Following a recent decision at the High Court in the case of Poplar HARCA -v- Begum & Rohim, social landlords have now been given clear direction on how to seek Unlawful Profits Orders (UPOs).
It was the Appellant’s primary case that the Respondents had moved in with the First Respondent’s mother and were illegally subletting the whole of their two bedroom flat and were making a profit as a result of the subletting. The Respondents were in receipt of full housing benefit. An alternative claim was also submitted on grounds 10, 12 and 14 of Schedule 2 to the Housing Act 1988, for breaches of tenancy.
The Recorder presiding at the County Court though found that they had not sublet nor parted with possession, and it was only because they could not afford the rent of over £600.00 per month and were living in cramped conditions in any event that they had moved out. The Recorder dismissed the primary case and granted a suspended possession order but no UPO.
On appeal, the Appellant argued that the Recorder’s decision was flawed, not least because the subletting was apparent and for profiteering reasons (particularly when full housing benefit was being received) and there was no evidential basis therefore for the Recorder to have found otherwise and not grant outright possession or a UPO as a result. Turner J presiding at the High Court agreed with this, commenting “it is not compassionate to allow profiteering fraudsters indefinitely to continue to occupy premises and thereby exclude from such accommodation more needy and deserving families”.
Turner J overturned the suspended possession order and granted outright possession instead. As to the UPO, he granted one to the Appellant, so ordering the Respondents to pay over the profits made from the subletting.
More importantly though, he gave guidance as to a two-step process to consider when applying for an UPO:
Firstly it will need to be ascertained as to the total amount the tenant had received as a result of subletting or parting with possession or the whole or part of the property. In doing so all income from the subletting as well as all housing benefit, discretionary housing payments, housing element of universal credit and any other housing related incomes and benefits should be considered
Deduct from the total amount ascertained in step 1, any amounts paid by the tenant as rent to the landlord (including towards service charges) for the alleged period of subletting.
The final amount is the unlawful profits to be claimed for, and in coming to this figure housing benefit should be considered at both steps above. Therefore, if a tenant is in receipt of full housing benefit and sublets a property for a six month period for an additional £500.00 a month, and is only paying £100.00 a month towards a monthly rent of £500.00, the total to claim from him is £900.00 a month for that six month period.
Subletting continues to be a major issue for landlords and UPOs will be a key tool in combatting it. This new guidance will better equip landlords to recover significant losses, and hopefully send a clear message as to the consequences of subletting.
If you require further information on the Unlawful Profit Order please contact Raihan Khoyratee on 020 8768 7095, or email