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Time for a clampdown on claims management companies?
The proliferation of so-called ‘claims farms’ targeting social housing tenants was raised in parliament last month and with the government planning to extend fixed costs to include housing disrepair, Carol Matthews discusses whether the reforms go far enough
There has been a lot of recent attention and discussion (including in these pages) on the issue of disrepair claims. Let me tell you why it is such an important topic.
I want to be clear from the outset: we stand alongside our customers in wanting to speed up the resolution of cases of disrepair – all tenants have a right to live in a decent, well-maintained home, and hold their landlord to account when they fail to deliver an acceptable service. And that includes Riverside.
But this is an area that is also in need of legal reform, and I’m not afraid to say so. We need to root out malpractice involving the targeting of tenants, particularly those with a range of vulnerabilities, and the profiteering that some unscrupulous claims management companies (CMCs) and legal firms are promoting.
Last year, Riverside and seven other housing associations commissioned Connect, a public affairs agency, to conduct research into the rise in disrepair claims originating from CMCs and legal firms.
The reason? We want to propose and promote practical ways in which government can speed up the resolution of genuine cases of disrepair in the interests of tenants and avoid the protracted and expensive legal processes that have been promoted by some legal firms and CMCs – an issue also highlighted by the Housing Ombudsman in its recent spotlight report on damp and mould, which highlighted cases being prematurely pulled out of complaints processes.
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While tenants need access to justice, it can’t be fair that some legal firms are pocketing three times as much as the tenant is getting in compensation and double the amount spent on repairs for successful disrepair claims. This just feels disproportionate, taking money out of social housing that could be used to invest in residents’ homes.
The research found that between April 2020 to 2021, the percentage of the claim costs being paid in claimants’ legal costs totalled nearly 50%, more than three times the amount of compensation tenants received.
To put that into context, for those eight housing associations alone, 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. That money would pay for retrofitting 340 existing social homes to make them fit for the future, more energy-efficient and reduce disrepair problems such as damp and mould.
“While tenants need access to justice, it can’t be fair that some legal firms are pocketing three times as much as the tenant is getting in compensation and double the amount spent on repairs for successful disrepair claims”
And what about the claims that aren’t successful? Jeff Smith MP shared in parliament the example of a constituent who was landed with a £12,000 bill after losing a so-called ‘no win, no fee’ case on a housing disrepair claim. So much for ‘no fee’! He called for a debate to “protect tenants against unscrupulous solicitors” and quite frankly, I agree with him – we need to have that debate.
From speaking to others in the sector, we have evidence that specific areas are being targeted by CMCs and legal firms. In May last year, a resident in Greater Manchester contacted their housing association after a legal firm posted a flyer through their door. Since May, that association has received 64 letters of claim from the same legal firm within that very same area.
And while the initial focus was in the North West, evidence suggests that the contagion is spreading to other parts of the country.
What really “rips ma knittin” (as we say in Glasgow when we’re annoyed) are some of the underhand tactics these firms are applying. From doorstepping an 84-year-old, taking photos of the property and asking her to sign a blank screen that turned out to be a conditional fee agreement, to cold-calling tenants purporting to be an employee of their housing association, this disgraceful behaviour needs to be rooted out and sanctioned against.
In many cases this is also dragging the repairs issue out for tenants. Riverside recently shared a case study with the Levelling Up, Housing and Communities Committee of a court case that dragged the resolution of repairs out across three years. The case lasted 34 months only for it to be dismissed by the judge after evidence was presented that jobs and inspections had been raised and followed through. Sadly, the tenant called to give evidence was visibly distressed in court and said she “never wanted it to progress this far”.
To its credit, the government is already in the process of addressing some of the issues, with plans to introduce fixed recoverable costs for housing disrepair claims later this year, similar to the changes introduced to limit personal injury claims.
“Our sector must remain steadfast in its customer-first priority and work together with tenants to resolve home repair issues quickly and effectively”
The issue is also on the ombudsman’s radar. However, I think we need to go further to protect our tenants, with the better regulation of CMCs and limiting the success fees legal firms can deduct from the damages paid to tenants in the case of successful claims.
I completely accept there are instances where a legal route to addressing disrepair is necessary and law firms can be helpful allies to tenants with legitimate claims. The rights of tenants to hold their landlord to account on poor standards must be protected. Tenants need access to good legal advice, but not through a model that has incentivised the development of perverse business practices in the hands of a small number of CMCs and legal firms.
For me this one is simple: do we want to turn a blind eye to the malpractice, sit back and let unscrupulous CMCs and legal firms continue to target tenants for their own financial gain? Or do we want to develop a fairer system that protects tenants and prevents profiteering?
Our sector must remain steadfast in its customer-first priority and work together with tenants to resolve home repair issues quickly and effectively. Protracted and expensive litigation is lining the pockets of CMCs and legal firms and hampering the sector’s ability to improve homes for our customers.
Carol Matthews, chief executive, Riverside
