Fraud by Landlords is a problem. The Audit Commission says so. The National Audit Office says so. The Social Security Select Committee says so. Local Authorities say so. So why does it continue?

The reason is simple. The principle is exactly like dealing with tenants who commit fraud, you have to prove intention and small independent landlords are the masters of claiming they did not know what was going on. Proving they did is difficult.
      

What is landlord fraud is often confused with general organised fraud. See organised fraud. This is not to say that landlord fraud is not organised but it is a specific from of organised fraud. In addition, some tenant fraud is attributed to landlord fraud when in fact it is simply tenant fraud. This has tended to distort reported figures. Landlord fraud is higher than we would want but not necessarily as high as we think.

Types of landlord would include:

• Failure to report that a tenant has left
• Failure to report a change in the tenants circumstances
• Conspiring with the tenant to falsify the rent levels
• Fake tenants
• Employing the tenant
• Applying for benefit themselves

Mr. Jones lives in an HMO (house in multiple occupation) owned by Mr Smith. Mr Jones leaves without giving Mr Smith or the council any notice. Housing Benefit is paid directly to Mr Smith. Mr Smith visits the room and finds that it has been stripped of everything including the light bulbs. Mr. Smith had charged Jones £80 pw for the rent. Housing Benefit had only paid £60. Mr Smith had been happy with the £60 and made no effort to recover the remaining £20. Mr Smith does not notify the council that Jones has left. The council find out eight weeks later when they process another claim by Mr Jones from another address.

In this case a number of questions of fraud arise. First is a clear breach of section 111a of the Social Security Administration Act. Proving intention will rely on the interviewing skill of the fraud inspector, as it would be safe to say the landlord will deny that they knew the tenant had left. The big question will be about the £20 that the landlord failed to collect. If the landlord says that they made no effort to collect the money because they knew that they would not get it from the tenant, it means that the rent was really £60 and not £80. Therefore the claim for benefit was not correct and should not have been assessed in the first place.

Large landlords such as housing associations and local authorities have no excuse for failing information relating to claims of benefit. They have access to good support systems that explain the duty of landlords correctly. Hostels clientele are by nature difficult to manage but many hostels have good management systems in place. However, some do not. Volunteers who have little experience in running complex organisation often run hostels. Fraud is often committed through good intention. Small landlords very rarely have the proper accounting or housing management systems in place, which make them a serious risk and an unsafe candidate for direct payment.