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When claims occur on legal indemnity policies, the costs involved in resolving the situation can often be eye-watering. But as this case study shows, it can be the expertise of our team and the experts that we instruct, rather than simply writing a cheque, which leads to a successful resolution. 

In September 2021, we issued a policy covering the lack of planning consent for a previous change of use of a property in Surrey which was being used as a house in multiple occupation (HMO) for eight people. The property had been converted from a single household around 2017, and we were supplied with evidence of tenancies from April 2018 onwards, proving more than three years of continuous occupation. It also benefitted from an active five-year licence that had been granted in August 2021 for up to eight people in seven bedrooms. The new buyer intended to continue operating the property as an HMO; and as there had been no contact or objection from the local authority in relation to the current use our underwriters were happy to provide cover for £475 with a policy limit of £585,000.

Question time

In March 2024, the policyholder received a letter from the local council, alleging a change of use of the property from a single residential dwelling to a care home. The letter included a Planning Contravention Notice (PCN) questionnaire, intended to gather more detailed information about any alleged breach, which asked directly if the property was being used as a care home. The policyholder responded, answering the questions posed and stating that the property was in fact an HMO with seven tenants, each with a separate shorthold tenancy agreement, providing supported independent living without care. 

It didn’t take the council long to come back. Based on the answers to the PCN they had concluded there had indeed been a breach of planning control for the change of use. Our policyholder was given three options: to cease using the property as a large HMO and revert it back to its original single residence use, reduce the number of occupants to six, or apply for planning permission for the change of use from a single residential property to a large HMO (specifically to a ‘sui generis’ use class) – and giving just three days to respond and confirm which course of action they would be taking. As they were looking into what information would be required for a planning application, the policyholder stumbled across our policy and contacted our claims team. With time clearly being of the essence, the team quickly got to work, investigating the background surrounding the claim and what may have prompted the local authority to serve the contravention notice.

Taking action

Our first step was to instruct a specialist planning consultant to prepare the application for retrospective consent for the change of use to an HMO. At this stage, it was also important to confirm what information the policyholder had sent to the council when they answered the questions set out in the enforcement notice, and ensure that nothing disclosed had prejudiced the process. 

The key element that needed clarification was the level of care being provided to the tenants under the description of “supported living”. The council were concerned that overnight care was being provided, meaning the property would be considered a care home – this was not the insured use we had issued cover for. Our planning specialist visited the property with the policyholder to get an accurate picture of the property and how it was being used, and he was then able to confirm to the council that no bedroom or overnight accommodation was provided for the support staff, only an office. 

Objections raised 

Throughout the process of drafting the application, our planning specialist was keen to ensure that any areas of concern were addressed as early as possible with the local council. And during this phase, it came to light that a number of objections had been raised against the planning application from neighbouring residents, who had also signed a petition against the application. Many of these objections were based on the property operating as a care home, which confirmed the policyholder’s suspicion that the council’s enforcement action was the result of complaints made by some of the neighbours. Happily, the council were already satisfied that care wasn’t being provided on-site, so this element of the planning objections was less of a concern, although the existence of the petition was still potentially problematic. 

Progress continued to be swift on this claim and positive news was received a few weeks later, when we were advised that the planning application had been approved, and retrospective consent granted for the change of use to an HMO for seven people. The council also specifically thanked the planning consultant that we had instructed for his proactive engagement with them, who had actively worked to ensure the application addressed their concerns. 

A successful outcome

This was excellent news for the policyholder and for the team, as the claim had been successfully resolved in just three months. Throughout the negotiations and discussions with the local authority, the team were mindful of further steps that could be required, and prepared for how time-consuming and complex the situation could become. Returning the property back to a single residence would have reduced its value by around £200,000, and if the claim had taken a long time to resolve, the prolonged uncertainty could have caused the policyholder a loss of rental income on the property. Instead the total costs for settling the claim came in at around £8,000, all incurred on professional fees to prepare and submit the successful planning application - a figure that far exceeded the original cost of the policy.

With a wealth of experience and expertise to draw on, our claims team is well-equipped to assess the individual circumstances around any claim, and appoint skilled professionals with the skillset the situation requires. They’re able to support the insured throughout what is often a stressful process, while acting on their behalf and ensuring that a satisfactory outcome is reached for all parties as quickly as possible – demonstrating our continued focus on excellent service, from quotation through to claims payment.