The outcome of the recent High Court case of Poplar HARCA v Begum (2017) has had important implications for social landlords for both what was and wasn't decided.
The court decided that the Recorder in the Court was wrong to grant a suspended possession order and to refuse to make an Unlawful Profits Order (UPO) in a clear case of unlawful sub-letting.
A decision was not reached, however, on whether the Recorder was also wrong in holding that the tenant's security of tenure had not ended pursuant to the Social Housing Fraud Act 2013 on the basis that the tenant had kept one room of their house locked and not available for use by their sub-tenants.
Legal background to the case
- The Prevention of Social Housing Fraud Act 2013 put housing association landlords on the same footing as local authority landlords by ensuring that their assured tenants (but not shared ownership lessees) will lose their security of tenure if they sub-let the whole of their property in breach of their tenancy agreement.
- This is set out in Section 15A of the Housing Act 1988 and means that the tenancy ceases to be an assured tenancy and can be terminated by service of a notice to quit.
- This new power sits alongside Sections 5 and 7 of the 1988 Act which provide that a periodic assured tenancy cannot be brought to an end by a landlord except by a court order based on one or more of the grounds contained in Schedule 2.
- The 2013 Act also introduced a new type of order called an Unlawful Profits order (UPO) which could require their tenants to pay their landlord the profits made from an unlawful sub-letting.
- Mr and Mrs Begum were assured tenants of a two-bedroom flat let by Poplar HARCA HA and received housing benefit which covered the rent in full.
- Their tenancy agreement prevented them from sub-letting the whole of the flat and required them to live there as their only or principal home.
- In fact it was accepted that: (a) they and their children moved out of the flat in August 2015 to stay with their family; (b) they received £400 rent from a Ms Rehana and a Mr Ahmed to live at the flat; (c) they deliberately kept the second bedroom of the flat – which contained toys and a cot- as camouflage to deceive their landlord into believing that in the event of an inspection they were still living at the flat.; (d) the second respondent used the flat as a base to further his interest in illegal drugs; and (e) the second respondent made a number of threats to the investigating officer in the Council's fraud investigation team;
- The Recorder dismissed Poplar HARCA's primary claim for possession based on loss of security of tenure. This was on the basis that the tenants had not parted with possession of it by keeping the second bedroom locked.
- Whilst the Recorder allowed their alternative claim for possession based on Sections 5 and 7, he exercised his discretion not to make an outright order on the basis that the tenants were not making a profit from the sub-letting as the rent they were receiving was less than the rent they were paying Poplar HARCA. He made no order in the claim for a UPO.
- Not surprisingly given the above facts, the High Court took a different view in holding that the Recorder's decision was fatally and demonstrably flawed by the unconvincing reasons given by the tenants for moving out and the fact that all their rent was paid by housing benefit.
- He therefore made an outright possession order and a UPO.
- Unfortunately he was not able to decide whether or not the tenants had unlawfully sub-let the whole of their flat as Poplar HARCA did not pursue this decision in their appeal.
Whist this is a moot point therefore, it would be interesting to consider whether Mr Justice Turner would have overturned this as well on the basis that it was a sham arrangement, although I suspect that he would have reached the same decision as the Recorder, albeit reluctantly.
Why is it relevant for social landlords?
Firstly because social landlords can be reluctant to appeal decisions. This case shows that sometimes appealing a case is the right decision.
Secondly, this case suggests an alternative route to applying for possession and sets out the factors that the court will take into account in deciding whether to make an outright possession order.
Thirdly, it reinforces the use of applying for UPOs when applying for possession and the basis on which the UPO provisions will be calculated in future.