REPORT Disrepair Claims: The true cost of disrepair - Some of the Issues

Transcription

1 REPORT Disrepair Claims: The true cost of disrepair - Some of the Issues 1

2 Contents Section Subject Page 1. Introduction 3 2. Landlord s Obligations 4&5 3 Tenant s Obligations 6 4. Types of Disrepair 7 5. Approach of Tenant s Solicitors 8 6. Costs 9 7. Regulation Conclusion 11 2

3 1. INTRODUCTION 1.1 For a number of reasons, Landlords are facing more disrepair claims brought by their Tenants both within the Magistrates Courts (by way of a criminal prosecution) and/or in the Civil Courts (either by way of defence to rent arrears proceedings or in the form of standalone claims). There are a number of factors leading to this increase including:- Most housing providers met the Decent Home Standard some time ago and, following investment by way of repairs and improvements some years back, have found the quality of accommodation has slipped back to meet revenue and capital cuts; In these more straitened times, standard means of heating are less affordable as a result of which Tenants are relying upon heating (such as bottled gas) which can generate extra moisture; Following on from the cost of heating, a number of Tenants are reluctant to ventilate their property by way of trickle vents within their windows or by way of opening windows; as a result of which moisture (both by way of day to day living and alternative means of heating) builds up and is not wiped away; With downward pressure on benefits and a low wage economy, a number of Tenants are caught by the bedroom tax (which could be between per week) and other benefits sanctions causing tenants severe financial hardship; With the introduction of Universal Credit (being rolled out March 2015) Tenants receiving benefits will exercise the right of consumers and refuse to pay for services that are (in the opinion of the Tenant) of an unsatisfactory standard; In some cases it is a simple try on! It is the winter! Properties tend to be cold which in due course creates moisture and a damp feeling. 1.2 No matter what the cause of the increase, many housing providers are now spending large sums of money either to prove their property is not in a state of disrepair or in defending claims. 1.3 The general rule of litigation is that the unsuccessful party usually pays the successful party s legal costs; in many cases the Tenant will be unable to meet that Order for Costs and in effect the Landlord funds both sides of the litigation. 1.4 Although many Landlord s will quite rightly argue they can defend such proceedings; the cost of defending them is great and never certain. 1.5 In addition, claims such as these cause significant harm to the reputation of the Landlord. Many are reported to the housing provider under the complaints procedure and many get referred to councillors and elected members. 1.6 Lastly there is the issue of Regulation. All are aware of the Homes and Communities Agency ( HCA ) Consumer Standard. Providers can be subject to intervention by the Regulator where standards:- have or could lead to serious detriment to tenants or potential tenants 1.7 These are very difficult times and the number of claims is only likely to increase. So what are the obligations of both the Landlord and the Tenant? 3

4 2. LANDLORD S OBLIGATIONS 2.1 The Landlord has a number of obligations contained both within their Tenancy Agreement (contract) and within statute (legislation and regulation). 2.2 So far as Tenancy Agreements are concerned, each Landlord has their own. There are no common or recommended Tenancy Agreements. First and foremost therefore, the Landlord should look at their Tenancy Agreement and see what their obligations are and to ensure those obligations are met. 2.3 There are however three principal statutory provisions that impact upon disrepair claims namely: Section 11 Landlord and Tenant s Act 1985 ( Section 11 ); Section 4 Defective Premises Act 1972 ( Section 4 ); Section 80/82 Environmental Protection Act 1990 ( Section 82 ). 2.4 So far as Section 11 is concerned:- In a lease to which this section applies there is an implied covenant by the lessor to: A) Keep in repair the structure and exterior of the dwelling house (including drains, gutters and external pipes); B) Keep in repair and proper working order the installations in the dwelling house for the supply of water, gas and electricity and for sanitation (including basins, sinks, baths and sanitary conveniences, but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity); and C) Keep in repair and proper working order the installations in the dwelling house for space heating and heating water. 2.5 Please note the obligation is to keep in repair. Many housing providers have inadvertently drafted a Tenancy Agreement that states: to keep in good repair. Please check your Tenancy Agreement. It may be prudent to amend your documentation in respect of new tenancies. 2.6 Section 11 in effect requires the Landlord to keep the structure and exterior of the property along with the means of supply of water, gas, electricity and sanitation in repair. 2.7 Section 4 requires:- Where premises are let under a tenancy which puts on the landlord an obligation to the tenant for the maintenance or repair of the premises, the landlord owes a duty to all persons who might reasonably be expected to be affected by a defect in the state of the premises a duty to take such care as is reasonable in all the circumstances to see that they are reasonably safe from personal injury or from damage to their property caused by a relevant defect. 2.8 Although the language of Section 4 is slightly different, the section requires Landlords to keep premises safe both for tenants and visitors. 4

