Water Bill

Debate between Lord Shipley and Earl of Lytton

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.

Water Bill

Debate between Lord Shipley and Earl of Lytton

Tuesday 11th February 2014 Lords Chamber

[Lord Shipley]

My Lords, I said earlier this afternoon that I strongly supported the Flood Re scheme. Again, I thank the Association of British Insurers, individual insurance companies, Defra and Ministers, and congratulate them on their achievement, which is a much needed reform that will give comfort to householders at risk.

However, I want to probe in this amendment the issue of the cut-off date of January 2009 and, in particular, those houses bought before the cut-off at the end of 2008 but not built or occupied until 2009 or after. This amendment uses the date later than 2009, which is simply intended to probe the Government’s intentions. I support a cut-off date—there must be one for the scheme to operate effectively—but the question is whether it must be 1 January 2009 or whether it could be later.

The reason why properties have been excluded from Flood Re from January 2009 is that they were excluded from the 2008 statement of principles. However, I read the Defra briefing, which says that,

“2009 is the most appropriate date based on our current understanding of flood risk”.

Does that imply that the understanding might change because of developments since the statement of principles was established in 2008? This doubt is also important because the proposals in the Bill do not take account of surface water flood risk where information was not publicly available until December 2012, or of changing weather patterns that alter our understanding of what “high risk” is.

The essence of this amendment is: given that houses granted planning permission before 2009 but built afterwards would not covered by Flood Re, there is a case for saying that post-2009 households should be allowed to enter Flood Re where flood risk has genuinely changed since 2009 due to changing weather; where developments are affected by surface water but the risk was not taken into account as it was not understood in 2009; or where contracts had been signed before 2009 but the relevant property was not built until 2009 or later. This amendment tries to address those key questions. I very much look forward to hearing the Minister’s reasoning on this in his reply. I beg to move.

[The Earl of Lytton]

My Lords, we have discussed the substance of Amendment 160B already so I do not propose to move it. However, while I am on my feet, I will comment on Amendment 160A and the terms in which the noble Lord, Lord Shipley, moved it. I received a different narrative on this. The circumstances of the post-2009 cut-off, as explained to me, were that that was the time when Planning Policy Statement 25, in relation to construction on flood risk areas, came into being. As the story went, therefore, everybody was on notice that that was an issue, so that was the cut-off point. However, it occurs to me that the noble Lord, Lord Shipley, has raised rather an interesting issue.

It is fair to say that the end of summer 2008 was when the wheels came off the banking system and, with it, the property development system. If anybody had a planning consent that he was hoping to implement in 2008, he would have found that there was no money or funding to implement it—nothing would be forthcoming. Many of these schemes were put on ice. Indeed, there was a government recommendation—I do not know if you can call it an instruction—to the local planning authorities that they should look favourably on extending the three-year life of these. As I am sure noble Lords are aware, detailed planning consent has a three-year life, so it would have run out and would have had to be reapplied for. Due to the circumstances of having to reapply—maybe there are a new lot of regulations and so on—you can run into a whole raft of cost, time and delay.

The idea was that those things should be perpetuated, and with very good reason. They underpinned balance sheets, loans and all sorts of things. If they were to be effectively prejudiced by the loss of a planning consent, so that you had a property with either no verifiable development value or a lower development value, that had repercussions for precisely the sort of reasons I outlined earlier this afternoon in another context. So it is perfectly possible that a planning consent that was negotiated on the basis of rules in 2006 or 2007 would not have got going by the end of 2008 or 2009, and would have had to be preserved. The houses would not have been constructed until some time later, but the circumstances relating to that consent would have related to the antecedent circumstances at the time of granting of planning consent. I can see that there is an issue here.

I am always a bit frightened by development land values anywhere. I am even more frightened when things go wrong and people start reaching for their lawyers. What are they going to start looking at? Will they say, “The house is now constructed, it was built on what might be called an old technology basis pre-2008, and, lo and behold, it has flooded”? If they are excluded, it may have a material effect on the value. Who will they look to for recompense—the local authority or the fact that Planning Policy Statement 25 did not apply, or should have applied in some other form? This makes me think of the time-honoured American superfund arrangements, where most of the money went not to environmental clean-up but into the pockets of lawyers trying to attach liability. I do not wish to see that sort of thing happening here. Some careful thought has to go into the date and where the cut-off should be. I know it is not easy. I am happy to believe that the account of the reasons and circumstances given by the noble Lord, Lord Shipley, is the correct one, but I am slightly surprised that it seems to be a little at variance with the one that I have. I would be very interested to hear what the Minister has to say about this.

Local Audit and Accountability Bill [HL]

Debate between Lord Shipley and Earl of Lytton

Monday 15th July 2013 Lords Chamber

[Lord Shipley]

My Lords, I speak in support of Amendment 43, and will be brief. I agree with the noble Lord, Lord Beecham. I think it is bad policy to backdate the definition of an excessive council tax rise so that it includes a levy from April 2013. I understand that in January this year letters were sent out to local authorities suggesting that the Government might take this course of action. I will say two things about that. The first is that it is simply not enough notice. Council tax-setting takes much longer than just a few weeks. There is a requirement that council tax is effectively set by the beginning of March, so that bills can be sent out. In my view, given the lengthy periods of consultation that local authorities are required to undertake, a period of six months would have been more reasonable.

My second reason for objecting to the Bill as it stands is that one should have respect for the law at the time at which the law is applied. I believe that councils and levying authorities abided by the law at the time. As the noble Lord, Lord Beecham, quite rightly pointed out, it is a comparatively small problem. Retrospective change, whether or not there was a warning, seems to me to be wrong in principle, and should therefore be resisted. The noble Lord, Lord Beecham, said that he felt that the Government were overreacting. I concur with that, because I believe that it is an overreaction to backdate in the way the Government propose.

[The Earl of Lytton]

My Lords, since my name is to Amendment 43, I would like to voice my support for the point that has just been made, and was also made by the noble Lord, Lord Beecham, about the undesirability of retrospection. Notwithstanding the comments made by the Minister at a previous stage of the Bill, there is no question in my mind that Clause 39(15) and (16) are, beyond peradventure, retroactive in their effects. Apart from the self-evident difficulties that that will create within the continuum of local government finance, one supposes that there must be some reason why this has been put in the Bill. I would like to inquire what that reason is, because to date we seem to have had reassurance that there is no intention that this should be retrospective. I do not wish to work out how many angels dance on the head of a pin between retrospection and retroactivity, but I prefer the term “retroactive”.

It seems to me that this is almost calculatedly destabilising, and I cannot believe that that was really the intention. It seems to me that there is a necessity for some further words of qualification, so that the clause is targeted at whichever particular issue needs it, and it is not capable of any sort of generic destabilisation of previous years of local government finance settled business, or what should be settled business. I hope the noble Baroness will be able to give an explanation.