible and assured/assured shorthold tenants lose their secure/assured status[11] and their landlords can terminate their periodic tenancies by giving notice to quit and starting possession proceedings without the need to prove any secure/assured ground for possession.

However, in case of fixed-term tenancies, this can only be done if the agreement contains a break clause or by forfeiture.

Criminal sanctions

Tenants found guilty of one of the offences above are liable to a fine and/or imprisonment.[12] Imprisonment applies only to tenants committing the offence with dishonesty.

Where a tenant is convicted in criminal proceedings, the court may make such order as it considers appropriate, including a prosecution costs order[13] and an unlawful profit order.

An unlawful profit order requires a tenant to pay to their social landlord an amount representing the profit they made as a result of breaching an express or implied term of the tenancy agreement prohibiting the subletting of the whole or part of the dwelling, and can be made in both criminal and civil proceedings.

The maximum amount payable under such an order is limited to the total amount (ie the combined amount of rent and housing benefit/universal credit) received by the tenant as a result of their breach of the tenancy agreement, minus:[14]

• any rent paid to the landlord during the period in which the offence has been committed (but disregarding amounts covered by housing benefit/universal credit)

• the amount of any unlawful profit order already made and successfully enforced by the landlord

Interest accrues on any amount payable under an unlawful profit order not paid when due.

Social landlords can apply for an unlawful profit order during civil proceedings (in the County Court or the High Court) against secure/flexible and assured/assured shorthold tenants who, in breach of their tenancy, have ceased to occupy and sub-let or parted with possession of their dwelling-house and who have received money as a result of that conduct. This is likely to be done during possession proceedings against the tenant.

There is no need for previous conviction in the criminal courts but landlords need permission of the court to enforce the order.

Local authorities have the power to prosecute any of the above offences whether or not they are the tenant's landlord and whether or not the dwelling-house is within their area.

The police also have the power to prosecute the offences in collaboration with the Crown Prosecution Service.

With effect from 6 April 2014, local authorities can compel listed organisations to provide them with information where it is reasonably required for the purpose of preventing, detecting or securing evidence for the conviction of an offence of social housing fraud.[15]

The listed organisations are:

• banks

• building societies

• other providers of credit

• telecommunications providers

• utilities companies

The power to require information from listed organisations covers investigations into:

• unlawful subletting of social housing

• fraudulent applications for social housing under Part 6 or 7 Housing Act 1996

• fraudulent applications for the right to buy

In one case, the High Court ordered Airbnb to share information with a local authority about payments it had received for short-term lets. The court granted the order to allow the authority to identify cases of social housing fraud. [16]

The general common law rule is that when the mesne tenancy ends, the subtenancy also ends. This applies whether the tenancy ends by reaching the end of the fixed term or by the service of a valid notice to quit, or the operation of a break clause, by either the landlord or the mesne tenant.[17]

If there is a surrender of the tenancy agreed by the landlord and mesne tenant, for example in the case of 'key amnesty' offered by several social landlords, or in the case of a defective notice served by the mesne tenant which is nevertheless accepted by the head landlord (the waiver of the defect in the notice operates as surrender[18]), then the subtenancy continues and be binding on the head landlord.[19]

The subtenancy continues on the same terms as the subtenant's existing agreement, and it appears not to matter whether the subletting was lawful or unlawful.[20] The exception to this is that an unlawful assured shorthold subtenant of a secure mesne tenant of a local authority becomes a non-secure tenant because a local authority cannot let on an assured shorthold tenancy.