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Commercial landlord must pay back rent as proceeds of crime

In a recent case, HHJ Timothy Smith at Manchester Crown Court ordered a commercial landlord known as T & M Investments Limited (the ‘Landlord’) to pay back £174,000 in rental income which was declared to be the proceeds of crime.

Dubai Cafe (the ‘Tenant’) received planning permission to operate as a restaurant but had later installed an unlawful shisha smoking bar. Despite this breach, the landlord failed to take action, even when an enforcement notice had been served by the local authority.

The premises located on the Curry Mile in Manchester was altered by the tenant so that the front of the restaurant had an area for shisha smoking. These changes had been implemented without obtaining the necessary planning permission. After discovering the shisha bar, Manchester City Council served the enforcement notice, arguing that the bar encouraged lawlessness and criminality in the area.

The enforcement notice ordered the landlord to close the shisha area and remove any building structures that did not have planning permission. The landlord 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 acting 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.

Manchester Crown Court found the tenant guilty of planning-related offences and issued a fine of £18,750 and ordered them to pay the City Council’s costs of £5,700. The tenant 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 handover 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 swift action is taken as soon as a breach is discovered,” explained Kimberley Teape. “It’s not enough to lay the burden of responsibility on the tenant.”

Kimberley said: “The Proceeds of Crime Act has not been implemented to identify a dishonest landlord, as 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.”

If you would like any more information relating to this article then please feel free to contact me by telephone – 020 8221 8053, via email here, or visit my profile.

This is not legal advice; it is intended to provide information of general interest about current legal issues.

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