Catching the fraudsters

Since the then housing minister John Healey announced a crackdown on tenancy fraud last July, the problem has become far more prominent on social landlords’ radars. With nearly 1.8 million people on the UK’s housing registers, tenants who sub-let or unlawfully occupy social properties are a serious problem. But tenancy fraud is no bright target bleeping clearly across the screens - it’s a murky, ill-defined blob that is difficult to detect, can surface anywhere and may disappear on closer inspection.

The only certainty is that there’s a lot more of it about than social landlords may realise. In Manchester, for example, a city-wide initiative has seen 18 social landlords set up a hotline for reporting suspected cases, which can range from unlawful sub-letting to unauthorised exchanges.

Participant David Squires, head of neighbourhood services at Southways Housing Trust, says that in the previous two years, there were just six recorded cases of tenancy fraud in the city. In the hotline’s first three months, it has already received six calls concerning Southways properties alone, and he fully expects others to follow. ‘On anecdotal evidence, landlords felt that fraudulent activity was very low. That may have been wishful thinking,’ he says.

Although the Labour government promised to make sub-letting a criminal offence, for the moment it is a civil one, which means the most a landlord can do is seek possession of the property from the perpetrator. The law is clear on what tenants are and aren’t allowed to do, but proving they’re in breach of it is devilishly hard. If a landlord can gather enough evidence - a big if - it can issue a notice to quit and fight for possession through the courts. Legal action in tenancy fraud cases takes around six to 12 months and can be very expensive.

‘You’re talking thousands not hundreds [of pounds],’ says Michael Donnellan, head of the property litigation team at law firm Trowers & Hamlins.

You really only want to be taking these cases on if you’re going to win them.’

So how can you win? Well, that depends on the particular fraud that is being committed.

Non-Occupation

How to spot it
Under Section 81 of the Housing Act 1985 and Section 1 of the Housing Act 1988, a tenant must live in a property as their only or principal home. In practice, the demands of work, family or a new relationship may lead them to spend more time elsewhere. A landlord must decide whether a tenant is still living in the property or whether they have effectively moved out, leaving a valuable home empty.

How to tackle it
Proving a tenant is not occupying a property may test housing officers’ detective skills. Southways’ Mr Squires suggests they may notice a build-up of unopened mail or spot that the fridge is barely stocked when conducting a tenancy audit visit. It is simplest to first write to the tenant and present them with the evidence in the hope that they will either relinquish the tenancy or comply with its terms. If that doesn’t work, and if the landlord can gather enough evidence to build a case, they can serve a notice to quit and if necessary, take them to court to gain possession.

Difficulty rating: 3

Obtaining a tenancy by deception

How to spot it
If a would-be tenant doesn’t qualify for social housing, they might lie. One of the most common deceptions is to fail to mention a previous or existing tenancy. ‘Those people tend to be motivated by the fact that there’s something unsatisfactory with the other tenancy - they’ve run up arrears, they’ve committed anti-social behaviour or they’re being evicted,’ says Mr Squires. These are the clear-cut cases - there are also a lot of loose ends that may never be resolved. For example, Mr Squires adds, a tenancy may be granted to a woman fleeing domestic violence, who reconciles with her partner soon afterwards. ‘I think we should always assume it is the truth, but sometimes one is left wondering whether the domestic violence was real,’ he says.

How to tackle it
For secure tenancies, the relevant legislation is in the Housing Act 1985, schedule I, ground 5, and for assured tenancies in the Housing Act 1988, schedule II, ground 17.

Housing officers could gather evidence of a tenant’s circumstances from many sources including housing benefit records, credit checks or the electoral register. Uncovering a lie is just the first step - you must prove the lie led to them being granted a tenancy.

‘If they haven’t disclosed a tenancy with another association but there hadn’t been any problems, the landlord can’t say they’ve been induced to grant a tenancy,’ explains Ian Alderson, a partner in the social housing department at Brabners Chaffe Street in Liverpool. Landlords must also take action as soon as possible.

‘If it happened five years ago and the tenant has been fine since, you won’t get a possession order. You need to strike while the iron’s hot.’

Tenants can only have lied if you asked them the right questions in the first place. ‘Take someone who might have convictions,’ says Mr Donnellan. ‘You need to be very specific about the convictions you’re asking about. We had one where the tenant was a convicted arsonist, but they [the landlord] hadn’t asked about that.’ The housing association did get the property back - but only after the tenant tried to burn it down.

If a case comes to court, the judge must be satisfied that it is reasonable for possession to be granted. ‘Any circumstance that exists on the day of the hearing can be taken into account. The defendant might say, “my mum just died” and the judge can decide, “I know you lied, but I don’t think it would be right to make you homeless now”,’ says Bim Badejo, a barrister at Arden Chambers. ‘But that’s very rare. Most of the time, they will be evicted.’

