How minor criminal convictions can invalidate a landlords insurance

How minor criminal convictions can invalidate a landlords insurance

19:50 PM, 30th December 2011, About 12 years ago 22

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I have been liaising a lot recently with someone I know whose job it is to find accommodation for people being released from prison. I wouldn’t go so far as to call them meetings, although that’s how we book them in our work diaries. In actuality we get together in the pub late afternoon, get slowly drunk and moan about our clients and mutual acquaintances. A meeting of sorts.

There is a quandary about this client group though and I thought I would run this by P118 readers as both a cautionary warning and to highlight the problems council housing bods have with Data Protection.

Its all to do with how a landlord’s insurance policies can be affected by their tenants having the most minor of criminal convictions.

A case in point

Back in 2009 Barnsley resident Michelle Barber’s house was burnt down by her estranged partner Gary Hooley, who subsequently got banged up for 4 years for arson.

She duly claimed on the insurance, £241,000 to rebuild the bungalow and her life but just before the payout was due the insurance investigators found out that in 2002 she had received a minor fine of a measly £150 for an undeclared overpayment on welfare benefits.

Spokesperson for insurers Aviva, said they would never have sold the policy to Ms Barber if they had been aware of the offence, which didn’t even involve the police and even by Mary Whitehouse’s standards didn’t exactly render Ms Barber the equal of Ronnie Biggs.

The vast majority of insurance companies will not sell a policy where people have even minor criminal offences in their recent past. On the tail of the Barber case the Guardian ran an investigative piece and rang many insurance companies asking if they could buy a policy, declaring the same fictitious small fine for dropping litter. They were refused a policy by virtually every company.

The core of the problem

This is a phenomenon known to many ex-offender charities. The Charity ‘Unlock’ has a list on their website of companies who will insure people with criminal records.

The problem for landlords is that they may well be taking on tenants with these same minor convictions, completely unaware that if they have to make a claim on their insurance they could find it invalidated by their tenant’s past actions.

The rehabilitation of Offenders Act 1974 places the responsibility on the ex-offender themselves to declare their convictions. There is a sliding scale with some offences only requiring a declaration to be made for a couple of years after release, some for 5 years and some for life. Ex-prisoners may either not be aware of the responsibility or may be too embarrassed to declare it or quite understandably, fear that a landlord wouldn’t take them on if they knew about their past.

Perhaps more problematic is the fact that a person doesn’t need to have been locked up for the insurance companies to refuse to pay out. How Michelle Barber’s £150 fine for a benefits overpayment could possibly make her more of a fire risk is beyond me. As is the Guardian journalist’s imaginary littering offence. Campaigners have been fighting for some time to get the government to lean on insurance companies about this.

All of which raises a serious moral quandary for many council workers who have close connections with their local PRS landlords. Often the council know that the person they want to place with the landlord is an ex-offender but because of the Data Protection Act they aren’t allowed to reveal this to anyone, the legal responsibility is on the offender to do that, if they don’t do it where does the council or rehabilitation officer stand?

On the one hand it seems only fair to let the landlord know, having spent ages building their trust and a 2 way working partnership, on the other hand the law prevents the organisation from revealing the information and if the ex-offender doesn’t do it this leaves the housing officer feeling dishonest and, if it all comes on top and the insurance policy is invalidated, the landlord, not unreasonably feeling that housing organisation pulled the wool over their eyes.

If the re-housing officer tells the landlord and he then decides not to let to that tenant then the client could be seriously miffed and sue the council for breaching the DPA. The individual officer getting sacked for the breach.

Luckily for my mate who works for the charity the landlords always know the background of their tenant, because they know the basis for the charity’s involvement from the get go but with councils increasingly looking to the PRS to house their applicants it is more of a grey area.

Difficult huh?

The villains of the piece

Insurance companies, as usual are at serious fault here in wanting to have their cake and eat it.

Do you remember a couple of years back when the ash cloud grounded flights for weeks? Many insurance companies, among them Aviva who were involved in the Michelle Barber case, refused to pay out on travel policies, citing small print that got them out of trouble.

Back in the 1950s Lord Denning famously put forward his idea for what he termed the “red hand rule”, saying that many contracts should have these kinds of get out clauses written in red, underlined and with a big red hand pointing to them so that customers would understand how important they were.

The only way around this problem for landlords as I see it is to ensure that their insurance policy covers people with criminal convictions just in case. They may not be the cheapest policies around but it would cover a landlord’s back if their lovely, credit-worthy tenant later turned out to be Harold Shipman.

I was myself fined £100 in breach of some daft law about 10 years ago for standing outside of a Pink Floyd gig at Earl’s Court helping a mate hand out leaflets advertising a Madonna gig he was promoting. Mind you ever since then I haven’t been able to resist carrying out a string of armed robberies for which I have never been caught. Once a recidivist always a recidivist I suppose.

