Why estate agents need to be aware of social housing fraudsters

In this guest feature, Dillon Darbar, counter fraud manager at Network Homes, sets out why estate agents need to be aware of social housing fraudsters.

For social housing providers like Network Homes, tenancy fraud is a significant challenge. The cost-of-living crisis and general shortage of private rental homes has created the ideal conditions for fraudsters to exploit.

Social housing fraud involves a social tenant subletting a property without the consent of the landlord (be it a housing association or local authority) and no longer living there as the principal resident. The current law was introduced under the Prevention of Social Housing Fraud Act 2013 and in the most serious cases those convicted could receive a two-year prison sentence and/or a fine of up to £50,000. Courts have the power to grant Unlawful Profit Orders which require the offender to pay back any profits made from illegal subletting.

Our fraud investigations have revealed cases where those determined to commit tenancy fraud have used estate agents to manage properties on their behalf. So, estate agencies need to be vigilant when carrying out their due diligence checks as fraudsters may seek to exploit their services to illegally sublet social homes.

Take one recent case we’ve been working on. Following a tenancy fraud referral, an investigation revealed a subtenant living at a Network Homes property. They were able to provide a tenancy agreement showing that the property was managed by a London estate agent. The subtenant also confirmed that the main tenant was not living at the property.

Contact with the estate agent revealed that the tenant had offered them a total of four properties for rent over the course of three years, the rent being paid into a third-party account. All four homes were Network Homes properties and the subletting had been managed through the estate agent. They were being let by three individual tenants who themselves were children of a former tenant. Each sibling had been allocated their property through a now discontinued ‘next generation’ scheme whereby children of tenants were offered alternative social homes to prevent overcrowding.

Our investigation revealed that two of these properties were unlawfully sublet. Another was obtained by deception because one of the siblings failed to disclose that he had purchased a property jointly with his mother (who had since relinquished interest in her tenancy) before being assigned the Network Homes tenancy.

We have served notices on two of the subletting tenants with applications for substantial Unlawful Profit Orders to follow. Notices on the tenant who obtained the property without declaring that he owned residential property elsewhere are due to be served shortly.

We discovered the estate agent that one of the siblings had used to advertise all four homes for rent was unaware of what (if any) due diligence checks they should have conducted on their prospective clients.

Effective due diligence isn’t just in the interests of landlords but it’s also crucial for estate agencies who themselves could fall foul of the law. Firstly, under the Accommodation Agencies Act 1953 it is a

criminal offence to advertise a property for rent without the express authorisation of the landlord. If an agent or anyone else involved in letting properties is found to have advertised a social housing tenancy without the express permission of the landlord, they will be committing a criminal offence.

Secondly, it’s also possible for estate agents and other parties involved in illegal subletting to be prosecuted on a joint enterprise basis. The criminal law allows the prosecution of parties who assist, encourage or procure the commission of a criminal offence. It’s likely estate agents would be seen as less to blame but it won’t guarantee that they’d be let off the hook!

But there are some simple steps estate agents can take to avoid getting caught out and embroiled in an investigation. Firstly, a Land Registry search can confirm the ownership of a property. In our case study, the estate agent would have been able to determine that all four properties were owned by Network Homes and not the individual renting them out. In addition to this, further checks could have been conducted to confirm proof of residency, proof of ownership such as mortgage details and retaining copies of identity documents.

If agents suspect tenancy fraud, then my advice would be to refuse the business and report it to the local authority or housing association that manages the property. Not only will effective due diligence protect estate agents from prosecution, but it also ensures much needed social housing goes to those who genuinely need it.

*Dillon Darbar is Counter Fraud Manager at Network Homes