5 2. LANDLORD S OBLIGATIONS (Cont.) 2.9 Section 80/82 requires: A Magistrates Court may act under this section on a complaint or, in Scotland, the Sherriff may act under this section on a Summary Application, made by any person on the ground that he is aggrieved by the existence of a statutory nuisance. A statutory nuisance is defined as:- Any premises in such a state as to be prejudicial to health or a nuisance Under this legislation a Tenant (or the local authority) can bring a private prosecution in the Magistrates Court requiring a Landlord to make good premises that are prejudicial to health or a nuisance. In addition, the Magistrates Court can order the Landlord to carry out specified works, to pay both costs and compensation and to fine a Landlord who fails to do as ordered Combined, the above three statutory provisions impose a significant statutory obligation on all Landlords regardless of the tenure and regardless of their obligations within their tenancy agreement These statutes will usually form the basis of a claim in respect of damages. All claims are very expensive both in terms of cost and time and in terms of damage to reputation comment upon the types of disrepair claims in Section 4 and the costs of such actions in Section 6 below. 5

6 3. TENANT S OBLIGATIONS 3.1 Tenant s obligations are contained within the Tenancy Agreement. Generally they will be to behave in the property in a tenant like manner and to report repair or defect that requires attention. Indeed for a Landlord to be caught by most of the claims, the Landlord must be notified of the defect and given a reasonable time to remedy the defect(s) alleged. 3.2 There is a great deal of case law around:- Notification of disrepair; Implied notification of disrepair; The cause of disrepair the Landlord or the Tenant; Withholding rent in respect of disrepair (a course of action that all Tenants should be dissuaded from so doing); and Human Rights Act applications. 3.3 I will not go into those details in this paper but, suffice it to say, the obligations are on the Landlord to provide premises that meet both their statutory and their contractual obligations. 3.4 I comment upon the types of claims in Section 4 6

7 4. TYPES OF DISREPAIR 4.1 Disrepair, and the consequences of disrepair, can come in many forms. Many will include allegations of damp (both rising and penetrating) condensation and mould. There are numerous cases on each of these issues, upon notice, causation and so on. I will not go into specific detail in this paper as each case tends to be treated and to turn upon it merits. However, Landlords must be aware of, and take action to prevent, damp condensation and mould claims. They are very costly both in terms of money and in terms of reputation. 4.2 In many cases, the issue is not damp per se. Often it is condensation and mould caused by a lack of either the means of affordable heating to a property or the lack of ventilation. If both heat and ventilation are provided, condensation should be avoided and so should consequential mould. 4.3 Having said that, almost all claims are avoidable. 4.4 Clearly, the provision of clean fresh air significantly reduces the chances of such claims and (perhaps more importantly) provides Tenant well-being. 7

8 5. APPROACHES OF TENANT S SOLICITORS 5.1 The approach of Tenant s solicitors varies from case to case but, it is not unusual for: Proceedings to commence in the Magistrates Court and for the Tenant to seek both an Order in respect of disrepair and payment of the Tenant s costs under Section 82 followed by; Proceedings in the County Court for damages. I comment below on the level of damages that can be claimed but generally they are for compensation in respect of both personal injury and in respect of damage to goods and for both a Tenant and members of a Tenant s family. 5.2 In certain localities, where there are not many legal experts in this field, a Tenant might ask the local authority to prosecute a Section 80 application on their behalf in the local Magistrates Court and then follow that up with a claim for damages in the County Court. 5.3 in cases where the Landlord has taken Possession Proceedings for non-payment of rent, many Tenants allege premises to be in a state of disrepair and that the cost of disrepair is equal to or greater than the cost of outstanding rent. In such cases a standard possession action can become drawn out and expensive and, in due course, not lead to a successful outcome for the Landlord. 5.4 In these straitened times, and most certainly following the introduction of Universal Credit in March 2015, Landlords will find more Tenants withholding rent and alleging either poor service or disrepair simply to: make ends meet. Indeed why would a Tenant seek to borrow money from a payday loan company (or worse still a loan shark ) when most Landlords can do very little about a Tenant withholding rent for up to 8 weeks. Although 8 weeks rent arrears might amount to less than 1,000, if upwards of 20% of tenants behave in this particular manner, costs to Landlords will be significant. You may say: We will issue proceedings against anyone owing rent on the basis of can pay but won t pay but will you? What does your policy say about possession proceedings? Have you incorporated mandatory 8 in your tenancy agreement? Will courts grant orders for arrears of that sort? 5.5 The likely outcome for many Landlords is that over the next 12 to 24 months there will be an increase in rent arrears and an increase in allegations of disrepair. 5.6 I set out in Section 6 below what the cost of those proceedings is likely to be. 8

