Disrepair despair

The issue is not about restricting tenants’ access to justice but ensuring the repairs budget is spent on repairs. Total spending on housing disrepair litigation could be enormous. Manchester City Council spends £4.5 million a year dealing with disrepair legal action on its 60,000 homes. This money goes on legal fees, compensation and other costs it has to pay if it loses or settles. It does not include the actual repairs. If each council in the country were dealing with that level of legal action on their three million homes it would cost £225 million a year. Over ten years that would add up to £2.25 billion or, 12 per cent of the £19 billion backlog of local authority refurbishment.

Even if Manchester is exceptional the costs could still be substantial and they show few signs of abating. The North West is currently hardest hit, though Doncaster has reported bulk no win, no fee actions and Hackney council is currently dealing with 40 cases. Manchester technical services manager Phil Holland says: ‘In the last six months we have seen increased activity. The repairs that we handled last year cost on average £294 but generated £5,000 plus in costs and compensation.’

Arnie Morris, senior surveyor at Willow Park Housing Trust – a Manchester transfer association – fears for his refurbishment budget. ‘The money comes out of the tenants’ pockets and it means that our five-year improvement programme could be hit,’ he says.

His point is echoed by some tenants. Moira Barrett, a tenant of Twin Valley Homes in Darwen, Blackburn and chair of the independent tenants’ federation, is only too aware of where the money to fund CFA disrepair action comes from and gives cold callers short shrift. ‘One came knocking recently and I asked him why he was trying to take our money. He gave up then and went away,’ she says.

Disrepair action has been a growing business since the number of people entitled to legal aid was restricted and conditional fee arrangements, used in personal injury cases since 1996, were extended to cover all civil non-family cases. The tenant funds the legal action by taking out a loan of around £2,500 that covers the cost of an insurance policy, usually around £600, and any other expenses. If the tenant loses the insurance is intended to cover all the landlord’s costs plus the cost of the policy. If the tenant wins the landlord pays the tenant’s costs. The loan repayments are paid when the case is settled and covered either by the landlord in the costs or the insurance policy. The tenant, in theory, pays nothing.

Some 60 per cent of council tenants are on housing benefit and could be eligible for legal aid. But legal aid franchises are not permitted to advertise so many tenants may not be aware of their existence. Ray Towers, a partner with Manchester legal aid franchise Peasegoods, says a tenant on benefits should be able to get legal aid if they have a case. And the Society for the Supervision of Solicitors says solicitors have a duty to advise their clients of the best way of funding their case at all times.

There is a huge difference between the costs of a conditional fee case and a legal aid case. If a social landlord settles a no win, no fee case, on top of the compensation, it could pay anything upwards of £3,000 in extra costs. These include its own legal costs, the tenant’s legal costs, the surveyor, the insurance policy plus a negotiable success fee based on a percentage of the compensation. In a legal aid case, even if there are legal fees, there is no insurance premium and no success fee.

It is difficult be certain how tenants are advised in these cases. Mrs B (see box) would most likely have been eligible for free legal advice as a single mother on housing benefit.

New Charter Housing Association – the transfer landlord in Tameside – feels this is a serious concern. ‘It may be that some solicitors are leaving it up to the claims canvassers to ask or advise the tenants about alternative types of funding. If so, this is a breach of the regulations covering CFAs,’ says a spokesperson.

Towers of Peasegoods says landlords could have a case for not paying the £600 insurance policy if they believe the tenant was eligible for legal aid. ‘If the point is made by the defendant that the tenant is eligible for public funding then the defendant shouldn’t be called upon to meet the cost of that premium.’

Social landlords are also concerned that some solicitors do not act in the spirit of recent legal reforms that try to avoid litigation. ‘When we have a flood of 70 claims it is very difficult to get the surveyor out. We have got 15 surveyors and 21 days to do the work,’ says Manchester’s Holland. Meanwhile New Charter reported 36 claims in the first three months of 2012, but in the following three months 14 of those were withdrawn by the tenants.

Landlords often dispute the actual sum of repairs reported. Solicitors will only get their costs paid if the disrepair action is over £1,000 and therefore not dealt with in the small claims court. Arnie Morris frequently finds claims for £2,000 are worth £200 when his surveyor investigates.

Part of the problem is the landlord’s procedure for reporting disrepair. If they do not have an accessible reporting process in place it is difficult for them to prove, for example, that a tenant did not complain about their leaky roof last year. National Housing Federation policy officer John Bryant says: ‘It is the responsibility of the landlord to have an efficient repair and reporting system and the responsibility of the tenant to use it.’

