I was surprised to read about a case of a landlord who saw their profits go up in smoke after being fined more than £170,000 for ignoring unlawful conduct by their tenant, writes Nyree Applegarth, Partner and Head of Property Disputes at Higgs LLP.
As far as I’m aware, it’s the first time a landlord has been subject to such stinging sanctions and underlines the need for landlords to take prompt action to put an end to an unlawful conduct on the part of their tenants.
The case concerned restaurant premises in Manchester which had planning permission for use as a restaurant. However, in 2018 it was actually being used additionally as Shisha bar and the front area had been unlawfully altered to facilitate outdoor Shisha pipe smoking.
Manchester City Council had served an enforcement notice on the premises in 2018 requiring it to cease operating as a Shisha smoking bar and for the premises to be reinstated for use as a restaurant only.
The tenant appears to have taken no notice of the enforcement notice and carried on trading despite two raids in which the Council confiscated the Shisha paraphernalia. The landlord also appears to have stood back and taken no action to end the lease which meant that the tenant could continue its unlawful activities.
The landlord only took action when they were prosecuted by the Council themselves and at that stage they forfeited the lease.
In the recent Manchester Crown Court case, the landlord pleaded guilty to planning related offences and was fined £18,750 and had to pay the Council’s costs.
However, the sting in the tail for the landlord was that an application had also been brought against it under the Proceeds of Crime Act 2002. This allows a prosecutor to make an application for anybody who had profited from a crime, in this case the landlord receiving rent, to have to repay the proceeds within three months or risk imprisonment.
The benefit to the landlord of the rent received was assessed at £174,074, namely the rent from September 2018 when the enforcement notice was served until they forfeited the lease. The judge therefore ordered that the monies had to be repaid by the landlord.
Interestingly, the Proceeds of Crime Act 2002 does not require any dishonesty on the part of the landlord, it merely requires knowledge or suspicion that the criminal property represents benefit from criminal conduct.
It sends a clear message that commercial landlords need to be very proactive in managing their portfolio to monitor for evident planning breaches and take prompt action of any that are identified.
Now that this case has set a precedent, you can well see local councils using such prosecutions as source of revenue.
