There has been a notable increase in the number of insurance claims made against agents, with some complainants being regular users of ‘no win, no fee’ law firms, according to a new report.
Mint Insurance Brokers, which specialises in servicing the insurance needs of property professionals, reports that the number of claims made against agents has increased owed in part to the economic downturn caused by the coronavirus pandemic.
The report makes it clear that the last few years ‘have seen some of the most challenging trading conditions for UK property professionals’.
‘There is no doubt we live in a society where there is an ever-increasing claims culture,’ the report adds. ‘Extensive choice coupled with advanced technology, social media, online claim centres, chat rooms, blogging, No Win No Fee law firms have all served to educate the consumer of their rights who in turn have become increasingly demanding and litigious.’
With the use of online platforms and the wide variety of communication mediums available, the report, which provides an insight to the professional risks associated with UK property professionals and how the current UK professional indemnity insurance (PI) market is responding, makes it clear that maintaining customer service levels has become increasingly challenging.
It adds: ‘The Property Ombudsman recorded a 20% increase in complaints for 2019 and have advised the last two years has seen a 2.5 x increase in customer service related tweets on twitter and a huge 60% of consumers will expect a response back within the hour.’
Property management claims continue to show consistent frequency, however the most notable development in the last 18 months comes from the surge in claims due to tenants deposits not being lodged on time and prescribed information being issued incorrectly.
It has been well documented that the courts can award up to three times the value of the deposit where a deposit has not been lodged on time, therefore tenants are being much more attentive and especially if prompted by a No Win No Fee law firm, according to Mint Insurance Brokers.
The insurance firm says it has seen a marked increase in employee fraud and dishonesty claims since 2020 and mainly through client money misappropriation. Due to the volume of claims proportionate to claims under other categories being low, there is no allocated category for fraud and dishonesty, however you can see from the report – on the ‘other’ category – how the frequency has increased from 1% to 9%. This also includes a rise in DSS discrimination claims building momentum following recent success.
Charlie Bending, partner at DAC Beachcroft LLP, who specialises in defending claims against property professionals and their insurers, acknowledged the findings highlighted in the report.
He commented: “In addition to lender claims against valuers, particularly by short-term lenders, we do anticipate claims by aggrieved landlords against property managers increasing over the next six to twenty-four months; these are likely to flow from rental default caused by anything from a failure by the property manager to take steps on behalf of the landlord to address maintenance issues to (more likely) tenants being unable to pay rent / refusing to pay rent due to their adverse financial situation.
“Having protection from eviction (residential) or protection from forfeiture (business) due to the Coronavirus Act 2020 will only increase landlords’ losses, potentially leading to claims that the property manager failed to vet tenants appropriately. Once the protection ends, property managers will also need to have the capacity to act swiftly in order to kick-start the process; taking care to adhere to time limits and prescribed steps to avoid making a potential bad situation worse.”
The broker’s full report makes for interesting reading and comes complete with warnings about the rise of cyber-fraud directed at agents, among other findings.
Comments (16)
Matters of ‘Tenants Deposit’ is so simple. Period.
If you can’t get that right, you shouldn’t be in lettings as an agent. As for landlords I can write a book on the things they get up to with deposits. Only England seems to have a problem in educating its landlords or some don’t want to hear!
LL it seems fail to understand sometimes that tenant deposits isn’t their money. I take and hold deposits in my bank accounts or sometimes keep in cash. I never regard it or use tenant deposits as my money. It is ringfenced from my other finances. That is the way a good LL should behave as Indeed I do. It is a shame if LL abuse tenant deposits. Perhaps I’m a naive LL but I wouldn’t dare do anything with deposit monies until a tenancy terminates. To me those monies don’t exist until tenancy end. I have heard that some LL with multiple properties have used deposits as a deposit on another BTL property!!!! Not something I would ever countenance doing!!
Well those problems can’t occur if its held in the custodial schemes.
Wouldn’t the easiest way for LA to avoid misappropriation of deposit monies be to insist that the LL holds the deposits in their own accounts.
Using the insurance deposit schemes.
No way would I ever let a LA have anything to do with deposit monies
Always use the insurance deposit schemes.
Ultimately the LL is totally responsible for deposit monies even if a LA does a runner with the funds.
So those funds might as well be in the LL bank account!!
It would certainly avoid chances of misappropriation.
There is also the very significant issue in LL being unable to recover deposits if tenants don’t agree.
Apparently there are millions languishing in deposit schemes that LL can’t obtain as the tenant has disappeared.
For all these reasons far better for deposits to be with the LL.
LA are certainly up against it as far as what I consider are vexatious legal claims against LA.
Many are choosing to settle out of court as they are unable to afford court action.
LA will have to adjust their business models if these unfair and unjustified actions against LA continue.
LA are understandably running scared.
I consider that the whole PRS community should assist LA to defend these vexatious claims like No DSS tenants.
There is so much rubbish now being disseminated that LL can’t discriminate against DSS tenants.
YES THEY CAN!!
A DSS tenant is NOT a protected characteristic and LL are entitled to refuse DSS tenants if they so choose.
It is just TOUGH if that means some tenants struggle to achieve a tenancy.
LL are entitled to take BUSINESS decisions on who they take on as tenants.
But of course no little LL is going to go to the High Court to test these bonkers claims so they pragmatically settle out of court.
