Water Bill

Lord De Mauley Excerpts

Tuesday 11th February 2014 Lords Chamber

[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.

[Lord Shipley]

My Lords, I am grateful for the two contributions. I am reassured in part by the Minister’s reply. This is about tenants who have an entitlement to know whether or not they are in a high-risk area; indeed, we have already had discussions today about how people find that out. Tenants in private residential properties are often on low incomes, and it is reasonable that they should be told formally if they are renting a property in a high-risk area. That seems to be a basic entitlement if someone signs a lease. It is right that they should know and be given a copy of the buildings insurance with flood cover that the landlord has, so that if the landlord does not have that then the tenant is aware of that fact.

The amendment is not about contents insurance; I fully understand the law in that respect. However, we need to be very careful if there is going to be a rising incidence of flooding that means that some private tenants find themselves flooded but do not have contents insurance because they did not think they were in a high-risk area or were not aware of it, or thought that the landlord would cover it even though the landlord would not be responsible for their contents insurance. With this amendment I am seeking better clarity, given that there have been cases in recent months where flooding has occurred and tenants have in practice had a cost to bear. Of course there are costs involved in moving out that fall on the tenant, not the landlord, unless the tenant is prepared to sue the landlord. They could do that but it is very complicated for a private tenant to do.

I note the Minister’s concern and will think further about this. For the moment, I beg leave to withdraw the amendment.

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Moved by

[Lord De Mauley]

162: Clause 70, page 120, line 26, leave out paragraph (b) and insert—
“(b) the revocation of a scheme’s designation under section 51(1)(b) without a new designation being made under that provision, at any time before sections 51 to 56 are repealed,”

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Moved by

[Lord De Mauley]

164: Clause 72, page 121, line 28, leave out “made by the Secretary of State”

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[Lord De Mauley]

My Lords, I thank my noble friend for raising the issue in Amendment 165ZA. We value and support the work of internal drainage boards and I agree with my noble friend that we should act to remove unnecessary barriers where it is clear that these are preventing boards getting on with their important work. It is for this reason that we have included provisions in the Bill to streamline the legal processes for internal drainage boards, making it easier and quicker for them to amalgamate or to make other structural changes.

My department has a close and constructive working relationship with the Association of Drainage Authorities, which represents internal drainage boards. Officials meet the ADA regularly to discuss a wide range of issues related to the work of IDBs, and the ADA has not highlighted this previously as one of significant concern to it. Until my noble friend’s recent communications with me, which resulted in the tabling of this amendment, we were not aware that this issue had been identified as a potentially widespread problem.

The concern that has been raised is that some internal drainage boards may no longer have access to the rating lists referred to in Section 37(5) of the Land Drainage Act 1991, and that this could present a barrier to boards wishing to extend their boundaries. However, I am concerned that the amendment of my noble friend is a tad premature, given that we have not yet received evidence on how widespread and significant this problem may be. If there is evidence to show that it poses a significant practical problem, we must consider whether it could be addressed through other means, potentially without recourse to legislation.

I am particularly concerned that the amendment has the potential to give rise to significant unintended consequences that might impact adversely on some internal drainage boards and local authority rate payers. For example, if rating lists to be used were revalued, this could have the effect of increasing special levies on some unitary and district authorities and in turn increase council tax in those areas. The amendment also appears to provide for the creation of a two-tier system whereby some internal drainage boards would continue to use existing rating lists for the valuation of urban land while others would potentially use a different measure where those rating lists are unavailable. This could result in different levels of charge being levied on local authorities in different parts of the country. It is important that a transparent and consistent approach to calculating internal drainage board levies and rates is applied across the country.

I hope that my noble friend is prepared to withdraw his amendment. However, I will consider carefully any further evidence brought forward by my noble friend or the Association of Drainage Authorities on this issue.

[Lord Howard of Rising]

I thank the Minister for his comments. It is interesting that he wants to see the expansion of internal drainage boards, as my amendment is there only to facilitate that. It is very nice that he has been in touch with the association, but it is not all-knowing. Few people are.

I cannot see how there would be unintended consequences. We merely seek to give the Secretary of State the power to take action should it be so needed. If he were to take the wrong action, there might be unintended consequences.

If there are no rating lists available, what are the Government going to do—absolutely nothing? Or will they agree that the Secretary of State can produce a method of valuation that is as close to other people as is possible? The whole point of the amendment is not to tell the Government how to do it; it is merely to give Her Majesty’s Government the power to do it so that there is no blockage on what the Minister has said is their intention.

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Moved by

[Lord De Mauley]

167: Clause 80, page 124, line 5, leave out paragraph (b) and insert—
“(b) section 76;“(ba) section 77 and Schedule 11;(bb) sections 78 and 79;”