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Sub-let Fraud Act 2013

Under the new act, people convicted of social housing fraud can face up to two years in prison.

At least 100,000 social housing properties are the subject of housing fraud, according to government estimates. In response to this, the government has introduced the Prevention of Social Housing Fraud Act and made £9.5m available to tackle the issue.

The act has seen tenancy fraud become a criminal matter – and local authorities will have the power to prosecute those who unlawfully sublet their social housing. But how does the act work for those dealing with the issue of subletting and prevent people from profiting from the scarce resource that is social housing?

Two new criminal offences

The act applies to social housing tenants and introduces two new criminal offences. Firstly, where the tenant sublets or parts with possession of a property or ceases to occupy knowing that it is a breach of tenancy. The second, more serious offence, is where a tenant dishonestly, in breach of tenancy, sublets without consent and ceases to occupy the property as their only or principal home.

The first offence only requires knowledge that the tenant sublet their home in breach of their tenancy agreement, the second requires proof this was done dishonestly.

The punishments

The maximum penalty for the first offence is a fine of £5,000. The second, more serious, offence is punishable by a two-year jail sentence and/or a fine of up to £50,000. The court will also have the power to make “unlawful profit orders” that require the tenant to pay back any profits “the court considers appropriate”.

The defence

There are various defences a tenant can use in their defence. For example if a tenant is not occupying the property due to actual or threatened violence towards them, or a family member residing with them for the same reason; if the landlord has consented to the subletting; or, where the remaining occupier (not the tenant) can apply to court for a transfer of the tenancy (under family law legislation, for example).

Going to court

Prosecutions may be brought by local authorities and must be started within six months from when the local authority has gathered enough information to begin legal proceedings, but prosecutions cannot be brought later than three years from when the offence was committed.

The Housing Act (1988) has also been amended so that where an assured tenant parts with possession or sublets the property, they lose status as lifetime assured tenants for good. Regulations will also be introduced to allow housing fraud investigators to obtain information about tenants and occupiers from third parties such as utility suppliers.

Unanswered questions

However, it is not clear whether the act will help registered social landlords, such as housing associations, deal with issues of tenancy fraud. A number of questions remain and the answers will need to be found out the hard way. For example, as the local authority has to begin legal proceedings, will cash-strapped councils prosecute on behalf of housing associations? Will local authorities require housing associations to seek possession before taking criminal proceedings so they can rely on the finding of the civil court? However, where a conviction is obtained by an local authority, a housing association will be able to rely on that conviction to prove “beyond reasonable doubt” the tenant has committed fraud – and so in theory making the possession claim reasonably straight forward.

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