Water Bill

Earl of Lytton Excerpts

Tuesday 11th February 2014 Lords Chamber

[Lord Shipley (LD)]

My Lords, this is a probing amendment on the rights of tenants and the problems that can arise if there is no adequate buildings insurance in place. Reputable landlords will take out insurance as a matter of course. However, there is no compulsion for landlords to do that, and tenants can be particularly vulnerable if their landlords do not take out buildings insurance. They may not be covered for the cost of moving out or for temporary accommodation in the case of flood. Of course, it is understood that tenants must provide their own contents insurance. The amendment does not relate to contents insurance.

The amendment would give tenants the right to know all the facts about an insurance policy on the property that they are renting, including whether there is one at all. The solution to this problem is to make it mandatory for landlords to take up buildings insurance that includes flood risk insurance; to require landlords to tell a tenant if a property is on the register of premises subject to greater flood risk as defined in Clause 61; and to show a copy of the insurance policy to a tenant on request.

I fully understand that landlords will not benefit from the FR scheme. However, landlords pay income tax, and I understand that they would be able to offset the cost of insurance against income tax. I should be grateful for the Minister’s confirmation of that and to know whether, therefore, the Government could support an amendment on Report that protects the rights of tenants, as proposed in this amendment. I beg to move.

[The Earl of Lytton (CB)]

My Lords, I had not intended to make any comment on this, but perhaps I ought to. I have one or two problems with the amendment. First, it appears to refer to any type of property, so it could be residential or non-residential. It appears to cover any type of tenure. The definition of “relevant premises” includes,

“any part of premises occupied”,

which presumably includes the garden. The requirement is for the landlord to hold insurance regardless of risk.

I declare an interest in that I am a landlord of a residential property that is let. It is not itself at risk of flood, but a stream crosses part of the garden. That does not put the property itself at risk, but if it was perceived by an insurer on the basis of the postcode lottery principle that it was somehow at risk and that ratcheted up my insurance premium—which, of course, I should be delighted to cover for all normal risks—I see that there might be a needless requirement to cover for a risk that was not there.

I do not know how that provision sits, because the terminology for “landlord” is wide and the amendment would probably include other properties without any streams in the garden that I might happen to let on a holiday letting, or something like that. I can see that tenants need to be protected in some way, but let us look at what the protection might mean in practice. There is a flooding event; there is insurance cover. Let us say the interior—the inhabitable bit—of the premises is rendered incapable of occupation, not only because of the effect of the flood-water, but also because of the filth and everything else, causing damage to fittings, de-lamination of kitchen units and all the other horrors. It will need a thorough clean-out, with bits replacing, probably a renewed kitchen, and certainly redecoration and drying out. That takes time. The tenant is inevitably going to have to move out. He is going to move to somewhere else. The consequential losses presumably do not cover the loss of the tenants; they only cover the damage to the property. If it needs shoring up then that is a consequential loss.

So with the greatest respect to the noble Lord, Lord Shipley, I am not sure that this amendment achieves what it sets out to do. Maybe I have got hold of the wrong end of the stick, but the landlord’s insurance does not enure for the benefit of the tenant. If you look at a commercial lease, for instance, it normally has a cessor of rent clause which causes the rent to stop being payable at a point where damage occurs beyond a certain level, so the property is no longer fit for occupation. But if it is not reinstated within a certain period of time, the tenant has the option to move out and determine the lease. The tenant, in the mean time, whether it is a business that needs to continue its business occupation, or a tenant in residence who actually needs a roof over his head, is going to have to move, so I am unclear about the mechanics of how this would really work in practice, because I do not see that it protects the tenant.

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley) (Con)]

My Lords, Amendment 161ZA from my noble friend Lord Shipley seeks to make it obligatory for landlords to hold buildings insurance, including cover for flood risk. I can confirm to him, in answer to his question, that the cost of insurance premiums can usually be offset against profits for tax purposes. I am sympathetic to the intention behind this amendment although I am not sure that this Bill is the right vehicle for this debate.

I note that while this amendment refers specifically to flood cover, buildings insurance includes protection against a range of perils including, for example, fire and theft. Although there is no legal requirement for property owners to take out insurance for their properties in the UK, owner-occupiers and landlords generally choose to do so in order to benefit from the financial protection that insurance offers. In addition, and importantly, most mortgage lenders specify buildings cover as a mandatory requirement for providing a mortgage on a property.

The Government agree that it is very sensible for landlords to take out insurance, but are conscious that the decision is a matter of individual choice, based on a commercial decision to protect an investment made in property. We are concerned that making insurance compulsory across the board could create a regulatory burden, which could deter investment in the private rented sector. I strongly encourage tenants always to check with a prospective landlord that appropriate cover is provided for the property.

If I might pause specifically on the issue of support for tenants in the event of a flood, we appreciate the concerns raised recently by the National Flood Forum and others that tenants of properties not covered by insurance might be left homeless following a flood. I note that some insurance policies have an “alternative accommodation” provision, but I would also like to assure noble Lords that, even if this is not the case, tenants do have protection. All local authorities are required to provide accommodation for households who are eligible for assistance, homeless through no fault of their own, and have a priority need for accommodation—into which category flood victims would clearly fall.

As part of its role in promoting flood awareness, the Environment Agency strongly encourages landlords to make a flood plan and to make their tenants aware of what to do in a flood. I also remind noble Lords that all residential contents policies will be eligible for cover through Flood Re, including tenants of rental properties, so long as they are not in properties built after 2009 or in band H or their equivalents. I ask that the amendment be withdrawn.

