Legal firms are reporting a sharp rise in the number of housing disrepair claims against councils and housing associations, and have accused claims management companies of targeting council estates and applying aggressive marketing techniques to sign up tenants.
They are warning councils that a new act which came into force in March, the Homes (Fitness for Human Habitation) Act, will potentially “open the floodgates” for a new avalanche of claims as it widens landlords’ legal responsibilities.
Source: Aticus Law
Louise Shawcross, head of the housing disrepair department and partner at the law firm Aticus Law, says that councils are seen as a “soft target” by some claims managements companies, because they are “solvent defendants” who are “known for paying out without proper investigation”. “They are more likely to have records of tenancy agreement, and will follow protocol because they have in house legal teams,” she said.
Ms Shawcross says she has seen an influx of claims management companies joining the sector. “These companies are now asking me to take upwards of 50 claims a week, and to pay upfront,” she said. “I could turn this department into a sausage factory of claims – but I just want to deal with the legitimate ones. We reject 50% of claims for different reasons, but in many instances it is because I am not happy with the provenance of the claim.”
In its 2018 annual report, the Ministry of Justice’s claims management regulator found there had been a 27% rise in the number of businesses operating in the housing disrepair sector between 2016-17 and 2017-18. At the same time, new applications from claims management companies operating in the housing repair sector went up by 69%, and housing disrepair turnover rose by 112%, from £0.7m to £1.5m.
Lawyers in Local Government (LLG) say its members are now reporting “definite spikes” in disrepair claims from firms operating outside of their authority’s geographical location. The claims management regulator’s report found that the North West and London have by far the highest concentration of claims management companies, with 434 and 207 respectively.
“Housing disrepair helplines are being set up and ‘no win, no fee’ agreements are being offered,” Denise Brosman, DWF
“We are also seeing reports of an increase in claims from tenants with vulnerabilities and, worryingly, signatories on instructions to act not matching those held on the tenants file,” said Helen McGrath, head of public affairs. “The costs and resources required to respond to a disrepair claim are exceptionally demanding on social landlords.”
Ms Shawcross claims that a social landlord pays on average between £10-12,000 for each successful claim made against them, of which legal costs make up £5-7,000. The CMC fee is normally between £500 and £1,500, which is absorbed by the law firm, with the tenant getting around £2-5,000.
“Some social landlords are not efficient and allow their costs to escalate,” she said.
The Homes (Fitness for Human Habitation) Act passes legal responsibility on to landlords for ensuring their ‘dwelling’ is fit for habitation when it comes to natural lighting – ensuring the property has windows and that they aren’t boarded up – as well as ventilation, water supply, facilities for cooking food, damp and electrical hazards.
Ms Shawcross claims she is now seeing a lot of “petty claims” for damp, which could be caused by not properly ventilating a property. “Freedom from damp is going to open up a massive area of litigation,” she said.
The rise in housing repair CMCs has coincided with a decline in the number of regulated personal injury (PI) CMCs, which fell by 16% last year and has been in steady decline since the implementation of the referral fee ban in 2013, according to the report.
“CMCs that were previously focused on PPI claims have found this is no longer profitable, and have now turned their attention to housing disrepair”, said Ms Shawcross. “The legal sector has also turned its attention to this, because it’s a prosperous area.”
Denise Brosman, a partner at DWF legal firm, says tenants in social housing estates are being targeted with “letter dropping, cold calling and the use of social media” to draw in large numbers of tenants, and that these same methods were historically used to target personal injury claims.
She claims that dissatisfied tenants are an “easy target” for such companies. “Housing disrepair helplines are being set up and ‘no win, no fee’ agreements are being offered, increasing the potential for disrepair cases to be heard.”
Ms Shawcross claims that some of the companies mask themselves as law firms, but actually make a living as sales operatives to find work - running Facebook campaigns in specific areas using algorithms that “target a certain demographic”.
“It’s a drumbeat that carries on through the estate,” she said. “The pressure is on them to make sales, and I think that brings about a degree of dubious processes in how they get those claims. When they get data, the CMCs sell that data regardless of its authenticity. The lawyers then get a barrage of claims and have to spend significant time filtering out what’s a genuine claim and what’s not.”
There are also plenty of genuine worthy claims, Ms Shawcross emphasises, and being approached by CMCs can help inform tenants living in squalid conditions of what their rights are and to realise that enough is enough.
“Conversely, there are tenants who are motivated by compensation rather than repairs,” she added. “A lot of people within that demographic are just looking at bringing a compensation claim.”
Aticus Law is offering guidance to councils on how to stem the tide of these claims, and LLG is producing guidance to its members. When concerns are raised, it urges its members to contact the Financial Conduct Authority, which holds responsibility for the regulation of CMCs after the MOJ’s regulator was disbanded in April.
Advice from DWF on managing housing repairs complaints
- Upon receipt of a complaint, fully document any contact with tenants and all steps taken to resolve complaints. Ensure you have an effective and efficient reporting system in place and provision of training to ensure good housing management and co-ordination.
- Once a claim is received, ensure all documents relating to any works carried out, visits to the property, inspection records, complaints records and any maintenance logs are collated to strengthen the defence.
- A disrepair claim can be defended if the landlord can show that it responded promptly to any suggestion of disrepair and that any necessary works were carried out within a ‘reasonable’ period of time. What is ‘reasonable’ will depend on the nature of the repair to some extent - local authorities should aim to arrange for works to be carried out as quickly as possible. Further, we must stress the importance of liaison between insurance/legal and housing teams in local authorities and housing associations as this provides the opportunity to be able to present counterclaims for any rent arrears in housing disrepair claims.
- High volumes of claims can be overwhelming and push the defendant towards settlement. Landlords that have a large stock of rented properties may want to take a proactive approach in anticipation of a high volume of disrepair claims. It is important to review contracts to consider whether they place obligations on the landlord which go above and beyond that required by statute. Landlords also need to ensure that the systems employed when dealing with notices of disrepair are best practice and will provide an effective platform to defend these claims.