Unlawful Profit Orders Explained
An unlawful profit order can require a social housing tenant to hand over every penny of profit they are found to have made from subletting — sums that frequently run into tens of thousands of pounds. The orders are also miscalculated surprisingly often. This guide explains what an unlawful profit order is, the legal basis for it, how the amount is worked out, and how specialist solicitors can challenge or reduce it. It forms part of the wider law on subletting fraud.
What is an unlawful profit order?
An unlawful profit order is an order that a tenant who has unlawfully let their social housing pay over the profit they made from doing so. The council can obtain one in either a criminal court or a county court.
The legal basis: Prevention of Social Housing Fraud Act 2013
In a criminal court, the council is entitled to an unlawful profit order if the tenant has been convicted of the offence of unlawful subletting under the Prevention of Social Housing Fraud Act 2013. In those cases the prosecution may apply for an order under Section 4 of the Act. Importantly, the 2013 Act is not retrospective — a point councils sometimes get wrong, as explained below.
When can a court make an unlawful profit order?
There are two routes. In the Crown Court, an order can follow a criminal conviction under the 2013 Act. In the County Court, where a social landlord wins possession on the ground of unlawful subletting — that is, the tenant has stopped using the property as their main and principal home — the landlord can also apply for an unlawful profit order. The calculation is the same in both courts.
How the unlawful profit amount is calculated
Where the order follows a criminal conviction, the amount is calculated in three steps:
- There must first be a criminal conviction under the Prevention of Social Housing Fraud Act 2013.
- Determine the total amount the tenant received from subletting the tenancy.
- Deduct from that amount any rent paid by the tenant to the landlord, including service charges. Any excess is treated as profit, and the court orders the tenant to pay that sum to the landlord.
Worked example. If a tenant charged a subtenant £1,200 a month while paying £450 a month in rent and service charges, over five years (60 months) they would have received £72,000 and paid £27,000. The unlawful profit order the court could make would be the £45,000 difference.
Defences and how the amount can be challenged
A possible defence to an unlawful profit order is to show that the tenant did not in fact make any profit from letting out their social housing. To do this, the tenant must account for any credits in their bank statements that might appear to be rent received from a subtenant. If it can be shown that no profit was made, the making of an order can be challenged.
This is closely linked to defending subletting allegations in the first place — the same evidence that explains a tenant’s bank credits often defeats both the allegation and the profit calculation.
The importance of early advice
A tenant facing a housing fraud investigation with the possibility of an unlawful profit order should seek specialist legal advice as soon as possible. Substantial sums are at stake, and councils often calculate orders incorrectly — for example, by including income paid into the tenant’s account from other, unrelated sources. Councils also sometimes try to claim profits from before the Act came into force, even though the 2013 law is not retrospective.
The savings can be dramatic. In one case the prosecution asked for £139,515; after our representations this was reduced to approximately £53,000. In another, the prosecution sought both a compensation order and an unlawful profit order of £120,000, which we reduced to £90,000. Significant sums are saved by obtaining early specialist advice — and even more is saved where early advice leads to prosecution being avoided altogether.
Call our expert housing fraud team on 020 8986 8336 or use the contact form. Legal Aid is available subject to means.
Frequently asked questions
How much is a typical unlawful profit order?
It depends on the period over which the council alleges the subletting took place. However, councils cannot go back further than 2013, when the Prevention of Social Housing Fraud Act 2013 came into force.
Can an unlawful profit order be appealed?
Yes — it can be appealed if the judge has erred in calculating the order or in its legal basis.
Is an unlawful profit order a criminal conviction?
It can form part of a criminal conviction where it follows a conviction under the 2013 Act, but it can also arise in civil proceedings where a court has ordered possession together with an order for unlawful profit.
Will an unlawful profit order affect my credit record?
If it is not paid, it will affect your credit record.
Can the council pursue an unlawful profit order if I have already left the property?
Yes. The local authority can still issue criminal and/or civil proceedings to recover an unlawful profit order.
Do I need a solicitor for an unlawful profit order hearing?
It is important to get specialist legal representation, as the law is complicated and the calculations made by councils are often wrong.