A case that saw a landlord  face confiscation of rental income totalling £174,000, under the Proceeds of Crime Act 2002 (POCA) is a stark reminder for landlords not to be complacent if they receive notice, or even suspect, that their tenant is in breach of any of its legal obligations.

The landlord in this case, T&M Property Investment Limited (T&M), held a long lease of premises in Manchester's famous curry mile. Those premises had planning permission which permitted the use of the premises as a restaurant. T&M's tenant, Dubai Café (DC), breached this planning permission by using the premises as a shisha bar and, in addition, had made alterations to the premises without the requisite planning permission.

As a result, Manchester City Council (MCC) issued an enforcement notice to T&M which required the use of the premises as a shisha bar to cease and the premises to be reinstated. This notice was ignored and T&M took no action against DC requiring them to remedy the breaches.

MCC had also, on more than one occasion, entered the premises to seize the shisha pipe equipment.

More than four years later, despite "numerous attempts" by MCC to secure compliance with the notice, MCC found that DC  was continuing to use the premises as a shisha bar.

MCC successfully prosecuted T&M for failing to comply with the enforcement notice and T&M was fined £18,750.00 plus costs.

Further, since a failure to comply with an enforcement notice can lead to criminal liability, MCC sought to persuade the court that rent obtained by T&M, whilst DC operated in breach of their planning obligations, was proceeds of crime and should therefore be subject to a confiscation order under POCA.  This claim was successful and T&M were ordered to pay back the rental income received from the date the enforcement notice was first served, to the date T& M brought DC's occupation to an end.  This resulted in a confiscation order for £174,074.79.  A failure to pay this amount within 3 months could result in imprisonment. 

Whilst this is one of the first cases we have seen where landlords have been subject to a claim under POCA from the planning authority, given the outcome here, it seems likely that planning authorities prosecuting in similar circumstances will ask the courts to take a similar approach.

The case is a cautionary reminder therefore for landlords that they are not off the hook for their tenant's actions.  Landlords must not be complacent and, if they suspect a tenant is acting unlawfully or receive notice of unlawful conduct, by way of an enforcement notice, for example, this must not be ignored.  Where landlords become aware of such matters, they should take prompt action against tenants but also ensure they are being proactive by regularly inspecting their property portfolios to ensure tenants are not partaking in criminal activity. 

Please note , it has not been possible to obtain the sentencing remarks of HHJ Timothy Smith and the facts have been taken from a press release issued by Manchester City Council.