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High court gives unprecedented guidance on unlawful profit orders

In a case conducted by Capsticks, Poplar HARCA v (1) Begum (2) Rohim [2017] UKHC 2040 (QB) the High Court has overturned a suspended possession order. It is the first case to consider and give guidance on calculating Unlawful Profit Orders (UPO).

The facts

Investigations by Poplar HARCA, assisted by the Local Authority’s fraud officers, found the Defendants to be living at a relative’s house and the property, a 2 bedroom flat, was being sublet to a couple at £400pcm. The Defendants were receiving full Housing Benefit. The Defendants had kept one of the bedrooms of the flat padlocked and set up with their children’s belongings to try to trick their landlord into believing that they were still living there.

The Defendants denied both moving out of the property and receiving monies from the ‘distant relatives’ who had been staying with them. They said that they had all gone to the other property to care for one of their relatives, padlocking the bedroom before leaving, and telling their guests to sleep in their bed. The Second Defendant bragged that he would “get away with it”, unlawfully evicted the subtenants by threatening to burn their belongings and the Defendants moved back in.

Possession proceedings issued

Possession proceedings were issued on the basis that the Defendants had sublet and therefore had lost security of tenure (under section 15A of the Housing Act 1988). In the alternative, possession was sought on Grounds 10, 12 and 14. An outright possession order was requested together with a UPO.

Trial

The Judge found that the Defendants had not sublet and had not parted with possession of the whole flat. He accepted the alternative claim but granted a suspended possession order because he found that the Defendants had not made a profit, had moved out for altruistic reasons and had been living in cramped conditions. He also refused to make a UPO on the basis that the Defendants had not made enough from sub-letting to cover the rent for the flat.

Poplar HARCA appealed.

Appeal

The appeal judge was satisfied that the decision had been “fatally and demonstrably flawed” and that the Trial Judge had made a serious error as he had “plainly overlooked” that the Defendants were “pocketing weekly Housing Benefit of £138.91 to cover the rent on the flat which they were no longer occupying and, at the same time, fraudulently harvesting an additional £400 per month from [the subtenants].”

The decision

The SPO was overturned, replaced with an outright possession order and a UPO made as the money received from the subletting “was pure profit”. He went on to confirm that Housing Benefit should be taken into account in the UPO calculation as “to disregard Housing Benefit under Step 1 but include it to the ill-gotten advantage of the fraudster under Step 2 would be to thwart the obvious intention of Parliament to provide a mechanism with which to strip him of his spoils.”

What to take away

In the first decision to consider the proper interpretation of section 5 of the 2013 Act, the Judge gave guidance about the relevance of  Housing Benefit in the UPO calculation. This will be welcome news for social landlords as it reinforces the need to safeguard social housing for those who actually need it.

The full Judgment can be read here and to find out more about this important case, or for any advice on social housing fraud, please contact Helen Gascoigne who conducted the case.  

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