Housing fraud and legal remedies. Dean Underwood Barrister. Twitter

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1 Housing fraud and legal remedies Dean Underwood Barrister Twitter

2 Commonly-encountered housing fraud

3 Commonly-encountered housing fraud How do you assess your organization s exposure to housing fraud? First step: understand the commonlyencountered risks Obtaining a tenancy by fraudulent misrepresentation applications under Parts VI and VII of the Housing Act 1996 succession applications Subletting the whole of a let property Right to buy fraud Mutual exchange and assignment fraud obtaining consent by material misrepresentation Housing Benefit fraud 3

4 Right to Buy fraud

5 Protecting the Public Purse 2014 Audit Commission, last report: Protecting the Public Purse 2014 total number of homes sold under RTB and preserved RTB increased fourfold over two years from 3722 in 2011/12 to 15,682 in 2013/14 detected RTB fraud increased more than fivefold since 2010, losses generated by fraud in 2013/14 approximately 12.4m

6 Protecting the Public Purse 2014 Audit Commission, last report: Protecting the Public Purse 2014 Local authorities struggling to cope with number of applications within tight, statutory deadlines unable to carry out sufficiently thorough checks to prevent success of fraudulent applications

7 Protecting the London Public Purse 2015 London Boroughs Fraud Investigation Group Report: Protecting the London Public Purse detected RTB frauds in capital in 2014/15, up from 131 in 2013/14 value of RTB fraud trebled over same period, from 9m to 26.5m estimate: at least 3% of RTB applications may be fraudulent new trend in no recourse to public funds fraud

8 Protecting the London Public Purse 2015 Chair, Kevin Campbell-Scott: The significant sums involved and the relentless increases in property values, especially in London, have made RTB discounts highly attractive, including to fraudsters. In the two years immediately after the discount increase was implemented, there was a near five-fold increase in the number of RTB frauds detected nationally. 8

9 Protecting the English Public Purse 2015 TEICCAF report of 2015 RTB and no recourse to public funds fraud have emerged as significant risks for local authorities detected RTB fraud cases more than doubled to 411, while their value increased by nearly 145% to more than 30m 9

10 Protecting the English Public Purse 2015 At least 3% of RTB applications in London are fraudulent; at least 1.5% in the rest of the country Extension of the RTB to housing association tenants is likely to result in similar levels of RTB fraud to that encountered by local authorities With few notable exceptions, however, housing associations do not have the counter-fraud capacity or capability to tackle such fraud. 10

11 CIH recommendations Extend the statutory deadline for processing applications to allow local authorities more time to investigate applications Give authorities new powers to ban applicants from exercising the RTB if their application is turned down because it is fraudulent Implement a system of mandatory affordability assessments for all applicants Prevent applicants from including a third party (other than a joint tenant) in their mortgage application or from adding their name to the property deeds Prevent applicants from exercising the RTB if they already own another property Government response?

12 Prevention and remedy

13 At a strategic level Six key questions for the Board or Committee 1. Do you have a zero tolerance policy in respect of fraud? 2. Do you have a corporate fraud team? 3. Does anyone have responsibility for fighting fraud across the organisation? 4. Are you confident you have sufficient counterfraud capacity and capability to detect and prevent fraud? 5. Have you measured your organisations performance against the TEICCAF fraud detection benchmark analysis? (If so, what trends and risks did the exercise expose?) 6. Do you have appropriate and proportionate defences against emerging fraud risks, such as right to buy fraud? 13

14 At a managerial level Prevention is better than cure Identity verification: know who is living in your accommodation passports current photographs Dedicated anti-fraud teams and officers Education and training of officers and managers

15 At a managerial level Prevention is better than cure Regular tenancy audits: let them know you re coming Data sharing: the importance of information-sharing protocols Using publicity: let them know what you ll do 15

16 At a managerial level but a cure is better than nothing! Pre-action Tenancy fraud amnesties Letters before action: encouragement to surrender Notice of intention to seeking possession and notices to quit Repossession

17 At a managerial level Prosecution: Housing Act 1996, sections 171 and 214 Fraud Act 2006 Prevention of Social Housing Fraud Act 2013 Financial recovery: Common law: claims for unjust enrichment Proceeds of Crime Act 2006 Prevention of Social Housing Fraud Act 2013: Unlawful Profit Orders 17

18 Prevention of Social Housing Fraud Act 2013

19 Policy rationale Why a new Act? Statistics: 50,000 homes occupied unlawfully in 2009; 98,000 in 2012 Estimated annual cost to local authorities: 900m Existing remedies considered inadequate Political aims: To ensure social housing is occupied by those in greatest need To mitigate financial loss Material dates: Royal Assent: 31 January 2013 In force: 15 October 2013 (E); 4 November 2013 (W)

20 Explanatory note Whilst the current law provides that a secure tenant who has sub-let or parted with possession of the whole dwelling-house ceases to be a secure tenant and that a tenant who is not in occupation of the dwelling-house cannot be an assured tenant (which enables the landlord to gain possession of the dwelling-house more easily), this has not proved to be an adequate deterrent to sub-letting and parting with possession, as tenants only risk losing the tenancy of a property in which they do not live.