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Ben Reeve-Lewis

10:18 AM, 5th January 2012, About 12 years ago

The daftness of my mis-spent youth as a leafletter was that I didn’t notice the cops and the council worker waiting by the fence opposite the tube station watching me get them out of my bag. When I started handing them out I was standing on the drive way for Earls Court car park fro 10 minutes with about 8 other leafletters where it apparently wasn’t an offence because those 15 feet of ground belonged to Earls Court but once I took a step onto the pavement to let a car pass they rushed me as it was then an offence. How petty is that? Obviously the other professional leafletters were clued up about the law but I was just helping a mate start his ticket business.
Anyway, I digress. Lets not get caught up with the offender angle here. For me the ridiculousness of it is that we are talking about petty offences, not ones that people have been banged up for. People literally like me.
The legal bod in me focuses on the words “Checks for certain types of convictions”. Have they said what type of convictions they search for? Common sense doesn’t seem to prevail in this so I would want a list to make sure it wasn’t benefit overpayments like Michelle Barber or some likewise nonsense.
Also, how do they define ‘Dishonesty’? I would want to know that too. Checks for convictions? As you rightly point out, what checks? Data protection would block most so how effective would it be? It sounds a bit of a wishy washy response to be honest, sounding as if they are addressing the problem and adopting a reasonable approach when in truth they aren’t really saying anything definitive and keeping their options open

10:29 AM, 5th January 2012, About 12 years ago

Thanks Ben for bringing this important loophole to light.  A couple of questions. 
Does this mean I cxan ask new tenants for residential lettings to declare any previous "dishonesty" in the Assured Shorthold Tenancy Agreement?  Am I entitled to do this?  Would making the request, even if the aspiring tenant lied and didnt declare any misdemeanour, be enough to revalidate the insurance policy in good faith?
Also, does this insurance loophole also apply to property let as holiday accommodation?  I've never been asked to declare any dishonesty when renting a holiday cottage myself, but should I now ask my own holidaymakers to declare re letting my own holiday cottage?   Regards Peter.

Ben Reeve-Lewis

11:14 AM, 5th January 2012, About 12 years ago

Interesting question Peter.
My understanding of the declaring obligations contained in the ROOA is that it is only for people who have served a custodial sentence and yet, as we have seen insurance policies can be invalidated for trivial convictions like mine.
In those cases it isn’t necessarily dishonest of people not to declare them, they probably don’t think they are relevant. I had completely forgotten about the leafleting incident until I started writing this article. It wasn’t a major trauma in my life – my mate Kappa paid the fine as I was doing it on his behalf..
You may be aware that in seeking possession against assured and assured shorthold tenants there are 17 grounds of eviction available to the landlord. Ground 17 is where a tenant has obtained a tenancy through dishonesty, so that may be a possible there. Also if you added a clause to your contract stipulating that a tenant must declare any convictions and it later comes to light that they didn’t then possibly you would have ground 12 as well, breach of terms of the agreement, although there may be arguments against that as the breach didn’t occur after the tenancy was signed.
In the alternative I suppose if you asked a prospective tenant to declare any convictions and they failed to do so and an insurance claim was subsequently refused you might have a case against them in small claims or higher up if the claim goes beyond the £5,000/£15,000 limit but I doubt you would get the money.
Holiday lets? Don’t know. Remember the invalidation of insurance policies isn’t a statute, this is simply a contractual clause that insurance companies choose to impose or not. You would always have to check with each company personally to find that one out.

16:22 PM, 5th January 2012, About 12 years ago

Yes I am Ben. Happy New Year!. Great to catch up with you after so long. Great information as well. Thanks

19:44 PM, 5th January 2012, About 12 years ago

The nightmare scenario for me Ben is the RGI policies I have on my tenants may not pay out as a result of all the circumstances that you have mentioned.
So even though I have insured;  as far a I was aware, I could still in extremis be bankrupted and homeless caused by a tenant not declaring ANY offence and my having to claim which gets turned down.
So now I might have to find an insurer who would cover the rental losses and property losses; fire, flood etc caused by false declaration by the tenant which invalidates my RGI and proerty insurances.
Do you know of any insurance company that would cover for this rather prosaic situation.
It is almost like we need an tenant liability insurance to cover the situation where the tenant has not fully disclosed which results in insurance companies rejecting legimate claims.
As you said pursuing through the county court is clearly a waste of time.
It is crazy that a landlord who has obtained all the relevant insurances could still find themselves bankrupted and homeless  by 1 wrongun tenant.
I have to say I think if such a situation arose I am afraid executive action would have to be taken against a tenant who refused to pay rent and wouldn't leave, if through his non-disclosure the insurance policies I obtained to protect myself from such a situation werte invalidated.
VERY,  VERY, worrying.

7:54 AM, 6th January 2012, About 12 years ago

Interesting article Ben. I'd like to get clear on one point: as a landlord my insurance policies are in my name and any claims will be by me. My tenants have to take out any cover they want for their possessions. Can a tenants criminal record invalidate my policy?
Donald Holden

Ben Reeve-Lewis

10:00 AM, 6th January 2012, About 12 years ago

I wont ask what you mean by 'Executive action' Paul haha.

Here is a report on the problem written for the Law Commission a couple of years back You might find a lot of answers in there. Also the offender charity Unlock, who authored the report have a list on their website of insurance companies who dont have a problem with minor criminal convictions

Ben Reeve-Lewis

10:20 AM, 6th January 2012, About 12 years ago

As I say Donald there is no law that dictates this so I cant advise, you would have to ask your insurance company for their rules on this and watch out for wishy washy answers like Pierce & Co got from their insurers

Ben Reeve-Lewis

10:22 AM, 6th January 2012, About 12 years ago

Excellent and a happy new year to you. I was talking to mad Sandra about you the other day funnily enough

17:14 PM, 6th January 2012, About 12 years ago

If you had a contents and malicious damage policy and the tenant also took out a contents policy and then there was subsequent theft , damage or destruction would your landlord policy pay out if the tenant had committed any offence as there are 2 policies in force.
Any ideas anybody?

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