Housing Disrepair: the new claims epidemic

The profit margins from low value Road Traffic Accident (RTA) injury claims have faced a continued squeeze, brought about by a series of measures from the Ministry of Justice. As a result, claims companies, and the law firms they push the claims to, are having to look in other directions to replace lost income in their fight for survival. Proposed Social Housing Reform and increased focus in the media on the condition of social housing has meant ever greater scrutiny for housing associations. That increased scrutiny and regulation, coupled with the cost-of-living crisis, provides an environment in which claims capture tactics are likely to thrive, resulting in a significant increase in volumes of disrepair claims that would not otherwise have been made. Furthermore, whilst most of the claims will be genuine, the involvement of certain claims management companies and associated solicitors could lead to the practice of claims layering. This practice involves ‘layering in’ losses which are not genuine, or would not otherwise have been pursued, in order to increase the value of the claim and the costs ultimately payable and thereby increase the overall cost. The resulting increase in costs could be significant and currently it’s not likely to be an area which landlords are tracking due to lack of awareness. Identifying and tackling such behaviour starts by collecting and analysing claims data - not just volume, but average damages claimed and settled, and average legal fees claimed and settled. A number of high-profile claimant law firms are moving resources into this claims market. A large law firm previously focussed on the credit hire market, announced it had already acquired over 1,000 housing disrepair claims and settled 500 of those claims in the first three months of activation. In parallel to this, other firms have been heavily recruiting amid announcements of housing disrepair departments springing up overnight. With around 4.4 million social properties in the UK, it is perhaps easy to see how this claims area could be tapped into and potentially exploited. Social housing organisations, councils, and other landlords are likely to be less well versed in aggressive and disruptive claims tactics, having received less focus in the claims market in recent years. Whilst their strategies will rightly focus on intervention, prompt repair and claims prevention, claims will nevertheless come and likely in significant volume. A whiplash claim worth £1,500 now attracts zero costs for the solicitors involved, with many resorting to taking a cut of the claim for their costs. A housing repair claim on the other hand worth the same amount could involve costs more than 12 times of the whiplash claim and arguably, in a much shorter time frame. Claims companies and other professional enablers have always reacted to revenue impacting reforms by moving into other areas and seeking to exploit them. This means it is important to have an effective strategy in place. The aim is to drive down the spending in respect of costs to those who service the disrepair claims. Whilst there are further reforms that will fix the cost of these in the future, those reforms will not be implemented until next year and the effect of them will mean more cases will be litigated. By working with partners to deploy tactics to reduce claim numbers and average damages and costs paid, scarce housing resources can be allocated in areas most in need – customers and affordable housing.

Housing Disrepair: the new claims epidemic

Jared Mallinson, partner and head of Counter Fraud at HF, discusses Landlord Disrepair and offers advice from a legal perspective on what landlords and tenants should be aware of

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