William Flannigan, who ran Lakeminster Park, and wife Pamela, a director of Lakeminster Park Ltd, could be charged with “criminal offences” this week, David Manley QC told the hearing.
More than 40 residents – some of whom are taking separate legal action against the park’s owners – packed the inquiry on its opening day in Beverley.
Inspector Diane Lewis is hearing appeals by Lakeminster Park Ltd (LPL) and resident Alan Coates against the refusal of planning permission by East Riding Council for permanent residential homes.
Many of the residents sold houses in West Yorkshire and beyond to live in what they thought were retirement homes, only to find they couldn’t stay there all year round, and now the face the prospect of being made homeless.
Last May police arrested five people in East Yorkshire and Cheshire following a lengthy investigation.
Four of the arrests were in connection with allegations of fraud and one with money laundering.
They are due to answer bail on Thursday, the force said.
Mr Manley, who represents LPL, said it was not for the inquiry “to sit as a quasi criminal court given that criminal charges are likely to be bought against Mr and Mrs Flannigan”.
He said people breached planning control “on a very regular basis”, adding: “There is no authority for the proposition that they should be punished for it by denial of retrospective consent on appeal.
“To seek to deny LPL retrospective consent would have the unfortunate consequence of punishing those residents who wish to remain in their homes.”
East Riding Council’s barrister Nicola Allan agreed, saying it had no relevance to the case, but later said the council had a duty to investigate breaches “and in this case where the breach is flagrant and on a massive scale it is in the public interest to pursue enforcement action”.
If the council’s enforcement notices were upheld they would be seeking to remove “all units...whatever their use and whether occupied or empty”.
She said LPL leased land from Flannigan Enterprises Ltd, and both companies were controlled by the Flannigans.
She said: “William Flannigan has undertaken the unauthorised operational development, sold the units and has day to day control of the site.”
She claimed that allowing the appeal would encourage other landowners to flout planning laws.
However the court will hear arguments that residents’ human rights will be contravened by forcing them to leave their homes.
Ken James, 77, told The Yorkshire Post, his wife Gwen who had cancer and died last year, “just gave in” when the last inquiry found against the residents. It was later quashed after the inspector was found to have “erred in law.”
He said: “We were married for 54 years and five days; she hung on for our 50th anniversary.
“She said they would only take her out in a box and they did last August.
“What can I do now? I can’t afford to get a new house and I can’t afford to pay £100 plus rent; all my money went into the house.”
The inquiry continues.