--- Later in debate ---

Moved by

[The Earl of Lytton]

165A: After Clause 75, insert the following new Clause—
“Liability in nuisance for a riparian owner
The Secretary of State may by regulations make provision to limit the liability in nuisance for a riparian owner when the Environment Agency or relevant authority withdraws from maintenance of flood defences.”

[The Earl of Lytton]

My Lords, I tabled this amendment following discussions I had with the Country Land and Business Association, of which I am a long-standing member. It relates to what might be described as a legacy issue, to do with circumstances where infrastructure in relation to flood defence or amelioration, which currently might fall under the auspices of the Environment Agency, might at some juncture, through the operation of this Bill, and the redefinition of the Environment Agency’s functions, cease to be maintained by a government agency.

The question is: what happens with this infrastructure? It has obviously been put in there for the reason of protecting life and property, some of which may be agricultural, and other residential or other property. This amendment intends to probe what the Government’s intentions are in the circumstances in which such a situation might occur. The Minister may say that there is no question of the Environment Agency or the state abandoning those things to an uncertain fate. However, they might say, “It’s going to be down to local communities to deal with it”—and then what? How are these obligations to be transferred?

--- Later in debate ---

[Baroness Northover]

My Lords, far be it from me to judge upon acts of God or even the implications of the Equality Act.

I thank the noble Earl for his amendment, which I will address at a little length, as I think he would probably like to hear my comments. He speaks of instances where the Environment Agency might decide to withdraw from maintaining some flood management assets and suggests that this could create a challenging situation for landowners, residents and others affected. He will probably know that we are discussing those concerns with the Country Land and Business Association, to which he referred, and that my honourable friend the Parliamentary Under-Secretary of State met it on 23 January.

We share the noble Earl’s wish to reduce the possibility of litigation, which is an aspect that is implied by some of the concerns expressed by the noble Earl. That is why we are promoting the asset maintenance protocol published by the Environment Agency. We strongly believe that developing partnerships and working arrangements between local parties to guarantee future maintenance is the best way to prevent problems arising that could lead to claims of liability.

The Environment Agency and other authorities maintain many thousands of flood defence assets. The situation to which the noble Earl refers is not one which is affected by this Bill. He is picking up instances where the Environment Agency may decide that it is no longer going to support certain flood defences and the responsibility for that would fall to others. So I would separate this issue from the Bill, as the noble Lord, Lord Grantchester, sort of did.

The Environment Agency is looking to withdraw maintenance of some of these assets where maintenance is no longer economically justifiable or where the work may not have a high enough priority for central government funding over the longer term. Examples of such assets are embankments in rural areas that protect grazing land or small flow control structures such as gates or penstocks.

Understanding these concerns, the Environment Agency has published, and recently updated, a protocol explaining the processes it will follow. The agency is committed to bringing together landowners and other affected parties to make sure that they are clear on their respective roles and responsibilities and that they understand the range of options that may be available to them for future management of the assets and their likely costs, benefits and impacts. This may include options for continued maintenance of assets by local groups and options involving less or no maintenance. The agency will then work with all the interested parties to help them reach agreement on how the parties involved will take forward maintenance of the asset in the future. It is possible, for example, for the landowner on whose land a defence is situated to enter into an agreement to secure contributions from his neighbours towards the costs of maintenance and repairs.

We understand the noble Earl’s concerns about whether these agreements will be possible. However, it is important to remember that third parties are also expected to play their part. If third parties refuse to make reasonable contributions for the maintenance of a flood defence asset that is protecting their property, they could diminish the success of any future claims against the landowner.

The noble Earl has suggested regulations should be drawn up to set out what actions a landowner should take in order to meet any claims of liability. This would not be the simple clarification that the noble Earl might have been expecting. Such regulations would need to cover many types of assets, the type of location, as well as a list of all possible activities that might be appropriate for their maintenance. The regulations would need to address the range of impacts of flooding, ranging from a garden becoming waterlogged to flooding of many buildings and possible loss of life. Most importantly, the regulations would need to address such complications as a flood asset being owned by one or more landowners or a number of different beneficiaries of different means. Such regulations would be complex and, to be proportionate, would need to have an element of subjectivity to what a landowner would be required to do to avoid liability.

For that reason, we do not believe that such regulations could give significantly more certainty than the current case law. We firmly believe that use of the Environment Agency’s protocol gives all the parties involved a chance to ensure an outcome that reflects the particular situation and circumstances of each individual case, while avoiding the need for litigation between landowners. For these reasons I encourage the noble Earl to withdraw his amendment.

[The Earl of Lytton]

My Lords, at this hour of the night it is not my intention to press the amendment; as I said at the outset, it is a probing one. I am grateful to the Minister for her explanation. I am aware of the ongoing discussions and I appreciate that this matter sort of sits outside the Bill. I suppose that if I have a hook to hang it on, it is the situation where somebody might be protected by such works and finds they are no longer protected and unable to get full cover insurance. They then go looking for the next deep pocket in order to press a claim, so the geometry of the circumstances might change.

However, it is right that the matter should be discussed by the industries concerned. I would hope that the protocol would at least give some protection in the sense that, if one had done something in accordance with the protocol that was agreed between the parties, that would be a reasonable defence in law. However, I do not think that I can ask the noble Baroness to go into that sort of detail. I would like to reserve my position in case it is necessary for me to come back to this at a later stage of the Bill but, in the mean time, I beg leave to withdraw the amendment.

Amendment 165A withdrawn.