The term “proceeds of crime” tends to conjure up images of popular HBO crime dramas and 1950s gambling rings. It certainly doesn’t tend to be associated in most people’s minds with subdivision of flats without planning consent.
But it should be. Southwark Council have recently won a £1.2m proceeds of crime confiscation order from a landlord who converted three flats in London Bridge into 20 studios and bedsits without planning permission (see here for Southwark’s press release). Southwark Council originally prosecuted the landlord in 2010, following which he was fined and ordered to reinstate the property to its original condition. The landlord failed to comply with this order and further charges were brought in 2017. The Council conducted an investigation into the rent that the landlord obtained by renting out the studios, and successfully sought a compensation order for that amount, which it regarded as a criminal benefit. The landlord has three months to pay this amount, with the prospect of a lengthy jail sentence if he fails to pay.
What does this mean for developers?
Most developers will be aware that it is not automatically a crime – though highly inadvisable – to carry out development without planning permission. It is, however, open to the planning authority to take enforcement action in respect of any unauthorised development and it is then a criminal offence to fail to comply with that enforcement action. Fewer developers may be aware that failure to obtain what are often perceived as more “minor” consents – such as highway consents, advertising consent or listed building consent (even if making a minor alteration) – is an automatic criminal offence. It is also an automatic criminal offence to demolish in a conservation area without planning permission.
And, wherever there is a criminal offence, the Proceeds of Crime Act 2002 (“POCA”) could potentially come into play, allowing the planning authority to secure a confiscation order at the same time as a planning prosecution. This follows a Court of Appeal ruling in R v Del Basso  EWCA Crim 1119 that confiscation orders can be sought in planning cases. POCA entitles the local authority to apply for an order to recover an amount equivalent to the benefit gained from the criminal conduct in question. So, this could amount to, for example:
- In the case of a failure to comply with a planning enforcement action – the rental income in respect of the unauthorised development (as in the Southwark case);
- In the case of a failure to obtain advertising consent – an apportionment of the additional revenue that results from the illegal advertisements (although establishing the value of the benefit here would be more challenging).
The Del Basso case concerned a park and ride business that was run in breach of planning control. The entire business was therefore founded on a criminal act, rather than there being an isolated incident in the course of a very much larger business. It also involved a deliberate decision to ignore enforcement action when it was taken by the planning authority. However, the Judge’s comments in the Crown Court, which the Court of Appeal agreed with, are worth repeating:
“I conclude with a final observation about the mentality of the [appellants] and other similar law breakers. I have received the strong impression that neither the [appellants] nor ... their accountant appreciated fully the risk that the companies and individuals involved in the park and ride operation faced from confiscation proceedings. They have treated the illegality of the operation as a routine business risk with financial implications in the form of potential fines or, at worst, injunctive proceedings. This may reflect a more general public impression among those confronted by enforcement notices with the decision whether to comply with the law or to flout it. The law, however, is plain. Those who choose to run operations in disregard of planning enforcement requirements are at risk of having their gross receipts of their illegal businesses confiscated.”
Since Del Basso, there have been a number of successful prosecutions in enforcement cases where, in addition to the standard fines, a confiscation order has been made. This may be motivated by the fact that of 37.5% of the funds from successful prosecutions under the Act go directly to the planning authority. In times of budgetary pressures on planning authorities, there are an increasing number of examples of them resorting to every weapon available to boost revenues and disincentivise bad behaviour.
It is not unusual for developers to pay a great deal of attention to ensuring that they get the initial planning consent exactly right, only for those aspects of a scheme which are perceived to be more “minor” or routine – such as advertising consents, highways licences, or listed building alterations – to fall by the wayside during the delivery phase. Developers may not appreciate that failure to obtain such consents, or to comply with the conditions of such consents, is automatically a criminal offence and can have severe consequences, including large financial penalties. The Southwark case is only the latest example of the importance of ensuring that your legal and consultant team are engaged throughout the delivery phase to ensure that you are obtaining the right consents at the right time, and complying with them.
Put simply, if you are considering working on the highway, putting up an advertisement or altering a listed building, a phone call to your lawyer to understand the process before doing so may ultimately save your money, stress and reputation in the long run.