Landlord wins appeal over confiscation after selective licensing breach

A private sector landlord has won an appeal over a confiscation order imposed after it breached a selective licensing regime put in place by the London Borough of Newham.

The local authority had designated the Little Ilford Ward Neighbourhood Improvement Zone as a Selective Licensing Area on 1 March 2010.

Sumal & Sons ignored a series of reminders from Newham that it need to license one of its properties in the area.

It was subsequently prosecuted and convicted of one offence of being in control of an unlicensed property.

In October 2011, the company was ordered at the Inner London Crown Court to pay a fine of £2,000 and costs of £3,821.96.  A confiscation order of £6,450.83 was also imposed, representing the rental income from the property during the period it remained unlicensed.  Sumal & Sons appealed.

The Court of Appeal has this week ruled that rental income from an unlicensed property did not in fact constitute a person’s benefit from the proceeds of crime, pursuant to section 76 (4) POCA 2002.

Matthew Paul, barrister at Argent Chambers and counsel to Newham in the case, said this was for four principal reasons:

  1. An alternative statutory scheme for the recovery of rental income in the case of an offence against section 95 (1) exists in section 97 of the Housing Act 2004 (Rent Repayment Orders). This scheme is incompatible with the regime under Part 2 of POCA as it creates the possibility of double recovery.
  2. Section 96 (3) of the Housing Act 2004 preserves a landlord’s ability to enforce the terms of a tenancy (including the payment of rent), despite the commission of an offence against section 95 (1). Parliament could not have intended the collection of such rent to be a criminal act in itself.
  3. The criminality of the offence therefore lies in failing to obtain a licence, not in collecting rent.
  4. A confiscation order in these circumstances ‘operates as a fine’.

However, the Court of Appeal rejected Sumal & Sons' appeal over its £2,000 fine, describing the sum as “on the moderate side”.

Read Matthew's analysis of the ruling here.