But blaming this act is too simplistic. The start of the increase in the number of cases dates back to 2013, when legal aid for dilapidated cases was effectively abolished.
“Once legal aid was stopped, you were still going to see ‘no gain, no cost’ type of job growth,” says specialty attorney Justin Bates, who co-drafted the Houses Act.
2013 also saw changes in personal injury claims – where many ‘no gain, no cost’ lawyers previously made a living. The so-called Jackson Reforms, named after Sir Rupert Jackson, the judge who proposed them, prevented law firms from recovering success fees from the losing party. Instead, they came from damages paid to the plaintiff, with fees capped at 25%.
There is no such limit on claims for dilapidation. According to Giles Peaker, an associate of Anthony Gold and another co-author of the Houses Act, this “has exacerbated” the movement of “claims farmer” type lawyers into disrepair.
“It’s not good because tenants are being charged exorbitant success fees,” he says. Indeed, in its report, Lambeth said that tenants handed over up to 80% of their remuneration to these companies.
But that’s not to say the claims of dilapidation are false. Donna McCarthy, head of housing management and property litigation at Devonshires law firm, estimates that eight out of 10 claims she handles for landlords would be “valid” if dealt with in court.
However, since the reduction of legal aid, the number of illegitimate applications has increased. Ms McCarthy, who represents social landlords, said the rules for getting legal aid before it was scrapped were “strict”.
“It acted as a filter for more spurious claims,” she says. If a tenant had a legal aid certificate, “99 times out of 100 the application was valid”. “Now I would say for 10 [claims]two of them are usually wrong,” she says.
“Claims of dilapidation coming from them [claims farmers] often have less value. The way they operate seems to be designed to maximize their ability to recover costs, not to get the best results for their clients,” she says.