What lessons can be drawn from how the Proceeds of Crime Act has been used to prosecute planning breaches?

Tim Rolt, planning enforcement manager at the London Borough of Brent, had a problem. By the late 2000s, he was increasingly aware that many developers were profiting from properties that had been illegally converted into flats, which the council believed were frequently of substandard quality. However, when the council prosecuted for breaches of planning enforcement, the fines were often insufficient to prevent illegal landlords from carrying on.

In 2009, Rolt changed tactics. He decided to use the Proceeds of Crime Act 2002 (POCA), which allows the courts to issue confiscation orders for money generated from illegal activities and typically involves much greater penalties for those found guilty than if they had simply been prosecuted for breaching planning enforcement.

At the time, the act was rarely used in planning cases. But in December 2011, Brent saw its first success, winning a £100,000 confiscation order for profits from a terraced house illegally converted into eight flats. Since then, the authority has successfully brought 26 further confiscation orders for ill-gotten gains from planning breaches under the POCA, bringing in close to £1.5 million.

Brent has been particularly prolific in its use of the act, but is far from the only authority to have recognised its potential. Though no figures are available on the act’s use in planning enforcement, commentators say it has grown. Estelle Dehon of Cornerstone Barristers says: “Since about 2015, there’s been quite a significant increase.”

The act is most commonly used for enforcement in London, commentators agree. Unlawful subdivision of properties or using outbuildings as housing can generate a “significant amount of money” in the capital, says Neill Whittaker, vice-chair at the National Association of Planning Enforcement and a planning associate at law firm Ivy Legal. The past 18 months have seen a series of confiscation orders issued for hundreds of thousands of pounds by boroughs including Hackney, Barnet and Lambeth. “I’d be surprised if there was a council in London that hasn’t used it now,” says Whittaker.

But POCA powers have also been used outside the capital. Last year, Tunbridge Wells Borough Council won a £132,000 confiscation order against a developer that had built holiday homes without permission. In 2013, Leicester City Council took action against three unauthorised retail units that resulted in fines, confiscation orders and court costs totalling more than £100,000.

Illegal flat conversions have made up the bulk of cases, say experts, where there is often an easily-followed paper trail allowing illegal income to be proven. But the act can apply to any planning breaches resulting in illegal income. That said, some breaches are easier to prosecute than others. Dehon says activities where the money is hard to trace, such as illegal advertising, can be tricky because of the time and expertise required.

So how can planning authorities maximise their chances of success? Dehon advises councils considering POCA prosecutions to plan for them as early as possible, ideally when drafting the enforcement notice, adding: “You have to make sure your indictment isn’t drawn too narrowly.” Dehon also recommends councils use a specialist financial investigator to follow the paper trail and prove illegal earnings.

But preparing cases can be resource-intensive and may put off some councils, warns Katy McPhie, an associate at law firm Bond Dickinson. “It can be a lot of work to pull evidence together for a POCA case on top of the planning prosecution. The authority needs to be sure it is worthwhile to spend that time on the POCA element of the case.”

There are lessons for developers as well. Izindi Visagie, founder of Ivy Legal, a consultancy which advises on enforcement action, says she tells developers in POCA cases to carefully defend any alleged breaches due to the risk of a confiscation order with a large penalty. “The stakes are much higher than before,” she adds. “Previously, it was just the cost of defending a planning prosecution and you could get away with a small fine.”

As the number of successful POCA prosecutions related to planning breaches mounts up, that awareness appears to be growing. In Brent, Rolt says POCA use has effectively added weight to planning enforcement action and, with the greater penalties involved, speeded up resolution of breaches. “Previously we would have to prosecute two or three times. Nowadays, we only have to do one prosecution with POCA and invariably we get compliance.”

Brent has also shown that a POCA planning operation can quickly become self-financing. In 2012, the council secured government funding for an investigation into unlawful “beds in sheds” and hired two more enforcement officers on time-limited contracts. The money lasted two years. By that point, the authority was generating enough money from confiscation orders to employ the additional officers permanently. Whittaker sees potential for many more councils to follow suit, if they are prepared to wait for enforcement action to bear results. “It’s an investment,” he says. “Every council to my knowledge will have scores of enforcement notices that have not been complied with. It’s such an untapped resource.”

FIVE BIG CASES FROM THE PAST THREE YEARS

Hackney – £700,000

The developer behind an illegal block of flats was hit with a confiscation order in December 2015. Garland Developments built 34 flats without planning permission and was served with an enforcement notice in August 2011. The developer continued to rent out the flats in breach of the notice and was later ordered to repay £700,000. Guy Nicholson, the council’s cabinet member for regeneration, says: “Anyone who thinks they have a right to build a property in Hackney without first obtaining planning permission must realise that the council will take action.”

Barnet – £556,000

Landlord Saied Rahmdezfouli ignored Barnet Council’s refusal of planning permission to convert his semi-detached property into nine flats and received an enforcement notice in 2007. At a sentencing and confiscation hearing almost 10 years later, the landlord was ordered to repay £555,954 of illegal proceeds alongside a £65,000 fine for the planning offences and £80,000 in costs.

Lambeth – £382,000

A landlord in Lambeth was ordered to pay a total of £427,000 in October 2015 after converting a property into flats without permission. Gilbert Garrick unsuccessfully appealed then ignored an enforcement notice, leading Lambeth Council to seek a prosecution for non-compliance. Garrick pleaded guilty, was fined £30,000 for breaching the notice and ordered to pay the council’s costs of £15,000. Lambeth’s enforcement officers worked with financial investigators from Brent Council to gain a confiscation order of £382,000.

Brent – £300,650

Brent Council won this confiscation order against developer NSV Management in relation to a former house of multiple occupation converted into 26 flats without planning permission. An enforcement notice issued in March 2012 was twice unsuccessfully appealed. Brent sought compliance before seeking a confiscation order in March 2016, winning the case in August this year. Brent Council planning enforcement manager Tim Rolt says the long-running breach “was only remedied through the use of POCA”.

Brent – £250,000

In December 2016, Brent Council secured this confiscation order against a developer that had rented out flats in an illegally-converted house in spite of a planning enforcement notice. Minamax converted a single dwelling into five self-contained flats. Brent applied for a restraint order to prevent the property’s sale and Minamax had to pay a £250,000 confiscation order plus £20,000 in council costs. Council cabinet member for stronger communities Tom Miller says: “This company showed a blatant disregard for planning rules.”

Source: Mark Wilding, Planning Resource, 15 September 2017