Landlords’ liability for tenants’ criminal activity

4th April 2019

In the first case of its kind in this country, a landlord has been prosecuted for its tenant’s criminal activity conducted at the premises.  Landlords need to be aware that, should they obtain knowledge of any illegal acts committed by their tenants, it is not enough to simply turn a blind eye.  Real Estate Litigator David Manda looks at how landlords can become liable for their tenants’ illegal acts.

What happened in the Viscomi case?

Leonardi Viscomi was the landlord of a property in Lincoln from which the tenants were carrying out criminal activities, in particular the sale of illicit tobacco and alcohol. Lincoln Trading Standards had carried out various raids on the property over a number of years and had notified Mr Viscomi of the activity and of the legal risks to him if he continued to accept rent.  The illegal acts continued and Mr Viscomi continued to accept rent.  Subsequently, on 18 January 2019 and in the first case of its kind in this country, Mr Viscomi was prosecuted for two offences of knowingly facilitating the acquisition of criminal funds by another person, by virtue of his knowledge that his property was being used for criminal activity.

In continuing to accept rent from tenants with knowledge of their criminal activity, Mr Viscomi actually met the custody threshold and could have been imprisoned.  In fact, the Judge at Lincoln Crown Court handed Mr Viscomi an eight month suspended prison sentence, 150 hours of unpaid work and scheduled a confiscation hearing under the Proceeds of Crime Act 2002.  It is anticipated that some or all of the rent he has received over the last six years will be confiscated.

What happened in Fouladi v Darout?

Mr Viscomi’s experience involved criminal liability, but the principles at play are similar to those in the recent civil case of Fouladi v Darout Ltd & Ors [1], which dealt with situations whereby a landlord can be liable for its tenant’s nuisance.

In this case, the tenant of a flat had removed carpet and installed a different flooring which led to increased noise levels. Fouladi brought a claim in nuisance against both the tenant, who lived in the flat above, and the landlord. The claim against the landlord was based upon the facts that landlord’s consent for the floor works was required and the landlord was aware of the works but did not inspect or request information as to their full nature.  The High Court concurred with the established position that in order for it to be liable in such a scenario the landlord must have authorised or participated in the nuisance (albeit the court found that that threshold was not met on the particular facts of the case).

Practical advice

Both cases demonstrate that a landlord may bear liability for the actions of their tenants and that, wherever there is an awareness of, or participation in, any wrongdoing, it is not enough to turn a blind eye.

Where landlords become aware of any potential issue at their premises, the best advice is to be proactive.  If illegal activity is being carried out by tenants, landlords should seek immediate legal advice and co-operate with the authorities.

The Viscomi case has provided a model for an enforcement strategy for these kinds of cases and the case has provoked interest from Trading Standards and police nationally who are looking to follow the example.  Had Mr Viscomi acted when he became aware of the illegal activity at his premises, he could have worked with Trading Standards to evict the tenants [2] and he could have significantly mitigated, if not completely avoided, any financial confiscation.

Wherever landlords’ consent, input or inspection is required, landlords should take those obligations seriously and exercise the property management controls that are necessary to enforce any relevant leasehold covenants.  Regular inspections of premises and positive interaction with tenants can foster good relationships and can help to identify and resolve any potential issues before they escalate, all of which can help to avoid formal complaints or legal action.

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[1] [2018] EWHC 3501 (Ch)
[2] Trading Standards do not currently have legal standing or power to evict tenants, but they can assist with the provision of evidence and attendance at court to support a landlord’s eviction action