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Social housing fraud

This content applies to England

Criminal offences relating to the unauthorised subletting of social housing by secure/flexible and assured/assured shorthold tenants.

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] and its provisions apply only to unauthorised subletting taking place on or after that date.

Generalist advisers should familiarise themselves with the information on this page as it affects housing rights of tenants, however people facing prosecution should be referred to an adviser specialised in criminal law without delay.

Criminal offences

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

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

The 'dishonestly' offence will be tried in the Crown Court where the tenant may 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 (ie aiding, abetting, counselling or procuring the offence).

The offences are slightly different for secure/flexible tenants and assured/assured shorthold tenancies (see below).

Secure/flexible tenants

A secure/flexible tenant commits an offence if, in breach of an express or implied term of her/his tenancy, s/he sublets (or parts with possession of) the whole of her/his social dwelling-house, or of part only without the written consent of her/his landlord, and ceases to occupy it as her/his 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 (ie licensees) and a qualified right to sublet part of their dwelling-house.[5] See Subtenancy granted by secure tenant for more on this.

See What is a secure tenancy? for information about the 'only or principal home' rule.

Assured/assured shorthold tenancies

An assured/assured shorthold tenant commits an offence if, in breach of an express or implied term of her/his tenancy, s/he sublets (or parts with possession of) the whole or part of her/his social accommodation and ceases to occupy it as her/his 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] See Subtenancy assured/assured shorthold tenant for more on this.

Defences to the 'knowledge only' offence

There are two special complete defences to the 'knowledge only' offence (ie not to the 'dishonestly' offence):

Threatened or actual violence

A tenant will have a complete defence if her/his subletting or parting with possession was caused by threatened or actual violence towards her/him or a member of her/his family who was living with her/him in the social accommodation immediately before her/his subletting or parting with possession.[8]

Permitted assignments

A tenant will have a complete defence if s/he 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 her/him (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 this will include the tenant's current or former spouse, civil partner or cohabitant, or a minor for whose benefit the tenancy could be transferred.

Test of dishonesty

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 her/his knowledge or belief as to the facts and then determine whether her/his conduct was dishonest by the objective standards of 'ordinary decent people’. The tenant’s belief as to whether ordinary people would regard her/his behaviour was dishonest is irrelevant.[10]

Penalties and sanctions

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

Permanent loss of security of tenure

As a result of the unauthorised subletting, both secure/flexible and assured/assured shorthold tenants will lose their secure/assured status[11] and their landlords will be able to terminate their periodic tenancies by giving notice to quit and starting possession proceedings without the need to prove any secure/assured ground for possession (see Ending a basic protection tenancy). However, in case of fixed-term tenancies, this can only be done if the agreement contains a break clause (see Break clauses and notices for more on this) or by forfeiture (see 'Position of the unlawful subtenants' below for more on this).

Criminal sanctions

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

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.

Unlawful profit orders

An unlawful profit order requires a tenant to pay to her/his social landlord an amount representing the profit s/he 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 her/his 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 will accrue 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 will need permission of the court to enforce the order.

Prosecution of offences

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 has the power to prosecute the offences in collaboration with the Crown Prosecution Service.

Inquiries into social housing fraud

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.

Position of the unlawful subtenants

The general common law rule is that when the mesne tenancy ends, the subtenancy will also end. This will apply whether the tenancy ends by effluxion of time (ie the end of a 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.[16]

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 (ie the waiver of the defect in the notice operates as surrender[17]), then the subtenancy will continue and be binding on the head landlord.[18]

The subtenancy will continue on the same terms as the subtenant's existing agreement, and it appears not to matter whether the subletting was lawful or unlawful.[19] The exception to this is that an unlawful assured shorthold subtenant of a secure mesne tenant of a local authority will become a non-secure tenant because a local authority cannot let on an assured shorthold tenancy.

See Position when mesne tenancy ends for more information on the rights of subtenants when the mesne tenancy ends.

Wales

The information on this page applies only to England. Go to Shelter Cymru for information relating to Wales.

[1] s.112 Housing Act 1985 and s.45(1) Housing Act 1985.

[2] s.2(3) Prevention of Social Housing Fraud Act 2013.

[3] Prevention of Social Housing Fraud Act 2013 (Commencement) (England) Order 2013 SI 2013/262.

[4] s.1(1) and (2) Prevention of Social Housing Fraud Act 2013.

[5] s.93(2) Housing Act 1985.

[6] s.2(1) and (2) Prevention of Social Housing Fraud Act 2013.

[7] s.15(1) Housing Act 1988.

[8] ss.1(3) and 2(4) Prevention of Social Housing Fraud Act 2013.

[9] ss.1(4) and 2(5) Prevention of Social Housing Fraud Act 2013.

[10] Ivey v Genting Casinos (UK) Ltd t/a Crockfords [2017] UKSC 67.

[11] s.93(2) Housing Act 1985; s.15A Housing Act 1988, as inserted by s.6 Prevention of Social Housing Fraud Act 2013.

[12] ss.1(6) and 2(7) Prevention of Social Housing Fraud Act 2013.

[13] R v Adedeji [2019] EWCA Crim 804.

[14] ss. 4(6) and 5(6) Prevention of Social Housing Fraud 2013; Poplar Housing & Regeneration Community Association Ltd v Begum and another [2017] EWHC 2040 (QB).

[15] s.7 Prevention of Social Housing Fraud Act 2013; Prevention of Social Housing Fraud (Power to Require Information) (England) Regulations 2014 SI 2014/899.

[16] Pennell v Payne [1995] QB 192.

[17] Gray v Owen [1910] 1 KB 622.

[18] Mellor v Watkins [1874] LR 9 QB 400

[19] Parker v Jones [1910] 2 QB 32.

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