9 6. COSTS 6.1 As indicated in paragraph 1.3 above, the general rule of litigation is that the loser pays the winner s costs. However, that rarely applies in the Magistrates Court via Section 80/Section 82 actions. A successful Landlord rarely recovers their costs. Worse still, if the Magistrates make a finding against the Landlord, they will also almost certainly order the Landlord to pay the Tenant s costs! I am afraid it is an expensive exercise. 6.2 In many cases Tenant s advisors work on a Conditional Fee Agreement. In effect they inform their Tenant/ client that their normal charge might be say 150 per hour but, on the basis of a no win no fee arrangement they reserve the right to increase that rate by significantly because of they (the solicitor) bear the risk of litigation. In cases such as these, the eventual cost paid by the Landlord to the Tenant s advisor in respect of legal work alone (excluding compensation and damages) might well amount 200+ per hour. If a case is settled after three short court appearances before the Magistrates Court an average bill could well be in excess of 5,000. If the case is resolved after a trial and the Landlord is ordered to pay legal costs of the Tenant, those costs could amount to 15, In addition of course the Landlord will have to pay their own legal costs. 6.4 The same applies in the Civil Courts either by way of a standard disrepair claim or a successful disrepair claim by way of a defence to a claim for outstanding rent. The figures above still apply. In addition outstanding rent is in effect lost. 6.5 You may say:- Not a problem we have an in-house team Well if you are fortunate to have your own team, that team costs money by way of salaries, overheads, training and so on. 6.6 In simple terms, the legal costs of a disrepair claim that begins life in the Magistrates Court, is contested and is followed by a claim in the County Court could easily be as follows:- Venue Landlord Tenant Total Magistrates Court 8,000 10,000 18,000 County Court 12,000 15,000 27,000 Total 45,000 To which should be added damages (compensation), lost time and risk or harm to your reputation..and finally, the HCA has in recent weeks indicated it is considering a regulatory downgrade against one of the UK`s largest housing providers as a result of alleged breaches of repairing obligations. (See Inside Housing front cover 13 February 2015). 9

10 7. REGULATION 7.1 As indicated above, the HCA regulates most housing providers via a regulatory framework entitled Regulating the Standards first published in May Whilst most of this document refers to good governance and financial viability there is a section specifically in respect of the consumer standard (see page 22). Under this section, the HCA can intervene in a case where:- A breach of those standards has or could lead to serious detriment to tenants or potential tenants. 7.2 There have been a number of interventions of late around Landlord s failure to comply with the gas safety obligations. However, as can be seen above, there is a distinct possibility of a regulatory down grade in the event of a significant failing on the part of a Landlord. By way of example, if a Landlord is prosecuted by a number of tenants in the Magistrates Court (perhaps 10 or more?) and the court is critical of the Landlords attitude to disrepair, the HCA may (and indeed are) likely to become involved. With intervention comes significant risk to reputation. 10

11 8. CONCLUSION 8.1 Failure to deal with disrepair is expensive. Whilst most Landlords invest heavily in their stock, some at times, fail to meet the standard required either by way of the Tenancy Agreement or statute. In such cases costs, compensation and lost management time can, and often is, very expensive and damage done to your reputation can take years to make good. 8.2 By way of example, a successful claim that starts its life in the Magistrates Court under Section 80/82 and is followed by a claim in the civil courts costs a great deal of money. The potential for action on the part of the HCA adds to risk and the need for a robust approach to condensation, damp and mould. 8.3 Providers should not let properties in such conditions and in cases where there are issues; those issues should be dealt with immediately. 11