Criminal convictions and insurance

I have recently become aware of quite an alarming development in private renting. It is to do with insurance policies in relation to criminal convictions of residential occupiers.

A friend of mine pointed me in this direction, she is the procurement officer for a local authority responsible for bringing in private lettings as a discharge of housing duties for people applying for homelessness assistance.

All sensible landlords should take out insurance but in many cases their insurance policy is invalidated when the occupier has an unspent criminal conviction within the past 5 years. This applies to not only tenants but owner occupiers too.

The situation is highlighted in the frightening case of poor Michelle Barber. Her estranged husband Gary Hooley burnt down her home and was jailed for 4 years for arson. Ms Barber understandably claimed on her insurance a sum of £241,000 because the house had been razed.

Insurers Aviva (formerly Norwich Union) paid out but 2 weeks before she was due to move back into her home, insurance investigators found out that she had, just a few years prior to taking out the policy, been fined £150 for an overpayment of housing benefit. Aviva duly voided the policy as a result and are claiming the money back off of her for failing to disclose a previous conviction.

They stated that had she disclosed the fine they would not have offered her a policy.  This is apparently common practice in the world of insurance and apart from general motoring offences many insurance policies are invalidated if an occupier fails to declare an unspent conviction however trivial.

Journalists for the ‘Cash’ column of the Observer newspaper contacted Norwich Union and Direct line insurance asking for cover and declaring an imaginary £100 fine from 2 years ago for dropping litter to see if they could get cover. Both companies declined to offer insurance.

Now this is bad enough when it comes to the policies of owner occupiers but it also effects the tenants of landlords. If a tenant has an unspent criminal conviction then this can void the landlords insurance. This is the case even if the tenant doesn’t tell the landlord about it, which understandably many tenants would not feel was any of the landlord’s business.

Another friend of mine is the procurement officer  for another local authority and has been set the task of finding landlords willing to let accommodation to ex offenders. She has to wrestle with the idea that the offence could seriously effect the landlords insurance against the prospective tenant’s right to privacy and her own duties under the Data Protection Act.

I can understand landlords not wanting an ex offender in their property in case it invalidated their insurance but does this then mean that ex offenders will not be able to ever rent accommodation?

Approximately 7.3 million people in the UK has a conviction or caution behind them. Insurance is always underwritten against certain risk factors and if, to use Michelle Barber’s unfortunate case, a residential occupier has a previous conviction for setting fire to their own home and then subsequently did it again I would think that most people would understand the company’s problem but how can it be possible or even sane to invalidate a person’s insurance for failing to declare a housing benefit fine?

Housing benefit overpayment = likelihood of arson by someone else? Where is Franz Kafka when you need him!

This effectively leaves the best part of 7.3 million people without insurance cover, not because of government legislation but because of insurance companies looking to get out of paying on a policy in any way they can. And I invite comments from anyone in insurance to justify the logic of these blanket policies on trivial unspent convictions.

• A mother has an old conviction for shoplifting from 4 years ago whilst suffering from post-natal depression
• A working accountant has a previous conviction when as student they were convicted of urinating in a public place during student rag week.
• A banker has a conviction for dropping litter in public….

come on. How does any of these possible scenarios make a person more of a risk to insure in residential accommodation?

If every single insurer indulged in this blatant rip-off there might be a case to defend, if only by numbers alone but there are insurers who don’t penalise their customers for minor historic infractions of the law:

• Insurable: 0845 0779949 | www.insurable.com
• Fresh Start Insurance: 01733 208278, | http://www.freshstartfinance.com/Buildings-and-contents-insurance
• Anchor Underwriting: 020 3301 3393 | email: peter@anchorunderwriting.co.uk
• Guildhall Brokers: 020 8446 6307 | www.guildhallbrokers.com
• Fairplay Insurance: 01424 222082 | www.fairplayhelp.com

If these companies can set up policies that don’t penalise 7.3 million people why cant Aviva or Direct line?

The Rehabilitation of Offenders Act 1974 sets a time period based on the sentence given that offences must be declared to employers and insurers. Depending on the nature of the offence the time period can be either 6 months or forever.

