A recent decision in the Manchester Crown Court has confiscated a landlord’s rent because of its tenant’s criminal failure to comply with a planning enforcement notice.
The landlord was fined and had almost £175,000 in income confiscated after admitting to the breach of planning laws.
The offences in question happened at Dubai Café (“DC”) on the Curry Mile in Manchester. DC had planning permission as a restaurant, however by around 2018, the premises was also being used as a shisha bar. The frontage had been unlawfully altered to facilitate shisha smoking, and unauthorised alterations had also been made to the interior.
Manchester City Council (the “Council”) served an enforcement notice on DC in September 2018 requiring it to cease operating the shisha bar, and to reinstate the premises in accordance with the planning permission. As part of the enforcement notice it stated that the presence of the shisha bar encouraged lawlessness and criminality in the area.
DC took no action, and continued trading with the shisha bar in place for nearly four years after the September 2018 notice; a period during which there were two raids by the Council in which it confiscated various paraphernalia from the shisha bar.
The landlord, T&M Investments Limited (“T&M”) had a 999-year lease of the property, with the freehold owned by a dissolved company. T&M allowed DC’s lease to continue despite the Council’s notices and enforcement action. In fact, it appears that it was only when the council prosecuted T&M was the lease to DC forfeited.
The Proceeds of Crime Act 2002
The Council had made an application under the Proceeds of Crime Act 2002 (“the Act”). The Act allows a prosecutor to make an application for an order that anyone who has profited from a crime; in this instance, T&M deliver up any proceeds of the unlawful activity, in this case, the rents it had received while DC had been in breach of the enforcement notices.
T&M was ordered to deliver up the proceeds within three months or risk imprisonment. The benefit to T&M was assessed to be £174,074.79 being the rents received from September 2018, when the enforcement notice was served, until the date the lease was eventually forfeited which brought DC’s occupation to an end.
In early May, HHJ Timothy Smith fined T&M £18,750 as well as awarding the Council £5,700 in costs. The judge also ordered that the assessed benefit of £174,074.79 received by T&M should also be confiscated.
T&M has until 4 August to pay the fine, the costs and confiscation order.
Clearly, the message from the above decision is that landlords need to be actively managing their properties, and should they notice a planning breach or indeed any other unlawful activity being carried on at the premises then they should take action by to ensure it is remedied by the tenant. The Act does not require the landlord to have acted dishonestly and knowledge or mere suspicion that the criminal property represents benefit from criminal conduct is sufficient.
The case also draws light on the need for well-constructed forfeiture clauses in leases which allow landlords to forfeit in such an instance, particularly in the face of intransigent tenants. Although this may result in the occasional rental void period, based on the instant case, that is arguably a far better scenario than having to deliver up the full rental income received pursuant to a successful POCA claim, with all the corresponding financial and reputational risk that might entail.
If you’re concerned that you might own a commercial property where there are planning breaches then do contact either Joanne McIvor or a member of the Commercial Property team to discuss any of these issues further.
If you aren’t receiving our legal updates directly to your mailbox, please sign up now
Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.
Edwin Coe LLP is a Limited Liability Partnership, registered in England & Wales (No.OC326366). The Firm is authorised and regulated by the Solicitors Regulation Authority. A list of members of the LLP is available for inspection at our registered office address: 2 Stone Buildings, Lincoln’s Inn, London, WC2A 3TH. “Partner” denotes a member of the LLP or an employee or consultant with the equivalent standing.