Such circumstances affect all LA and LL.
The LA needs to be defended.
Many LA may be caught out by insufficient training which is why exams need to occur so that affordable indemnity insurance may be sourced.
LA regulation and qualifications can’t come soon enough for LA who are being unfairly assailed by ambulance chasing lawyers.
It will just result in LL being even more careful who they take on as tenants
LA will be far more selective as well.
It will be the tenant that suffers.
Most LL don’t have a problem with DSS tenants per se; it is the current UC system they discriminate against along with the completely dysfunctional eviction process.
Dont forget Paul….
And that’s why I’m leaving the PRS
I’ve been trying to sell my property since 2015
Yep absolutely I knew we were on a slippery slope when S24 was announced. That was when I realised I had to get out of the AST and BTL PRS. So far have been unable like you to achieve this. But I won’t give up trying. Just so annoying that circumstances prevented me from selling up as 2015 would have been the ideal time to get out of AST lettings. There must be many LL trying to get out of the game but are prevented by issues. Cladding being the biggest one currently. LL stand to be bankrupted by the flat cladding issues!! Whatever way you look at it being a leveraged LL is not a very wise business model. But many of us are stuck for the moment into being LL. So much easier just selling up shares!!
“I’ve been trying to sell my property since 2015” – are you trying to sell with PurpleBricks ?
Nope due to CIRCUMSTANCES haven’t been able to market my properties…………. don’t ask!!!
For over 3 years been trying to sort out things with my lender so I can sell up.
Still not resolved!!!
Your knowledge and pitfalls of the insured scheme is somewhat lacking and the advantage for LL/LA with Universal Credit. I will leave it at that.
I am fully aware of the pitfalls of the deposit insurance schemes. However they are considerably less than the other schemes. The insurance versions are the lesser of the other schemes evils. Having claim experience I know the insurance scheme is best for the LL. The insurance fee is well worth it! If I used a LA I would not allow them to have anything to do with deposit monies. I would hold the deposit in my bank account. Of course if there is a dispute then every scheme is effectively the same. But as I hold deposit monies and deductions are needed the tenants have agreed to the deductions so never been a problem. One deposit of £2000 was never returned due to rent arrears. As it was in my bank account for the deposit insurance fee of £17 I had no problems retaining it. Plus the RGI company had to shell out another £10000 Took 10 months to evict!! Nope deposit monies sit in my bank account. Nice and safe there!
Actually tenants deposits isn’t safe in your bank account! Also it offers no extra protection to tenants than custodial, which is free and you have to go through the same regulatory requirements with the tenants. So your arguments are unfounded. More than a few LL have run off with deposits or used it for other purposes and then unable to pay it back. Then you have to go through the insurance claim process. Custodial there is not that problem.
You are totally incorrect.
Custodial schemes prevent LL obtaining deposit monies if the tenant refuses to engage.
Deposit monies are best kept by the LL who is liable for the monies.
There is no better place for the LL who is liable for the deposit to be in complete control by having the monies in a bank account or in cash.
If the tenant does a runner then the LL has control of the deposit.
I used to take 2 months deposit which was a considerable sum.
Deposits were easily managed by me.
Nobody else was involved.
The deposit insurance schemes are the best way for LL to have deposit monies.
I would not use any other deposit method.
Very simple admin that I totally control.
That is my preference.
It enables me to have one less worry knowing that I am responsible for deposit monies.
The involvement a LL has with other parties especially when it comes to money the better I like it.
One reason I don’t use LA who for some reason seem to think that rent should be paid to them before it is sent to me.
Not how I operate.
All rent and deposits are paid directly to me.
It really isn’t difficult for me to detect whether rent has been paid!!
If I used a LA I would then advise them of rent arrears so they could manage arrears etc.
No LA had ever liked my terms of business which is why I have been and will remain a self managing LL.
I can see why LA never liked your terms of business, lol. Joking aside I think your viewpoint is somewhat clouded in dislike of lettings agents and a complete lack of understanding on this subject.
The money is never yours. If the tenant in your scenario does a runner, you don’t have legal right to it. It belongs to the tenant until such time as you can prove your claim to retain. The same principle applies in both custodial and insured and for all matters. Your tenant can come back later and ask for it! I do hope your put it through ‘arbitration’ before you think its yours.
“Custodial schemes prevent LL obtaining deposit monies if the tenant refuses to engage”. Absolute nonsense.
Property Valuers are likely to be under attack for their role in the cladding scandal . The cladding system now known to have a material affect on value and marketability of a property .
All those professional indemnity insurance policies to test
That’s going to be interesting, most valuers were paid by the purchaser to advise the mortgagee on value not them, the mortgagor.
With a lot of mortgage valuation being, no valuer will call, desktop assessment that rubber stamped properties built or dressed up in new cladding to match the pretty ones, no-one much gave the fire risk of claddings a thought until June 2017.
It’s more likely the building control officers who signed the properties off as safe and let everyone think the claddings had been properly tested and were safe are more culpable than valuers who would have been under the same impression as everyone else
Mortgage valuation only should have been outlawed. Homebuyer reports should be the minimum standard. Homebuyers were asking for trouble not taking the right steps “Buyer Beware”. Now find they are liable to £k’s by taking a short cut.
Cladding should be a builders, architects and building control problem today. Most buyers bought in good faith.