The legislation is one thing but do ex offenders even know that a trivial conviction needs to be declared to their landlord?

Ex offenders charity ‘Unlock’ is mounting a campaign against the blanket policies of insurers not to offer cover to people with convictions.  Luckily the government has plans afoot to deal with this problem. The Law commission has a consultation paper out inviting comments by the 24th June 2010. Hopefully a new law will eradicate this insane practice once and for all.

Ben Reeve-Lewis

About Ben Reeve-Lewis: Ben was the Tenancy Relations Officer for Lewisham Council for 11 years, prosecuting landlords for harassment and illegal eviction. Now he is a freelance housing law training consultant with a more balanced approach, delivering housing law courses for the Chartered Institute Of Housing, Shelter etc. His aim now is to help the housing world work as a interdependent system that benefits all

Legal Aid
Long term readers of this blog will know that I have written extensively in the past on legal aid, and have expressed concern, along with other law professionals, at what appears to be the gradual destruction of our once proud legal aid system.  This was set up by a Labour government in 1949, and was at that time considered to be an essential service along with the national health service.

In the past
When I first started to practice law in the 1980’s, virtually all law firms offered a legal aid service, along with their work for fee paying clients.  Someone on a low income could get legal help and assistance from almost any firm they wanted.  However in the past 15 years or so, this has all changed.  Now hardly any firms do legal aid, and it is extremely difficult for people to get help for housing, welfare, and similar legal problems.

Giving with one hand …
It ironic that the government which gave us the Human Rights Act 1998 has taken away the ability for many people to use it.  We live in a complex society and our laws are therefore complex also, as a reflection of this.  Inevitably it will be difficult for ordinary people to enforce the legal rights which are available to them, without professional legal help.

Yet this government seems intent on dismantling the legal aid system, and is making it more difficult for people in need to get proper help.

The recent PRS announcements
A prime example of this is the recent announcement by Mr John Healey, the minister for housing.  He accepts that tenants need help, but what is he offering them?  A tripadvisor type web-site and a telephone helpline.  However what tenants in difficulty *need*, is to see a qualified and experienced lawyer face to face.  Yet this is something the government appears reluctant to countenance.

What tenants actually need
Face to face advice, in particular for people who are disadvantaged (which will include vast numbers of tenants), is really essential.  As I discussed in 2006, telephone advice can be worse than useless.

To advise properly you need to see the paperwork.  An experienced housing solicitor can often get a complete understanding of a situation from just a brief glance through the papers.  He will then be able to advise on the correct course of action with confidence.  However a tenant at the end of a telephone line will not know the significance of the paperwork they hold.  They may, for example refer to a courts summons as an injunction, and fail to mention altogether documents which are crucial in the understanding of their case.

What happened to joined up thinking?
Proper professional advice can not only help the client, it can also in the long term reduce public expenditure.  For example there was a report recently in Shelter’s magazine Roof, about a recent case where a young man, who had got into a bit of a muddle with his rent.  Through the help of an experienced solicitor from the South West London Law Centre, he was able to bring a claim under the Human Rights Act against the Local Authority who were seeking to evict him.  He is now assured of accommodation.  Making him homeless would have done no-one any good, and if he had ended up sleeping on the streets, he could have developed medical problems which would then have been a cost to the National Health Service.

Save our Law Centres
The South West London Law centre is fortunate in that it receives support from City law firms (not normally short of a bob or two).  However even so it is finding it extremely difficult to survive.  Many law centres have closed over the past few years and others have major funding problems.  Yet law centers such as this are crucial for helping the under privileged.

If Mr Healey really wants to support and help tenants, providing more funding for law centres might be a better way of doing it. Rather than funding a ‘tripadvisor’ type web-site which is not going to do much to help needy tenants (many of whom won’t even have access to a computer), and will only serve to antagonise the landlord community who, understandably, consider it to be invitation to malicious tenants with a grudge to ‘bad mouth’ them.

