Supplementary written evidence submitted by Riverside, Torus, Onward, ForHousing, Salix Homes and Shepherds Bush Housing Group [RSH 110]
1.1 Thank you for the invitation to submit further evidence on the issue of disrepair and for allowing us to address some recent comments made to the committee about our work.
1.2 In 2021, eight social housing landlords commissioned Connect, public affairs agency, to conduct research into the rise in disrepair claims originating from Claims Management Companies (CMCs) and legal firms. Together we are responsible for over 180,000 homes across the country.
1.3 In commissioning this work, our aim was to propose practical ways in which Government can speed up the resolution of genuine cases of disrepair in the interest of tenants and avoid protracted and expensive legal processes which have been promoted by some unscrupulous legal firms and CMCs. We accept that there are instances where a legal route to addressing disrepair is necessary and firmly support the right of tenants to take action when genuine disrepair issues arise.
1.4 Through this work, we have evidence that specific areas are being targeted by CMCs. We know that there has been a rising number of claims coming through these companies in the Liverpool City Region and Greater Manchester, as well as in the Midlands and London. Our research has also found evidence of some tenants being pressured or misled into taking legal action when they would be happy to work with their landlord directly.
1.5 We strongly support the rights of tenants to hold their landlord to account on poor standards, however we want the Government to address the well-evidenced sharp practices which see some legal firms and CMCs exploiting tenants for their own financial gain, often discouraging them from engaging directly with their landlord, for example by using complaints processes, and unnecessarily protracting the repairs process. We have numerous case studies and have included one in Appendix 1 as a demonstration of a claim which delayed the successful resolution for the tenant.
1.6 We remain committed to providing comfortable, safe and well-maintained homes for our tenants and their families. This overriding customer-first priority means we will always work to resolve home repair issues quickly and effectively, to make sure homes are at the standards we expect. We, therefore, encourage tenants to contact us directly when such issues arise.
1.7 We commissioned this work after the Government had already closed its consultation on Fixed Recoverable Costs (FRC), to which a number of us responded. We identified FRC as a potentially beneficial reform in part because it was already on the Government’s agenda. The Government have since published the findings of that consultation, have recognised the core issue we identified in our report and are seeking to address it.
1.8 We therefore agree with the Government that these reforms are necessary. However, we believe that there are further reforms that could better protect tenants from high pressure selling and other sharp practices that previously had been confined to PPI claims.
2. What the Connect research found
2.1 On average, across the eight housing associations involved in commissioning the research, we found that over a twelve-month period (April 2020-21), the percentage of the claim costs being paid in claimants’ legal costs totalled 47%, more than triple the amount of compensation tenants received (14%) and more than twice the amount spent on repairs (19%). To put that into context, that is projected to be £5.7m paid out in claimants’ legal fees when existing claims and those settled in those 12 months are added together. This supports evidence put to the Committee by Claire Miller, the Chief Executive of Clarion.
2.2 Whilst there is a need for legal costs to be met in the case of genuine disrepair claims, we believe the scale of costs going to solicitors overall is disproportionate and builds perverse incentives into the system which in some cases, encourages unscrupulous behaviour. This is taking money out of the sector that could be used to invest in homes. For example, £5.7m would pay for the retrofitting of 340 existing social houses to make them fit for the future, more energy efficient and reduce disrepair problems such as damp and mould.
3. Why is this relevant to the Committee’s inquiry?
3.1 We believe that this issue is highly relevant to the Committee’s inquiry into the regulation of social housing. The opportunity provided by the Social Housing White Paper to improve complaints processes and put residents first, is being undermined by some legal firms and CMCs who have created a new ‘compensation culture’ around disrepair. This is an area recently highlighted by the Housing Ombudsman in its Damp and Mould Report: “For registered providers, it has led to an increase in speculative disrepair claims from solicitors on a “no win no fee” basis. This is not necessarily the most effective route to resolution for residents as some registered providers will settle the claim out of court while the underlying disrepair issue remains outstanding.”
3.2 The ‘Make Things Right’ campaign is a step in the right direction in helping tenants making informed decisions. However, this could be undermined if at the same time residents are receiving leaflets (see Appendix 2) encouraging them to pursue disrepair claims or being pressurised by unscrupulous CMCs into adopting an approach that is focussed on maximising returns for the legal firms rather than ensuring necessary repairs are carried out as soon as possible.
3.3 The malpractice of some legal firms has also been raised in Parliament. In 2020, Jeff Smith MP called for a debate to “protect tenants against unscrupulous solicitors”, after a constituent was landed with a £12,000 bill having lost a no win, no fee case on a housing disrepair claim. Business of the House - Hansard - UK Parliament.
3.4 The priority for the associations involved in this work is to ensure that shortcomings are identified and put right as quickly as possible so that we can achieve positive outcomes for tenants.
4. Our Key Proposals
4.1 Through our joint work, we have developed a series of recommendations to Government as follows:
Solicitors and small claims
Greater regulation of CMCs
5. The current Government’s position
5.1 The Government is already in the process of addressing the first of our recommendations, having conducted a consultation on implementing Lord Justice Jackson’s 2017 reforms on FRCs, which concluded in June 2019.
5.2 The Government responded to the consultation in September 2021 with proposals which include:
- extend FRCs to all civil cases in the fast track (those cases valued up to £25,000 in damages that will last no longer than a day)
- expand the fast track to include simple ‘intermediate’ cases valued between £25,000 and £100,000 in damages
5.3 The Civil Procedure Rules Committee agreed to introduce the planned reforms by October 2022.
5.4 This is a promising start, however we still believe there is a case for the better regulation of CMCs and the limitation of success fees that can be deducted from the damages paid to tenants.
Appendix 1: Case study:
THEME / TIMELINE
A court case
May 2018 –
Example of a no win, no fee legal firm leaflet, targeting social housing tenants via Facebook
Example of a leaflet posted through a social housing tenant’s door in May 2021 in a suburb of Greater Manchester. Since May 2021, the Housing Association has received a total of 64 Letters of Claim from the legal firm within the area the leaflet was posted.