HMO Rent is Not Proceeds of Crime
Where an HMO landlord is prosecuted for not having an HMO licence he has, of course, committed a criminal offence. Therefore, it could be said that the rent he has received is the proceeds of crime. This then permits the prosecutor to ask the magistrates to commit the offender to the Crown Court for a confiscation order to be made under s70, Proceeds of Crime Act 2002. Or at least it used to be the case…
Some local authorities have been quite aggressive in using POCA to obtain rent from HMO landlords they have prosecuted. They have also done their utmost to publicise the results. This is despite there being powers under s73, Housing Act 2004 for tenants to reclaim rent paid and local authorities to recover housing benefit paid after a prosecution for failing to have a licence. It may be that the limitations on this recovery of a maximum period of 12 months and the fact that the RPT was usually reluctant to award 100% of the rent or benefit back has motivated this course of action.
However the Court of Appeal has recently ruled that this is not possible. In the case of Sumal & Sons (Properties) Ltd v London Borough of Newham [2012] EWCA Crim it has been held that rent paid to an unlicensed landlord is not the proceed of a crime. The reason for this is that the unlawfulness of having an HMO licence is not connected to rent directly. Indeed the Housing Act 2004 itself, in section 96, states that the fact that a landlord has broken the law by not having a licence does not prevent him seeking rent. Therefore it is not the seeking of rent which is unlawful but the failure to have a licence. In addition, the very fact that there is already a mechanism for recovering rent, the aforementioned Rent Repayment Order, makes it unlikely that Parliament intended that landlords could be forced to return that same rent a second time. The objective of confiscation proceedings under POCA was not to fine people but to recover their ill-gotten gains. Recovering rent twice would clearly amount to more than that.
Therefore, it seems that local authorities will have to stop using POCA and return to the use of RROs and landlords who are being prosecuted for an HMO licensing offence have one less thing to worry about.