Law Reform
Then there is the question of law reform generally.  The Law Commission was set up specifically to review the law, and make recommendations for reform.  From about 2003 it conducted a major review of  housing law and carried out a consultation exercise where literally hundreds of landlords, tenants, and advisors were spoken to and/or submitted responses. This culminated in 2006 with a final report, the Renting Homes Report, and an accompanying draft bill.  Shamefully, this major and well thought out report has been completely ignored.

What is the point of having a respected organisation such as the Law Commission, with expert lawyers such as Professor Martin Partington (who headed up much of the housing project), conduct an expensive and detailed review, if you are going to completely ignore it?

The governments main reaction was to commission yet another report (no doubt hoping that this would bring forth the ‘right answers’) from Dr Julie Rugg.  However the actions which are now proposed (including the proposed ill thought out reforms to the planning system) follow neither the (generally excellent) advice of Dr Rugg nor that of the Law Commission (although there are  elements of both).

The Law Society’s Manifesto
The Law Society, as the representative body for solicitors, who form the largest part of this country’s legal profession, has recently issued a ‘manifesto‘ setting out its position and its concerns. It looks at four main areas:

• The rule of law and access to justice
• The defence of the rights of the people
• Good governance and better law-making
• A strong and independent legal services sector

The document makes some very important points, and I hope that both those in power at present, and those hoping to be in power, will read it and take note.  You can download the pdf here.

The tenancy deposit disaster
One of the points the Law Society make is about ill drafted legislation and unintended consequences. We have seen this with the tenancy deposit legislation, added as a late amendment to the Housing Act 2004.

Although generally based on a good idea, the drafting of the clauses have proved so problematic that we are at the time of writing left with a situation where a tenant’s right to recover the penalty award of three time the deposit money (supposed to be there as a deterrent to landlords) is now dependent on the rules of the tenancy deposit scheme concerned.  Surely it should be the terms of the Housing Act which decide this, not a third parties terms and conditions?

Is this what we want?
One of the problems we have, and in particular with legal aid, is the general negative attitude people have towards the legal profession.  Generally people’s response when learning about cuts in the legal aid scheme is something along the lines of “good, that will stop all those greedy lawyers making fat profits from our money”.

Leaving aside the fact that legal aid lawyers are finding it difficult to make any sort of profit at all, let alone a fat one, the fact is that in the long run it it is not going to be the lawyers who will suffer.  They are all pretty clever people with a good qualification, they will find something else to do (and will probably be a lot better off financially as a result).  The people who will suffer will be the clients, desperately in need of good legal help, but with no-one available to provide it.

Is that the sort of society we want to live in?

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You can read the news item here, and the report itself can be downloaded from here.

This follows on from the consultation document published in the summer, which I wrote about here.

The CLG on their news page set out a list of new measures, and I copy this below, with a few comments from myself and others.

However everything needs to be read in the light of the forthcoming election (believed to be taking place on 6 May), which many people consider is most likely to be won by the Conservatives. The government therefore have limited time to get things done, and much of this list therefore should be considered just as a statement of intent, should Labour stay in power.

“Funding for a new housing hotline offering free help and advice for private tenants should things go wrong”
This would I am sure be very welcome to tenants. However would it not be more cost effective simply to provide more funding to the existing organisations who already provide help to tenants, such as Shelter and the Citizens Advice Bureau?

“An online word-of-mouth directory of landlords similar to tripadvisor or mumsnet.”
I suspect that this suggestion will not be popular at all with landlords, although vote wise, there are more tenants in the country than there are landlords! See also the NLA comments below. It is most unlikely however that anything like this can be set up before the election (so landlords are safe for a while).

“A requirement for written tenancy agreements”
This was of course suggested by the Law Commission in their report, years ago. The Law Commission took the view that there should be prescribed forms of tenancy agreement setting out all the relevant law, which should be in plain English. They also recommended penalties for default.

The government paper states that prescribed forms of tenancy agreement are being considered, but goes on to say that more work is needed before a decision can be made. This probably means that nothing much will happen before the election.