But defenders of no win, no fee say the system helps people get justice. The claims managers who knock on tenants’ doors and send out leaflets see themselves as providing a valuable service for tenants. Managing director of national claims manager LawSearch Rob Surridge says he is aware that some surveyors try to increase the claims but adds that he would not use them. He also explains that the solicitors he works for will identify tenants entitled to legal aid and that tenants do not pay anything themselves. ‘We only work with specialists in housing disrepair cases. If councils have a major problem with conditional fee arrangements then they should have done the repairs in the first place.’

Principal research fellow at Warwick University’s law school David Ormandy sees CFA as a valuable resource for tenants. ‘If there is no case you can’t start an action and what is wrong with telling people their rights?’ he asks.

There are moves to improve the way disrepair action is handled. The Law Society has produced a pre-action protocol that includes proposals such as appointing a joint surveyor to act for both sides to agree the level of disrepair. The Lord Chancellor’s Department is currently deciding whether to make this protocol legally binding.

Meanwhile, landlords are tightening up their procedures. North West-based transfers including Twin Valley Homes, New Charter and Willow Park have established a disrepair action forum to pool ideas and possibly resources. Manchester Residents Association chair Bernard Caine says repairs and reporting have improved in the last six months with the council’s new call centre. And Sandwell council has established an arbitration panel, including tenants, for dealing with disrepair disputes.

Tenants need a recourse to legal action but some checks on shoddy practice is necessary – or lawyers will be the only long-term winners.

The tenant’s story

Mrs B is a single mother on housing benefit who has just been presented with a bill for £8,000 from her landlord. The tenant of a Northern transfer landlord took out a disrepair claim under a no win, no fee agree- ment which was contested by the landlord. The judge struck out the case and awarded costs to the landlord.

Mrs B says she only found out about this when her landlord told her more than six months later. She has not heard from her solicitor for a year. Since receiving the bill she has made efforts to contact the firm but as ROOF went to press it had not returned her calls. The landlord also made efforts to contact the solicitor over payment of the costs before presenting the bill to Mrs B but had no response. When ROOF rang the firm we were told that it needed the client’s permission to comment. A spokesperson for the Society for the Supervision of Solicitors said keeping the client informed was a basic principle for solicitors.

Mrs B is unclear at this stage whether the insurance policy she took out will cover the bill. She tells her story: ‘Two years ago I got a leaflet through the door advertising a disrepair claims service and took it up. I was fed up with broken fencing and rubble in the garden that was the remains of a garage. I signed the forms and took out the loan and the insurance. But then I got a bit worried and called the solicitor to ask for a letter saying I wouldn’t have to pay anything, which he sent me.

‘When the surveyor came round I was shocked. He said I had damp everywhere but I didn’t think it was as bad as that. I thought my house was falling down. Some of the repairs were done immediately. For example there was a window that was sticking and the ceiling in the bathroom needed a bit of work. I am getting the fence done now and the rubble is being cleared, which is nice. But that is being done as part of the landlord’s refurbishment programme.

‘They said I would get compensation of between £1,500 and £3,000. I thought that was a lot of money. I don’t remember them mentioning any alternatives to taking out the insurance policy.

‘The last letter I had from the solicitor was about one year ago. I don’t know what happens now.’

The landlord’s story

Arnie Morris is fighting a daily battle with disrepair action. The senior surveyor at Willow Park Housing Trust will often receive claims from numbers 1,3,5,7 etc in the same road and frequently they are from solicitors based many miles away. ‘We can get 10 cases arrive on one day from the same solicitor. We have got sharks circling outside the walls.’

Last year Willow Park paid £250,000 in compensation, legal costs and other expenses, mostly for CFA disrepair cases. Out of that sum, its own legal fees,for employing a solicitor and barrister, came to £100,000, again largely for CFA cases.

Morris disputes the repair costs of the majority of the CFA claims he receives. For example a recent claim totalled £1,340 but the surveyor acting for Willow Trust found disrepair items totalling £131.65.

Morris finds legal aid cases do not incur the same level of costs, are much simpler and involve known local solicitors who play fairly. He cites a recent case where tenants moved in before the house was really ready. There was disrepair which the landlord was happy to accept and pay the compensation due. The tenant claimed legal aid and the case was handled by a local solicitor.

The case cost Willow Park £2,150, including compensation and the costs of the tenant’s solicitor and the surveyor. Morris is convinced that if the case had been handled on a no win, no fee basis it would be looking at £8,000 costs split between its own and the claimant’s legal fees. Compensation and any other special damages would be on top of that.

Morris is now about to set up a more robust repairs service of six-monthly inspections to catch repairs by employing six surveyors on average salaries of £20,000 a year. ‘The cost has got to be born and eventually these solicitors will decide there is no point coming here.’