The Curry Mile in Manchester is a stretch of the Wilmslow Road, leading from the city centre to the suburbs. It is lined with restaurants, cafes and shops from all parts of the Middle East and the Indian subcontinent. Afghan restaurants rub shoulders with Bangladeshi sweet shops and continental stores display fruit and vegetables on pavement stands to tempt in the passers-by who are a mix of locals and students from Manchester’s two universities.
Compliance with planning regulations is not the chief concern of the restauranteurs, bartenders and shopkeepers, but a very recent sentencing decision of HHJ Timothy Smith at Manchester Crown Court illustrates starkly that a landlord cannot allow its tenant to disregard planning controls and ignore planning enforcement
The Dubai Café had planning permission for use as a restaurant. However, by at least 2018, it was being used additionally as a shisha bar and the frontage had been unlawfully altered to facilitate shisha smoking. Manchester City Council (“MCC”) served an enforcement notice on the premises in September 2018 requiring it to cease operating a shisha smoking bar, and to reinstate the premises. The enforcement notice alleged that the presence of the shisha bar encouraged lawlessness and criminality in the area. It appears that the operators of the Dubai Café took no notice, and indeed carried on trading despite two raids in which MCC confiscated the shisha paraphernalia. Nothwithstanding the MCC’s enforcement action, the Landlord allowed the lease to continue. The landlord, T&M investments Limited (“T&M”), apparently has a 999-year lease of the property, with the freehold owned by a dissolved company. It appears that only when MCC prosecuted T&M was the lease forfeited. The Dubai Café has been empty for some months.
Earlier this month, T&M pleaded guilty to planning related offences at Manchester Crown Court. The sentencing judge, HHJ Timothy Smith fined it £18,750 and awarded costs to Manchester City Council of £5,700. This was not all, however, as an application was also brought under the Proceeds of Crime Act 2002 (“POCA 2002”). The POCA 2002 allows a prosecutor to make an application for anyone who has profited from a crime (in this case, the landlord in receiving rent) to deliver up the proceeds within three months, or else risk imprisonment. The benefit to T&M from its criminal conduct was assessed at £174,074, being rent from September 2018 when the enforcement notice was served until the date that the landlord brought the tenant’s occupation to an end. The judge ordered that these monies received by T&M were accordingly be confiscated.
This case illustrates the need for well-drawn leases that prohibit planning breaches or any other illegality by the tenant; allowing the landlord to forfeit the lease and put an end to the unlawful conduct but more than that, it also requires landlords and their agents to be vigilant. The POCA 2002 does not require any dishonesty on the part of a landlord, it merely requires knowledge or suspicion that the criminal property represents benefit from criminal conduct. Other scenarios in which a landlord may be vulnerable to proceedings include where premises are being used for prostitution or drug-related crimes, or where there is a breach of listed building consent (a criminal offence).
These sorts of prosecutions are more commonly seen in connection with planning breaches in the residential sector, where the landlord has profited from, for example, building more rental units than authorised by planning permission. However, to our knowledge this is the first instance where a local planning authority has taken action against a commercial landlord and then confiscated the rent it received for the period from the date of the enforcement to the date on which the enforcement was complied with.
The clear message from the above is that commercial landlords need to be proactive in managing their properties to monitor for evident planning breaches (e.g., change of use/external works) and if they identify such a breach ensure that they take prompt action against the tenant to remedy the situation. Whilst the ultimate landlord protection of forfeiture would result in a vacant unit, this is likely to be preferable to a fine, costs order and being compelled by a court to pay over some or all of the rental stream, not to mention the reputational impact of having rents confiscated as proceeds of crime. The case illustrates that landlords cannot rely on a defence that under the lease the tenant is required to comply with all legislation/planning requirements but requires them to take positive steps in the event they suspect non-compliance with these obligations.
Note: the facts in this blog are taken from a press release issued by Manchester City Council. It has not yet been possible to obtain the sentencing remarks of HHJ Timothy Smith.