“An increase of the short-term rental threshold from £25,000 to £100,000 a year.”
This has been on the cards for a long time, and of all the announcements made, this is the measure most likely (indeed it is virtually certain) to come into effect. The report states that ‘subject to the availability of Parliamentary time, we plan to lay a Statutory Instrument changing the threshold to £100,000’ which would come into effect on 1 April. Landlords of high rent properties should therefore start considering which tenancy deposit scheme they will be using after that date.

“A National Register for Landlords to help tenants make basic checks on their prospective landlords. Councils will be able to identify local landlords more easily, making enforcement of letting rules easier, and registered landlords will gain access to the latest advice and information on what their role entails and how best to fulfill their responsibilities”

The proposal for a register has been vigorously opposed by many landlords ever since it was first suggested. The government report however states that they are ‘committed to the establishment of a National Register’, and that they are now clear on the firm proposals for the its basic operation, which are as follows (and I quote):

• A national register run nationally
• Compulsory for all landlords (defined as those letting a property on a tenancy agreement – this excludes leasehold, resident landlords and holiday lets)
• Basic information required on registration will be name (plus date of birth to ensure uniqueness), contact address, address(es) of property for rent
• No further information will be required and there will be no hurdles to registration
• There will be a registration fee to cover administration costs
• Registered landlords will receive a unique registration number which will be a prerequisite to key landlord activities
• Failure to register will be a civil offence attracting a cash penalty
• Compliance will be enforced through the two elements set out above backed up by extensive national publicity focused on both landlords and tenants
• On registration, landlords will receive a “starter pack” containing information about their rights and responsibilities and helpful links to other organisations.
• Similar information for tenants will also be made available as part of the Register website
• public enforcement agencies will have access to the full data. Landlords will be able to access their data (using their unique registration number). Tenants will be able to access current or prospective landlords’ data (using the relevant landlord’s unique registration number and, therefore, only with permission from the landlord)

However there are a lot of other matters relating to the Register which he CLG are still unsure about. So it is possible that this also may not make the statute book before the election.

Needless to say, the National Landlords Association is deeply unhappy about the proposals:

“At the same time as having to provide more accommodation in order to plug the housing gap, landlords are also now expected to be on a register, declare the addresses of their rental properties and also have feedback (whether true or false) posted about them on the internet. Where is the incentive for landlords to develop their housing provision in today’s proposals? And how exactly do these administrative functions actually improve the quality of rental property?”

Better regulation of letting and managing agents
This is very welcome and long overdue. Many of the problems encountered by both landlords and tenants stem from inept (and occasionally downright dishonest) letting agents. Good agents (of which there are many) will also welcome this, as it will root out the bad agents who, most unfairly, give them all a bad name.

These are what the government report says are the key principles and characteristics which should underpin the new regime (and I quote):

• A separate regime from estate agency.
• Should cover all letting and managing agents, including landlords who manage properties on behalf of other landlords, and those managing long leasehold properties. Should not cover landlords managing their own properties.
• Self funding through fees paid by agents to join
• Must contain the following elements:
  • A clear mechanism by which consumers feel confident that they will get a fair hearing if they complain
  • The ability to provide redress, where appropriate
  • Non-negotiable and enforceable safeguards to protect client money
  • Hurdles to entry ensuring agents conform to basic standards including basic levels of knowledge and expertise.
  • Enforceable undertakings around the quality of stock let and managed by agents (including energy efficiency) and the fairness and transparency of fees
  • The ability to impose sanctions

The CLG report also sets out proposals for accreditation and for creating Local Letting Agencies.

There are a lot of good things in the report. Personally, although I know it will annoy landlords of high value premises, I think that the increase of the AST rent limit is well overdue. I also think that a requirement for all landlords to give tenancy agreements is a good one.

So far as the Register is concerned, I can see many advantages to it and can certainly see why it is attractive to government. For one thing, it will enable them to have a much better understanding of how many landlords there actually are, so they can plan accordingly.  I can also sympathise with landlords though, and there may perhaps be some human rights implications if they are forced to make make public what which many landlords consider to be private information.

It could also end up being an expensive waste of time. Professor Martin Partington in a talk which I reported here was of the view that ‘light touch’ regulation would either be ineffectual or not ‘light touch’. We will have to see.