21 Overview Creates criminal offences of unlawful sub-letting by secure tenants and assured tenants of social landlords but not those in shared ownership Gives local authority power to prosecute 2013 Act offences Creates Unlawful Profit Orders ( UPO ) requiring tenant to pay landlord the proceeds of sub-letting Provides that assured tenants of social landlords lose security of tenure permanently if they sub-let the whole of their home Enables the Secretary of State and Welsh Ministers to make regulations to facilitate investigation of social housing fraud

22 Criminal offences Lesser, summary offence: Tenant ceases to occupy property as only or principal home and either sublets or parts with possession of it, knowing that to be a breach of his tenancy agreement Exceptions / defences: e.g. sub-letting due to violence or threats by another occupant Greater, indictable offence: Tenant acts not merely in knowing breach of tenancy agreement but dishonestly Dishonesty? R v Ghosh Knowledge that a reasonable and honest person would consider his actions dishonest Exceptions / defences to lesser offence not available

23 Prosecution and sentences Prosecution Lesser offence to be prosecuted: Sentence within 6 months of the date on which the prosecutor became aware of evidence sufficient to warrant prosecution, but not later than 3 years after commission of the offence, or the last day on which it was committed if it was a continuing offence Lesser offence: fine not exceeding 5000 Greater offence: on summary conviction, up to 6 months in prison, a fine not exceeding 5000 or both on indictment, up to 2 years in prison, a fine or both

24 The unlawful profit order The Unlawful Profit Order (Criminal) Court must consider making a UPO post-conviction may do so if it considers it appropriate may make UPO instead of- or as well as dealing with tenant in any other way Maximum payable = tenant s net profit (proceeds of sub-letting rent paid to landlord) Otherwise, amount payable is generally at court s discretion If Civil UPO exists, Criminal UPO can only require payment of profits exceeding amount of Civil UPO plus any unpaid amount of Civil UPO Any unpaid amount attracts interest at Judgment Act rate

25 The unlawful profit order The Unlawful Profit Order (Civil) Applies to: secure tenants and assured tenants of social landlords (PRPs and RSLs) who, in breach of tenancy agreement, cease to occupy their home, sublet or part with possession of it, or part of it and receive money in return Does not apply to shared ownership leases Maximum payable = net profit (proceeds of sub-letting rent / service charges paid) Otherwise, amount of UPO is generally at court s discretion If Criminal UPO exists, Civil UPO can only require payment of profits exceeding amount of Criminal UPO plus any unpaid amount of Criminal UPO

26 Security of tenure etc Act ensures parity between secure tenants and assured tenants of social landlords security of assured tenants no longer ambulatory security lost permanently if, in breach of tenancy agreement, assured tenant sublets or parts with possession of whole property does not apply to shared ownership leases SoS and Welsh Ministers may regulate to: enable prescribed persons to compel others to provide information for housing fraud investigation create criminal offences of failure to comply see Prevention of Social Housing Fraud (Power to require information) (England) Regulations 2014

27 Questions Will local authorities prosecute? Will they need to? Will the threat of prosecution result in keys handed in at the office? What use the UPO? Money spinner, or tactical device? Will it apply to tenants sub-letting at the Act s entry into force? Will the Act result in the occupation of social housing by those in greatest need?

28 Remedies in action 1996: Mark Kenny became the secure tenant of one-bedroom flat in Sidcup, Eltham 2014: Kenny made a RTB application, claiming 66,500 discount 2014: Housing fraud team discovered Kenny had bought a house in Eltham in 1999; and another in Welling in 2012, where he had lived permanently since In interview, he claimed he still lived at the flat in Sidcup December 2014: he appeared at magistrates court for two offences under Fraud Act 2006 January 2015: he returned the keys to the flat in Sidcup May 2015: he agreed to pay the local authority 7376 compensation, then paid the local authority and pleaded guilty to making the fraudulent right to buy application July 2015: he appeared at the crown court and was: sentenced to 10 months in prison, suspended for one year ordered to work 150 hours unpaid in the community given a 3-month home detention curfew ordered to pay 4400 for the borough s legal costs.

29 Housing fraud and legal remedies Dean Underwood Barrister

30 Contact details: Dean Underwood Cornerstone Barristers 2-3 Grays Inn Square London WC1R 5JH Tel: Fax: