Two executives have been suspended from HomeLet, the largest supplier of referencing to the UK lettings industry, while an investigation into the selling of tenants’ insurance policies is under way.
The investigation follows a crackdown by City watchdog the Financial Services Authority on the selling of contents insurance policies by HomeLet, which is one of the brands owned by insurance giant Barbon – the company formed from the former insurance wing of the collapsed property services firm Erinaceous.
The probe revolves around a clause in lettings agents contracts, making it a mandatory requirement for tenants to take out tenants’ content insurance.
It is understood that the clause – which was apparently a long-standing one and not objected to by the FSA during earlier inspections – was originally inserted by agents on the advice of HomeLet.
HomeLet has refused to name the suspended staff, with a spokesperson for HomeLet declining to comment, saying it was an internal matter. The two names are known to LAT.
HomeLet sells its policies to landlords and tenants through letting agents, and claims to sell one in five of all tenants’ references. It has a network of 3,000 lettings agents, all of whom have apparently been contacted and told to remove the clause.
It is understood that the FSA, which requires HomeLet to make sure the agents do not breach the regulator’s rules, has been concerned on two fronts: first, that making purchase of insurance a condition of tenancy could be an unfair term; and secondly, because the clause breached FSA and OFT guidelines which state that a tenant cannot be asked to buy their own contents insurance – although, confusingly, a tenant can be asked to buy insurance that covers their landlord’s possessions.
The HomeLet spokesperson said: “HomeLet is involved in a review process which may lead to policyholders with tenants contents policies being contacted about how such contracts were purchased.
“This is a thorough process to ensure it meets the company’s required standards. HomeLet continues to provide insurance products and services to existing and new customers.
“HomeLet is committed to best practice in the service it offers to landlords and tenants via agents.”
The next step in the investigation will be for HomeLet to contact tenants who were sold the HomeLet contents insurance. HomeLet says the tenants will be contacted ‘shortly’.
It is thought the FSA could have other lettings insurance firms in its sights.
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Comments
I rented a house and I was told that "I had to purchase a content insurance", before I even noticed I was paying a monthly fee to HomeLet... of course I'm asking them to revise my case! In one word: UNFAIR
They knew and desperate attempts to cover up have finally caught up with them The COO knew all the way along but commercialism rules compliance at Homelet
i dont agrre that the CEO should take the hit as he was lied to like everyone else
Heard on the grapevine that Oliver and Walden are about to pay the price for this complete mess. The Homelet team are kicking off and customers are very unhappy.
Its to easy to blame John & Heidi. The compliance procesess are not up to scratch - and compliance reports to the Barbon CEO Martin Oliver. I suspect the auditing of AR's and IAR's is way off the mark and Oliver should have been aware of that.
Homelet will lose ground now and its the only growth business in the Barbon Group. Time for a complete change at the top or a fire sale.
This is interesting. I am now an ex homelet agent. Prior to that I had to sit through a compliance presentation over the phone. They told me that THEY approached the FSA for clarification over this! This doesn't seem so true now.
In my experience Homelet are as competent as they honest, that is to say not at all! The FSA should be asking questions about their declaration exemption list as well as insurance miss selling. Not to mention the illegal declarations they had to pull a few weeks ago. An investigation and a three day suspension of tenants contents insurance trading would be the least of Homelet's worries if everything was known about their trading practices.
I'm sure Mr John Boyle (CEO) and Heidi Abbot (COO) are now regretting letting this desperate attempt at profit end in their suspension but I doubt anything will really change at Homelet.
@ Matt
We were given the option of gaining approval directly with the FSA and remaining AR, but the level of insurance business we take doesn't make all of the hoop jumping worthwhile.
There wasn't any other option available as fas as I was aware unless you know different?
@ Industry observer- it is illegal to insist that tenants have cover for their own items, they are their own items they have free choice if they wish to protect them or not!
However , the agent or landlord can insisit that they take out cover for their liability under the contract i.e. third party cover (like car insurance). Inevitably all policies that cover this are bundled with contents cover for their own items anyway.
@ray comer - Homelet have not removed everyone's AR status, they have just increased the number of hoops we have to jump through! We still have our AR status after clearing all these additional hoops.
Why does the Homelet website show staff members who have left the company? In a number of instances some of them now work for competitors and have done so for a good while. Very odd.........
No it can't be dave as this Dave obviously knows what he is talking about.
Good old Japan dave thinks the population of Japoan is less than in 1950 when the population of Tokyo alone is more than Japan's entire population was in 1950!!!
That can't be the "Dave", no mention of Japan!
IndustryObserver is spot on and the ‘buggers muddle’ has been seriously miss-managed.
Martin Oliver (CEO) and Richard Walden (HR) have jumped the gun in suspending the Homelet CEO and COO. In trying to protect their own backs they have scored an own goal.None of this needed to hit the headlines.
I suspect the shareholders of Barbon will be asking some difficult questions and very quickly losing confidence in the board.
This is old news; Homelet downgraded all their Appointed Representatives to Introducer Only agreements weeks ago after the FSA started throwing their weight about over this issue.
The FSA are scared of getting caught with their trousers around their ankles like they did with the banks so they are making it nigh on impossible for people like Homelet to have Appointed Representatives anymore; we've all been downgraded to Introducer Only.
There is little consideration for the landlords or tenants in all this, by Homelet and certainly not by the FSA.
Hi Steve
Yes sadly I do actually know. Not only did I work for Nationwide for 23 years (proud to be different!!) but I have also fought a two year battle with the OFT over the tenant having to give notice clause in the agreement to leave at the end of the fixed term, without penalty.
Less of an issue now post Laine v Laine and Meya cases, but an experience not to be repeated.
Am also familiar with the idiosyncracies of the FSA!!
Hopefully the FSA will now look at Homelet illegally selling their referencing package in Scotland to include 6mths rent guarantee for the Landlord at the tenants expense.
IO, there is only one flaw in your logic.
You are assuming that regulatory bodies use common sense.
In my previous career I worked for BT PLC, a company which was heavily regulated because of its market share. You wouldn't believe (honestly, you really wouldn't) some of the rulings that came down from the regulator and BT's internal Regulatory Affairs Division (people known to the rest of us as SPOs - Sales Prevention Officers)
Complete Bugger's Muddle this.
There is no Law (or compliance regulation) against Landlords insisting that a tenant takes contents insurance. In fact given the number of people in the UK who don't have contents insurance or even buildings cover, the landlord is actually doing them a favour.
This is not an OFT matter because any such clause is not unfair as it will apply to all of an agent's tenants. And they have a simple choice - if they are not prepared to freely enter into a contract with such a clause, which is for their own benefit anyway, then go and rent somewhere else.
CVontents cover, apart from the blindingly obvious benefirs of covering their own possessions and accidental damage cobver to the Landlord's, has two other major and often overlooked benefits for the tenant:-
1. It provides alternative accommodation costs cover in the event of a frustrated contract (like flooding or anything else making the property uninhabitale)
2. It provides public liability cover for the tenant. Let's see how grateful he is to be prevented from being forced to take the cover when his self erected satellite dish brains the postman.
The FSA compliance (and to a degree OFT) issues would only arise if the tenant was FORCED to take the Landlord or Agents isisted upon policy - so that they got commission.
There is nothing to stop a compulsory insuring clause if the tenant is then free to obtain it from wherever they like. After all ever examined the insuring obligations clauses on a Landlord in a tenancy agreement (and they are not a legal requirement either)?