The NLA however is steadfast in its opposition, to what it believes is the wrong approach to the problem of rogue landlords:

“The NLA has said again and again that we do not need further regulation which over-burdens the overwhelming majority of good landlords. However, we recognise the desperate need for local authorities to better use existing powers to drive up standards and root out rogue operators. Once again, we call on councils to devise strategies which target rogue landlords without penalising the law-abiding majority.

“For many landlords today’s announcement when combined with last week’s proposed changes to the planning regime surrounding Houses in Multiple Occupation (HMO) will not make for good reading. Very little of what we have before us recognises the value of the majority of good landlords who work tirelessly in the provision of decent and affordable housing solutions. Landlords could be forgiven for thinking that this latest round of measures is little more than landlord-bashing by the Government.”

The British Property Federation is also critical

The government risks alienating the UK’s one million plus private landlords with pre-election showboating policies that overshadow the desperate need to encourage investment in the sector,

Going on to say

“There is a growing mood of hostility towards registration amongst landlords. We will defend landlords’ interests robustly on any legislative proposals because past experience has shown that policy theory often ends up being indiscriminate in practice. It is important that any new measures target the rogues whilst being fair to good landlords. Decent landlords are up for raising standards, but do not believe the current proposal for landlord registration is true to the Rugg Review vision of a simple and well-enforced scheme.”

It will be interesting to see how much of the program set out in this paper makes it to the statute book before May 6th, and if the Conservatives then take over government, how much of it will survive the change.

He started by saying that the PRS is now a key feature of the housing market and one which the government needs to encourage. He looked briefly at the prospect of large scale investment in the sector (most private sector landlords have only a few properties) such as the Kick Start delivery initiative, and concluded that it remains to see if these actually result in any developments, although it could happen.

The Rugg Review
Turning to the Rugg Review, this was commissioned by the government after the Law Commission (under Professor Partington) had spent several years carrying out an extensive consultation and research exercise in the same areas. Needless to say, there is a strong suspicion among many that the Rugg Review was commissioned because the Law Commission’s report did not say what the government wanted!

The Rugg Review recommendations can be summarised as follows:

• A ‘light touch’ licensing system for landlords and mandatory regulation for agents
• A new independent complaints and redress system for consumers
• Tax changes to encourage good landlords, and changes to stamp duty to help them buy more properties
• Look at ways to see how PRS can help lower income families, including support for landlords willing to house vulnerable people
• Local Authorities taking steps to better understand the sector and do more to support good landlords, tackle bad ones, and promote tenants rights

The Law Commission was disappointed that it decided against the legal changes recommended in its reports, but it seems that the Rugg approach reflected more closely what government officials were thinking.

The Government’s Response
This was published in May 2009 and was discussed on this blog here. The issues which it looks as if the government will want to take forward are:

• The National Register of Landlords
• A requirement on landlords to provide a tenancy agreement
• The compulsory licensing of letting agents, and
• The raising of the AST threshold limit to £100,000.

The report confirmed that the government are not proposing to implement the Law Commission’s proposed legal changes (note – this recommended two simple tenancy types – one for the PRS and one for social landlords – to replace the current plethora of tenancy types, which many find very confusing) as it could lead to too much upheaval in the market.

However Professor Partington does not agree with this view. In his opinion, for the PRS to achieve its full potential, it is essential that there be a much closer analysis of how the PRS and the social rented sector interact. The Law Commission’s recommendations would have allowed for this.

‘Light touch’ regulation
After its mammoth consultation exercise, the Law Commission did not feel that mandatory self regulation would be appropriate plus it was likely to prove too expensive. However the Government have become attached to the idea of a Landlords’ Register.

The governments paper though, does not appear to address the key question of whether ‘light touch’ licensing will actually be effective in driving out bad landlords. The Law Commission had come to the conclusion that any licensing scheme would either be ineffective or not light touch. This is why they recommended instead, a program of self regulation via landlords associations’ and local authorities working together to promote accreditation and standards.

