Rental properties with rising damp or mould, owned by a private individual, housing association or local authority, could result in a tenant claim. Poor conditions could cause distress or result in health issues for the tenant, which might constitute a legitimate claim against the landlord.
The Homes (Fitness for Human Habitation) Act 2018 makes it easier for tenants to hold landlords, local authorities and housing associations accountable for failing to provide a residential property that’s fit for habitation.
If rented domestic premises are deemed not fit for human habitation, tenants can take their landlords to court. The court can make the landlord carry out repairs or solve health and safety problems, and make the landlord pay compensation to the tenant.
There is the potential for spurious claims. While the law is designed to protect genuine claimants, we’ve already seen opportunist would-be fraudsters, as well as some signs of more organised fraudulent activity.
No win, no fee
Historically, CMCs were proactive in motor injury claims, particularly whiplash. However, in 2021 an Official Injury Claim portal was introduced, and whiplash injuries are now valued through a fixed costs regime, which has destroyed that market for CMCs.
If you carry out an internet search for ‘property disrepair claims’, the first ten results are for CMCs. All these firms actively offer advice and encourage tenants to make a compensation claim against landlords who fail to make vital repairs to rented properties. Many offer a no win, no fee service, tempting people into legal representation for a no-risk potential pay-out.
If the objective of those businesses and the no win, no fee cost model is to hold ‘rogue’ landlords to account and provide compensation for genuine injury and damage, the cause is entirely valid. In the medium term it will drive improved standards and better living conditions for all.
However, a minority of CMCs are adopting the same tactics as they have done previously by ‘layering’ damages and re-focussing a claim that starts as a simple property damage disrepair claim to include an injury element. Those claims often include reference to psychological injury, distress and bronchial conditions. Our observations are that while 80 per cent of claims are valid, the remainder are suspect in some way. The injury element of a claim is of primary concern.
Fraud factors
A combination of housing stock shortages, interest rates and inflation increased rental costs for tenants by 9.1% in 2023, up from 4.2% in 2022.
Increased costs provide a breeding ground for claims fraud for two reasons:
- Tenants may be driven to seek revenge against a landlord who may have increased the rent, while not maintaining the property to the required standard.
- A genuine need (as opposed to greed) to secure additional funds to cover increased costs of living.
Those factors and motives result in tenants being more motivated to explore litigation and, in some cases, exaggerate the extent of their damages and injury.
While many could have genuine property disrepair claims, they might be tempted to embellish the effect on their wellbeing it is particularly difficult to challenge health issues such as ‘psychological impact’.
In a shift to exploit the more lucrative property disrepair claims market, some CMCs are expected to step up their aggressive marketing tactics to attract more potential claimants. Some claimants will be unable to withdraw their claims without incurring a fee. Following initial sign up they may feel forced to pursue a claim against their better judgement to avoid a financial penalty.
Tackling the risk
It’s good practice for landlords to ensure all contact with their tenants is fully documented and all documents are available in the event of a claim to assist swift validation or defence. This includes works carried out, visits, inspection and complaints records, and maintenance logs. Having good records helps evaluate, and where appropriate, defend exaggerated or wholly contrived claims.
It’s essential to have a top-down anti-fraud culture with a clearly articulated and defined threat assessment, together with strategies to tackle the threats. Property managers and claims handlers should be alert to the risks and the critical role they play in both prevention and detection of contrived and exaggerated property disrepair claims.
Businesses need to be alert to the increasing claims that are the result of claims farming activity. Counter fraud analytic solutions can help tackle sophisticated organised fraudsters and local authorities and their insurers create robust ‘know your opponent’ strategies. Ethical and legitimate data sharing through the Insurance Fraud Bureau, for example, assists with early identification of the determined minority seeking to take fraudulent advantage of the legislation.
Property managers, landlords and their representatives should ensure they have robust, documented practices. It is of utmost importance that insurers and loss adjusters have good controls that quickly and accurately identify those seeking to take advantage. Of course, these should also ensure zero harm or delay to those facing genuine suffering from poor living conditions.
