By Christopher Crosby

Law360, London (May 18, 2020, 7:12 PM BST ) A London judge on Monday refused to lift a freeze on the rental income from a developer's £15 million ($18.22 million) property empire pending fraud charges against him, saying he would otherwise profit should the real estate market rebound after the pandemic.

High Court Judge Nicholas Hilliard kept in place a property freezing order preventing businessman Richard Leahy from earning money off the rental income stream from 43 residential and commercial properties in south London in the face of charges brought by the National Crime Agency.

The judge refused to discharge the order, which has been in place since 2017, in place of a lump £1 million down payment placed with the court ahead of a mid-2021 trial over whether Leahy obtained the real estate illegally through fraud and money laundering. The sum represented the difference between the value of the property and the debt on the portfolio.

But Judge Hilliard sided with lawyers from the agency, who warned the lump sum wouldn't be enough if property markets rebounded due to the discovery of a vaccine or treatment for the coronavirus.

"The NCA have not obtained valuations of their own but I accept that with so many properties, even small deviations from the predicted values could have a very significant impact on the overall value of a mixed portfolio of commercial and residential property in South London," Judge Hilliard said.

The agency's case centers around unspecified allegations that Leahy illegally financed the properties through "drug trafficking, fraud, money laundering and tax evasion."

Leahy, who is fighting the allegations, claims the properties were bought through loans and gifts from friends and family, some of which were never recorded in writing.

The businessman had asked the court to lift the order, as the squeeze had led lenders to cut ties, forcing him to take out expensive bridging loans to cover the mortgages and loans secured against the properties, to the tune of £22,000 a month.

Leahy complained that the agency's actions meant he missed payment deadlines, leading contractors and suppliers to terminate their business relationships, according to the judgment.

In lieu of the freeze, Leahy had offered to deposit a security payment with the court based on an April 2019 survey of 43 properties, which put their value around £14.8 million. After subtracting the outstanding debt on the properties, some £13.8 million, the businessman argued he should be allowed to secure the rental income release in exchange for a little more than £1 million.

The NCA resisted, arguing that the sum would effectively "cap" the properties' values for the court's purposes, failing to adjust if the real estate appreciated. Lawyers for the agency also questioned whether the bridging loans were even necessary, and doubted the values quoted for the real estate in the survey.

The judge noted that Leahy was proposing to put up £1 million in cash and said he'd spent £500,000 in legal fees, suggesting he wasn't short on funds. Though the judge noted that the order could be burdensome, he said it had been adjusted periodically to allow Leahy to use a bank account and sell the properties to pay off any existing loans.

Lawyers for Leahy did not immediately return a request for comment Monday.

The NCA is represented by Andrew Sutcliffe QC of 3VB and Alexander Cook of 4 Stone Buildings, instructed by the NCA.

Leahy is represented by Tim Owen QC and Edward Craven of Matrix Chambers, instructed by Stokoe Partnership Solicitors.

The case is the National Crime Agency v. Leahy, case number QB-2018-000250, in the High Court of Justice of England and Wales.

--Editing by Marygrace Murphy.

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