Banning referral fees for housing disrepair claims is on the government’s agenda as questions continue to be asked about harmful practices in the sector.

The Ministry of Housing, Communities & Local Government last week opened a call for evidence on claims management activity for cases where a tenant brings a claim against their landlord for housing disrepair.

The volume of claims is widely acknowledged to have increased in recent years, as has the number of law firms offering advice to tenants.

The government acknowledges that too many renters have to put up with poor conditions in their homes, saying it is ‘unacceptable’ that 10% of social housing and 21% of privately rented homes do not meet safety standards. The call for evidence states that claims management plays a ‘vital role’ in connecting tenants with legal remedies.

But there is concern too that vulnerable tenants are being exploited by unscrupulous claims management companies and law firms, even though they are regulated by the FCA and SRA respectively.

The government wants to establish whether there are issues with hidden or unexpected costs and with lawyers not acting in their clients’ best interests. The call for evidence specifically asks whether this area of work might benefit from similar law changes and new regulations brought into personal injury claims in the last decade.

One potential change could be to ban law firms from paying CMCs to acquire housing disrepair cases.

‘Banning referral fees would tackle the issue of claimants being passed to the firm willing to pay the highest referral fees, rather than to the one most appropriate for their claim,’ said the government. ‘Banning their use would not prevent claimants with valid claims from pursuing their case but would enable a claimant to choose a solicitor based on their specific needs, rather than being referred to the highest bidder.’

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Another option could be to increase the small claims limit from the current threshold of £1,000. This would effectively remove costs for lawyers running claims worth less than the new limit, with those claims moved to a small claims track which runs on the principle that each side usually bears their own costs.

The call for evidence added: ‘Increasing the small claims track limit to ensure all housing disrepair claims are heard in the small claims track could reduce and rebalance these costs across both parties to the claim.’

Research published last month by Manchester-based claims firm Pabla + Pabla Solicitors, based on responses to its freedom of information requests, found that the volume of claims has risen on average across all councils by 392% in the last five years.

Councils and housing associations spent, on average, 428% more last year on housing disrepair-based legal costs than they did five years ago.

 

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