Prevention of Social Housing Fraud Bill
Explanatory Notes
introduction
These Explanatory Notes relate to the Prevention of Social Housing Fraud Bill. They have been provided by the Department for Communities and Local Government, with the consent of Richard Harrington MP, in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.
summary and background
3.
The Prevention of Social Housing Fraud Bill
creates new criminal offences of unlawful sub-letting by secure and assured tenants of social housing. It also makes provision concerning the prosecution of these offences (including prosecution powers for local authorities). The Bill additionally provides for courts to make orders for the recovery from tenants of profits made from unlawful sub-letting, either following conviction or in separate civil proceedings. Finally, it provides that an assured tenant of a dwelling-house who parts with possession of, or sub-lets the dwelling
-house
cannot subsequently regain their status as an assured tenant of the dwelling
-house
. In this respect, the Bill brings assured tenancies into line with secure te
nancies (where the restoration
of secure status is already excluded following parting with possession or sub-letting by the tenant).
The policy rationale for the new provisions is to secure that social housing tenancies are for those in greatest housing need. Whilst the current law provides that a secure tenant who has sublet or parted with possession of the whole dwelling-house ceases to be a secure tenant (which enables the landlord to gain possession of the dwelling-house more easily), this has not proved to be an adequate deterrent to sub-letting and parting with possession, as the tenant only risks losing the tenancy of a property in which he does not live.
The new provisions are intended to create additional deterrents to unlawful sub-letting in the form of the new offences, orders for the recovery of profits and loss of assured tenancy status.
territorial extent and application
The Bill extends to England and Wales only.
COMMENTARY
Clause 1: Unlawful subletting: secure tenancies
The clause creates two new criminal offences in relation to secure tenancies. In general, secure tenants are local authority tenants although other social landlords, such as private registered providers of social housing ("PRPs") may have secure tenants. The offences only apply where the tenant has ceased to occupy the property.
Under subsection (1), a secure tenant will commit an offence if, in breach of an express or implied term of his tenancy agreement, he sublets or parts with possession of the whole or part of the property and knows this action to be in breach of his tenancy agreement. Subsection (3) provides that the tenant will not have committed an offence under subsection (1) if he ceased to occupy the dwelling-house and sublet or parted with possession of it because of violence or threats of violence towards him from a person living in the dwelling-house or in the locality of the dwelling-house. Subsection (4) provides that the tenant will not have committed the offence in subsection (1) where the person who occupies the dwelling-house as a result of the tenant’s actions is a person entitled to apply to a court for a right to occupy the dwelling-house, or to have the tenancy transferred to them; or a person in respect of whom an application may be made to have the tenancy transferred to them. In practice this will include the tenant’s current or former spouse, civil partner or co-habitant.
Subsection (2) of clause 1 creates an additional new criminal offence, applicable where the tenant has acted dishonestly. The acts comprising this offence are otherwise the same as for the offence under subsection (1). The type of dishonesty intended is knowledge that a reasonable and honest person would consider the action in question to be dishonest. The offence under subsection (2) carries a greater penalty than that under subsection (1). Whether or not the action was dishonest will be a question of fact but is more likely to be found where the tenant made a profit from the transaction, for example by charging a market rent for the property. The defences of sub-letting because of violence or threats of violence, or occupation by a spouse, civil partner etc are not available where dishonesty can be established under subsection (2).
Subsections (5) and (6) set out the penalties that are to apply upon conviction of the offences under subsections (1) and (2) respectively.
Clause 2: Unlawful subletting: assured tenancies
This clause creates two offences in relation to assured tenants of private registered providers of social housing (PRPs). The offences and penalties are in substantially the same terms as those that apply in relation to secure tenants under clause 1. The offences do not apply to PRP leaseholders with a shared ownership lease.
Clause 3: Prosecution of offences
This clause provides for time limits for the bringing of prosecutions for the new offences created by sections 1 and 2, and gives powers to local authorities to prosecute the offences.
The offences in clauses 1(1) and 2(1) that do not include an element of dishonesty are summary-only offences. Unless provision is made in legislation, a summary-only offence must be prosecuted within 6 months of the date of the commission of the offence. Subsections (1) and (2) of clause 3 enable the prosecutor to bring a prosecution within 6 months of the date on which evidence sufficient to warrant the prosecution came to the knowledge of the prosecutor, provided it is brought no later than 3 years after the date on which the offence was committed (or the last day on which it was committed if it was a continuing offence).
Subsection (5) enables a local authority to prosecute an offence under clause 1 or 2 (or an associated offence of aiding, abetting, counselling or procuring etc as defined in clause 8(8)) whether or not the local authority is or was the landlord of the property and whether or not the property is within the prosecuting local authority’s area. This enables one local authority to prosecute offences committed in PRP properties and in properties owned and managed by other local authorities.