Difficulty rating: 3

Sub-letting

How to spot it
Mainly a problem in the high-demand south and in inner cities, sub-letting is most common in London where the greatest profit can be made on the difference between social and market rents. ‘You can see the incentive,’ says Peter Day, head of service development at Southern Housing Group. ‘On one of our nice central London estates, we had someone who was paying £100 a week and letting it for £1,000. Sometimes we come across people who don’t realise the property belongs to us because it’s been let through an agent.’ Southern now writes to local agents to alert them to the scam.

Sub-letting is not always for profit - a tenant may have moved out to live with a partner, leaving the flat to family members. ‘We tend to have more sympathy with these cases,’ says Mr Day, ‘but ultimately we want the property back.’ Or it may be part of a larger criminal racket. Coffin Mew Solicitors works for housing associations all over south east England and social housing partner Scott Greenwood has encountered some extreme cases: ‘In the east end, you still get Yardie gangs who use subletting to deal drugs or run brothels. They find vulnerable tenants and move in.’

How to tackle it
On secure tenancies, the law is very robust. Section 93(2) of the Housing Act 1985 says that if a tenant parts with possession or sub-lets the whole property, the tenancy ceases to be secure and cannot subsequently become a secure tenancy. It can then be terminated by a notice to quit. For assured tenancies, the Housing Act 1988 is less prescriptive and landlords must turn to the tenancy agreement. Ground 12, under schedule II of the 1988 act allows them to seek possession if any condition of the agreement is broken. For the most serious cases, landlords could also seek injunctions or anti-social behaviour orders against the unlawful occupants.

Routine tenancy audits can pick up sub-letting if the occupant’s signature or picture doesn’t match those of the original tenant. Both Mr Day and Mr Squires plan to take photographic ID when a tenancy is granted in future. There are many other subtle signs - family photos or children’s toys may not match the supposed tenants, or post may be addressed to someone else.

Proving sub-letting is notoriously difficult, as tenants are allowed to sub-let a room, just not the whole property. ‘You need to prove a negative,’ says Mr Donellan. ‘It’s not that there’s someone living there, it’s that the tenant has gone. If they’ve been very stupid and signed a tenancy agreement, it’s easier. If they get cash in hand and they’ve left themselves on the electoral register, it’s more difficult.’

The silver bullet is the sub-tenant themselves. ‘If the sub-tenant is prepared to get involved, it’s very easy,’ says Mr Badejo. ‘I did two cases recently where the sub-tenant attended and said “he sub-let to me”.’ What’s in it for them? ‘Absolutely nothing. Most of the time they come because they have been conned. When they find out they’ve been paying £300 a week for a flat that’s worth £100, it doesn’t take much to make them give evidence.’

Difficulty rating: 5

Succession

How to spot it
Succession cases often present landlords with difficult judgement calls. Spouses or partners must have been living at the property at the time of the tenant’s death; family members must have been there for 12 months prior to the death and some may go to great lengths to make it look as if they have. Mr Squires recently encountered a case where a son was trying to succeed to his elderly mother’s tenancy, stating he had been living there even though she had been claiming concessionary gardening and decorating services. ‘He was trying rather unpleasantly to claim his deceased mum was fraudulently claiming benefits. To obtain a flat in Didsbury, he was happy to sully her name.’

How to tackle it
For secure tenancies, go to Section 89 of the Housing Act 1985; for assured tenancies, it’s Section 17 of the Housing Act 1988 and the tenancy agreement.

Again, housing officers must turn detective. Mr Alderson has prepared questionnaires for would-be tenants that ask for information including where they work and where their children go to school. Tip-offs from neighbours can be useful, if approached with caution. ‘They may have their own agenda - they’ve got an eye on that house for one of their relatives, or might have something against the person who wants to move in.’

One social landlord received a tip-off about suspected non-occupation from the neighbour of an Asian woman who, due to ill health, sometimes stayed with her family. The association decided the claim was groundless and likely to be racially motivated.

These cases rarely get to court, but Mr Alderson warns that tenants may deploy the Human Rights Act to back up their case. Succession is legally clear cut and the court has no discretion, so tenants may claim that their right to a fair trial under Article 6 has been breached. They may also fight the decision under Article 8, the right to respect for private and family life and home.

Difficulty rating: 4

Unauthorised exchanges

How to spot it
If a landlord discovers two tenants have swapped homes, it may be simplest to grant new tenancies to the occupants. As Mr Alderson says: ‘My advice is to never leave it as it is. If you’re happy with the exchange, get paperwork sorted as soon as possible so it’s all regularised. You might need to go to court in rent arrears and you don’t want a mess like that to explain to the district judge.’

How to tackle it
If there are grounds to deny exchange, such as rent arrears, anti-social behaviour or the relative sizes of the properties, it’s relatively simple to terminate the contracts under the same rules that prevent non-occupation - the tenants are not living in the properties as their only or principal homes. Often they may swap back in response to a notice to quit - problem solved.

Difficulty rating: 1

The Communities and Local Government department’s guidance on tackling unlawful sub-letting can be found at http://tinyurl.com/38mj6b3

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