Real Estate Blog: “Put that in your pipe and smoke it” - Landlord ordered to repay nearly £200k in rent due to unauthorised shisha café!

A recent decision at Manchester Crown Court resulted in a landlord’s rent being confiscated under the Proceeds of Crime Act due to its failure to comply with a planning enforcement notice.

The landlord in question, T&M Investments Limited (“T&M”), had a 999 year lease of a commercial property on Manchester’s well known “curry mile”. This property was let to a tenant who used the commercial premises to operate the Dubai café.

Whilst the premises had planning permission to operate as a restaurant, Manchester City Council (“the Council”) discovered that it was also operating illegally as a shisha bar. Council Officers noted that unauthorised works had been carried out on both the frontage of the premises to facilitate shisha smoking as well as inside the premises too.

As a consequence, an enforcement notice was issued by the Council which ordered the landlord to close the café and remove any works that had not been approved by planners.

Despite this, and following two further raids by the Council, it became apparent that the premises were still being operated as a shisha café some four years later.

Consequently, T&M were prosecuted for failing to comply with the planning enforcement notice and fined £18,750.

The Proceeds of Crime Act (“POCA”)

In addition to receiving a fine for the breach of planning offence, the Council also persuaded the Crown Court to make a Confiscation Order against T&M under the Proceeds of Crime Act.

Such Orders are liable to be made against convicted defendants in criminal proceedings where they have benefited from their particular criminal conduct and there is a clear causal connection between this conduct and the benefit obtained. This is known as the “as a result of test”.Under the terms of the Confiscation Order, T&M must repay £174,074.79 by 4^th August 2023 or face the prospect of further enforcement action. This figure represents the value of the rent received between September 2018, when the enforcement notice was first served, until the date the lease was eventually forfeited.

Our comment

This case serves as a timely reminder to landlords that they need to be proactive if they receive a planning enforcement notice due to the illegal actions of a tenant.

Not only will Councils use their powers to prosecute those who fail to comply with enforcement notices but, if convicted, they may also seek to persuade the Courts to confiscate any rent which landlords have received during the intervening period.

As was clear in this case, the amount of rent confiscated far exceeded the fine imposed for the criminal offence itself. That being so, landlords who find themselves in this position should expect the Courts to continue to take a hard line when dealing with such offences by not only penalising landlords for failing to comply with planning enforcement notices but, as an additional sanction, also ridding them of any rent which they have received as a result of any such offence!

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Please get in touch with author Daniel McNally in our Compliance and Regulatory Team to discuss anything covered in this blog.