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Commercial landlord must payback rental income as proceeds of crime

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Commercial landlord must payback rental income as proceeds of crime

A commercial landlord has been forced to pay back £174,000 in rental income that was declared to be the proceeds of crime.

The tenant was operating an unlawful shisha smoking bar and the landlord failed to take action, despite knowing an enforcement notice had been served by the local authority.

Located on Curry Mile in Manchester, the Dubai Café had planning approval to operate as a restaurant but altered its frontage to create an area for shisha smoking without obtaining the necessary planning permission.  After discovering the shisha bar, Manchester City Council served the enforcement notice, arguing the bar encouraged lawlessness and criminality in the area.

The enforcement notice ordered the landlords to close the shisha area and remove any building structures that did not have planning permission. Landlord T&M Investments Limited held a 999-year lease on the property but continued to allow the tenant to operate even though they were aware of the planning breach, only taking action when prosecuted by Manchester City Council.

While breaches of planning permission are not usually a criminal offence, failure to comply with an enforcement notice or any stop order can lead to criminal liability under the Town and Country Planning Act 1990.  When calculating the amount of the fine, the Court will consider any financial benefit made because of the offence.

Now, T&M have been found guilty of planning-related offences at Manchester Crown Court, with a fine of £18,750 and an order to pay the City Council’s costs of £5,700.  Also, they must pay back £174,074 under the Proceeds of Crime Act 2002, representing the rental income they received from when the enforcement notice was served through to when they ended the tenant’s occupation.

The Proceeds of Crime Act allows for anyone who has profited from a crime to hand over the proceeds within three months, or else risk imprisonment. In this case, the judge ordered that the landlord was liable under the circumstances and ruled for the confiscation of the rental income.

The lesson for landlords is, firstly, to make sure any lease specifically prohibits planning breaches or other unlawful actions by tenants, and secondly, that there is swift action if any breach is discovered. It’s not enough to say the burden of responsibility was on the tenant to comply.

Also, it’s important to appreciate that the Proceeds of Crime Act does not require the authorities to prove any sort of dishonesty on the part of a landlord; it is enough that the landlord knew, or suspected, some form of criminal conduct was taking place that could be generating income to fund the rental payments.

Mike Leeman

Mike is a specialist criminal defence solicitor with over 25 years experience in this field.  Mike attended Calday Grange Grammar school on the Wirral and then studied at Sheffield Hallam University followed by the University of Sheffield.