Tenancy agreements
However Professor Partington was happier with the conclusions on tenancy agreements. The question here however is whether:

1. There will be minimum standards set, allowing individuals to draft their own agreements, based on these standards, or

2. Whether prescribed model agreements will be set out in legislation, which landlords can add clauses to, to reflect individual circumstances.

He suspects the latter, and does not think that the first option would work.

Licensing of letting agents
There is a large body of opinion in favour of this and it is likely that the government will do this, although the paper is short on detail. We will have to see what happens.

Conclusion
Although it looks as if the government are going to do something, it is not entirely clear what this will be. The Conservatives however, in their recent Green Paper have indicated that they will (if they get into power) conduct a review of the PRS to see how it can play an enhanced role in the housing market.

Maybe this indicates that the Conservatives are unhappy with the approach taken both by the Law Commission and the Rugg Review and are looking for a further review to justify a different approach.

(With thanks to Professor Partington for allowing me to use his notes for this post.)

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Supporters of the Law Commissions long project and reports, will be pleased to see that this is acknowledged and referred to in the response which confirms that many of the Law Commission’s ideas are being considered. However it also states that they do not think the time is right for the extensive changes in tenure proposed in the Renting Homes report.

No doubt further comments on the paper will be made later, but on a preliminary reading, the following points stood out for me.

The report acknowledges that most tenants are satisfied with their landlords and that the majority of landlords provide a good service. The main thrust of the proposals therefore are intended to support good landlords, improve standards generally across the sector, and drive out the persistent bad landlords.

National Register
The paper proposes a national register for landlords. This will be ‘light touch’ and mostly web based. Landlords will need to register their name and address, and details of their property holdings, and pay a small fee annually. They would then be given a number which would have to be used in all landlord related paperwork such as tenancy agreements, tax forms, benefit claims, and court proceedings etc. The register would be run by an independent organisation.

The benefits of the register for government is that it would give them accurate statistics, and they could use it as a way of disseminating information to landlords (such as regarding energy efficiency standards). It would presumably also (although this is not specifically stated) help the revenue with tax collection.

Landlords who fail to comply with the regulatory regime or where there are ‘persistent abuses’ will be removed from the register, be unable to let out property by themselves, and will probably be ineligible to receive housing benefit.

Tenancy agreements
They are considering introducing mandatory tenancy agreements, as suggested by the Law Commission, and are seeking views on how this should best be implemented.

Rent Limit
They propose increasing the limit above which tenancies are not longer ASTs to £100,000 pa (currently it is £25,000 pa)

Regulation of letting agents
The paper concludes that voluntary regulation of the letting agency sector has not worked, and propose full compulsory regulation of all letting agents. This would include

• entry requirements
• a code of practice
• business and consumer protection (e.g. indemnity insurance, client protection schemes, complaints procedures)
• monitoring of compliance by an independent body
• enforcement powers and sanctions

Dispute resolution, Courts, etc
The Law Commissions proposals put forward in their Proportionate Dispute Resolution paper are being considered in conjunction with the Ministry of Justice.

Encouragement of investment
They are considering setting up a Private Rented Sector Initiate to encourage institutions to invest on a large scale and in the long term

Support for tenants being evicted by landlords mortgagees
They will be looking to change the law to ensure that tenants in this position are given at least two months notice to find alternative accommodation.

Tax changes
Significantly the report simply says that the treasury is aware of changes proposed (e.g. by the Rugg Report) to the tax system to support the private rented section, and will keep them under review. Which presumably means that nothing will happen.

Local Authorities
They discuss how local authorities can better engage with local landlords, perhaps by dealing with them through their small business unit rather than via environmental health, and by giving better training to staff. Many local authorities are of course already doing this sort of thing.

Accreditation
They would also like to build on the various current accreditation schemes for landlords, perhaps with a view to developing a national standard.

There is a lot more in the report (which runs to 37 pages) but the above gives a flavour of what it says.

The full report can be found here

The paper is also a consultation and various questions are asked at various stages for feedback on particular points. These should be submitted to the department by Friday 7 August. Note that I hope to be able to set up one of my online answer forms for this shortly, so watch this space.

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