Check If You Can Sublet
It is common for owners of properties to sublet them either having purchased a property for that purpose or because circumstances create that opportunity. It is vital however that anyone purposing to let a property does check that they are entitled to do so. Two recent developments illustrate the importance of this.
In the case of Burchell -v- Raj Properties Limited the Lease provided that the Leaseholder was “to use the flat as a private dwelling for the lessee and his family and for no other purpose”. When the leaseholder Mr Burchell applied to extend his Lease he also wanted to amend the Lease and remove those words so he could sublet. As the landlord did not agree the Leasehold Valuation Tribunal had to decide if the words “for the lessee and his family” did prevent him from subletting to anyone outside his own family. They decided it did not. On appeal however the Upper Tribunal took a different view saying that those words in their natural and ordinary meaning were an additional limitation and therefore must be applied. Mr Burchell could not have them removed. The Tribunal also concluded that he was unable to justify their removal or make changes to the Lease to rectify a “mistake” or “defect” which neither party intended when the Lease was originally drawn up. Mr Burchell therefore was unable to sublet.
Anyone purchasing the flat to sublet or subletting for other reasons must check their Lease to ensure there is no restriction in their doing so and take legal advice is necessary as well as complying with any requirement to obtain the consent of their mortgage company.
The consequences for illegally subletting social housing properties have been significantly increased following the introduction of the Prevention of Social Housing Fraud Act on the 15th October 2013. This seeks to address housing fraud where social housing accommodation is sublet against the terms of the tenancy thereby denying houses to those in genuine need. It has been estimated that in excess of 100,000 social housing properties are subject to this kind of housing fraud.
The Act has made tenancy fraud a criminal matter with Local Authorities being able to prosecute social housing tenants if they do this. If a tenant sublets his or her home not only are they in breach of the tenancy agreement, they may face a maximum penalty of £5,000.00. If however they are dishonestly in breach of the tenancy to sublet without consent and cease to occupy the property as their own or principal home then the tenant may face up to two years in prison and up to a £50,000.00 fine. The Court also has power to make an order requiring the tenant to pay back any “profits” as the Court considers appropriate thereby providing financial consequences as well.
It will be up to the Local Authorities to decide to bring a prosecution. Their investigative powers have been assisted by regulations being introduced to allow them to obtain information from third parties. However budgetary constraints and staff levels may restrict the number of prosecutions Local Authorities actually bring.
This will not prevent Social Landlords from bringing possession proceedings for breach of the terms of the tenancy by subletting. They may rely on any evidence collected by the Local Authority and any successful conviction in any such claim. There is an added sting for tenants who have parted with possession or subletting the whole of their properties. They will lose their residential status as assured tenants for good. They will no longer be able to argue that the subletting has come to an end and ask the Judge to let them back into the property. The Judge can find their tenancies have come to an end and grant the Social Landlord possession in any event.
Clearly these provisions provide an co-ordinated approach and serious penalties. The most effective way recently of taking action against those who are illegally subletting (thereby depriving those on waiting lists in overcrowded or inadequate accommodation of the housing they are entitled to) has been when Central Government provide specific funding to Local Authorities for their investigators to make enquiries on behalf of Housing Associations who were then able to present comprehensive evidence and obtain Possession Orders on the information supplied by those local authority investigators.If you have any queries concerning the matters raised please contact
Jeremy Teall, Partner and Housing Management Team Leader on
020 8567 3477 or e-mail email@example.com