Clause 4: Unlawful profit orders: criminal proceedings
Clause 4 makes provision for unlawful profit orders in criminal proceedings for offences under clause 1 or clause 2 (and for related offences).
An unlawful profit order is an order requiring a convicted offender to pay the landlord an amount representing the profit made by the offender as a result of the conduct that constituted the offence (subsection (3)).
Where an offender is convicted, the court must (whether on application or otherwise) decide whether to make an unlawful profit order, and may make such an order where it considers it appropriate to do so instead of, or in addition to dealing with the offender in any other way (subsection (2). If a court decides not to make an unlawful profit order it must give reasons for that decision when it passes sentence on the offender (subsection (4)).
The amount payable under an unlawful profit order is a matter for the court’s discretion, subject to the matters referred to in paragraphs 19 to 21 below.
The maximum amount payable under such an order is determined by subsection (6). This provides for calculating the amount of profit made as the total amount received by the offender as a result of the unlawful conduct minus the rent paid by the offender to the landlord during the period in which the conduct was committed.
Subsection (7) provides that where an unlawful profit order has already been made against the tenant in civil proceedings under clause 5, an unlawful profit order following conviction may only be for the recovery of an amount of profit made by the tenant that exceeds the amount payable under the civil order (or which the landlord has failed to recover under that order).
Subsection (8) requires the court to have regard to the offender’s means when deciding whether to make an order, and determining the amount recoverable under any order made.
Subsections (9) and (10) provide for how the court will determine priority between an unlawful profit order, any compensation order to be made under the Powers of Criminal Courts (Sentencing) Act 2000, and any fine to be imposed where the offender’s means are insufficient to pay all three. In such a case preference must be given to the making of the unlawful profit order.
Subsection (11) makes provision concerning the application of sections 131 to 133 of the Powers of Criminal Courts (Sentencing) Act 2000 in relation to unlawful profit orders.
Clause 5: Unlawful profit orders: civil proceedings
This clause allows social landlords to seek an unlawful profit order in civil proceedings against secure and assured tenants who, in breach of their tenancy, have ceased to occupy and sub-let or parted with possession of their properties and who have received money as a result of that conduct. (It does not apply to PRP leaseholders with shared ownership leases).
Such an unlawful profit order enables the landlord to recover the profit the tenant has made from the unlawful activity. Subsection (5) provides that the amount payable under an unlawful profit order is to be calculated as the total amount received by the tenant as a result of the unlawful conduct minus the rent paid by the tenant to the landlord during the period in which the conduct was committed.
Subsection (6) provides that where an unlawful profit order has already been made against the tenant following a conviction in criminal proceedings, an order in civil proceedings may only be for the recovery of an amount of profit made by the tenant that exceeds the amount payable under the criminal order (or which the landlord has failed to recover under that order).
Clause 6: Loss of assured status
A secure tenant who sublets or parts with possession of the whole property will cease to be a secure tenant and cannot regain secure status by moving back into the property. The loss of secure status means that the landlord may end the tenancy by giving notice and this makes possession proceedings more simple. As the law stands, an assured tenant who sublets or parts with possession of the whole property will not be an assured tenant during this period, as he does not occupy the property as his only or principal home, but he may regain assured status by moving back into the property.
Clause 6 ensures that PRP assured tenants will lose assured status permanently if they sublet or part with possession with the whole property in breach of their tenancy agreement. This puts those tenants on equal footing with secure tenants. This clause does not apply to PRP leaseholders with shared ownership leases.
Clause 7: Consequential amendments
Clause 7 and the Schedule make provision for the consequential amendments that are required as a result of the creation of an unlawful profit orders in criminal and civil proceedings.
Clause 8: Interpretation
Clause 8 makes provision in relation to the interpretation of the Bill.
Clause 9: Extent, commencement and short title
Clause 9 provides that the Bill extends to England and Wales only, save that any amendments to other Acts have the same extent as the provisions being amended.
Commencement
The provisions of the Act are to come into force on such day as the Secretary of State may by order (made by statutory instrument) appoint.
financial effects
The Bill does not confer major new functions on local authorities, who already have wide powers to bring civil or criminal proceedings.
The changes made by the Bill will not involve the incurring of significant new expenditure by public authorities.
Local authority landlords and private registered providers may benefit financially from the provisions in the Bill for unlawful profit orders that may be made in their favour.
Summary of Impact Assessment
An Impact Assessment has been prepared in relation to the Bill and will be made available on the website of the Department for Communities and Local Government (www.communities.gsi.gov.uk).
public sector manpower implications
The Bill will not represent a significant change to public service manpower.
