The main reason many landlords instruct agents to act for them is so they can find a suitable tenant for their property. Inevitably one of the biggest complaints against agents is that the tenant they have found and allowed into occupation is unsatisfactory.
Indeed, when I did eviction work, it was not uncommon for my client to tell me that they were shocked that the agents had let their property to a tenant who, in retrospect, was clearly unsuitable.
So I was very interested to read on Tenant Referencing UK (now seemingly offline) about a case where a landlord sued his agent on this basis and won.
Hale v. Blue Sky Property Group – Bristol County Court – 26/1/2016
In this case, the letting agents (Blue Sky Property Group), who are ARLA registered, had used a third party referencing agent and had accepted their recommendation – without doing any further checks. This was despite the fact that it was clear from reading the referencing report and the tenant’s application that there was, at least, one lie – the male applicant had ticked to say that he had never had a CCJ when he had.
Had the agents done further checks, they would have discovered that the female tenant had no job (the person named as her employer being a relative primed to answer questions) and that the male tenant had numerous debts, which accounted for a large part of his salary.
The landlord, having lost some £4,000 for unpaid rent and interest and a further £4,000 odd for legal costs and other expenses, was not happy. She initially complained to the Ombudsman, who found for the agents. She then brought a claim in the Bristol County Court against the agents for breach of contract under the Supply of Goods and Services Act 1982.
The Result
The Judge found that the agents were at fault.
- They should have reported the CCJ to the landlord (even though the judgment had been paid)
- The credit risk had been given as medium – this also should have been reported to the landlord
- They should have picked up on the fact that the tenant had lied on the form, which should have prompted further investigation
- They should have insisted on seeing further documentation, in particular, three months’ bank statements (which would have revealed the fact that the tenants had other debts)
The landlord, therefore, won her case and an award of compensation against the letting agents.
Lessons for letting agents
The main lesson to take away from this is that if there are any issues thrown up by the tenant’s application and reference report – this should be followed up and double checked.
- Paperwork such as bank statements, P60 forms, and wage slips should be obtained
- References should be followed up – in particular, employers’ references, as it is the tenant’s salary that will be paying the rent
- Information provided by tenants should be considered suspect until verified. In this case, the female applicant’s ‘employer’ was, in fact, not her employer at all but a relative – which could have been found out by some simple checking
- Reference reports should not be blindly followed without question – particularly if they show that there is any risk.
Your client, the landlord, is employing you as an expert, and they are relying on your skill and judgement to find a suitable tenant. As can be seen in this case, allowing an unsuitable tenant into the property can cause the landlord many thousands of pounds of loss in unpaid rent, legal costs and (often) damage to the property.
It is only right that landlords should be entitled to compensation from you when a bit of further checking would have revealed the unsatisfactory nature of the applicants.
These agents could have escaped liability in this case by disclosing the reference report and tenant’s application form to the landlord and getting her written approval before letting. If any of the references you obtain reveal any issues, you should ensure that this is done as a matter of course and do not let to the tenants unless the landlord’s agreement is obtained, in writing.
Many agents claim that they are not able to do this as it would be a breach of data protection to pass this information on to the landlord. However, this is not correct. The ICO say on their website:
The agent can pass this information to the landlord, as long as, when the reference is asked for, they make clear to the tenant and the referee that this will happen.
Needless to say, all agents should do this as a matter of course otherwise, it is arguable that they are in breach of their duties to their landlord client.
Advice for landlords
As this case shows, it IS worth pursuing a claim against your letting agents if they have clearly let your property to an unsatisfactory tenant, and you have suffered financial loss as a result.
Would the agent have escaped liability if they had JUST “disclosed the references report and tenant’s application form to the landlord and getting her written approval before letting”? Or does an agent have a duty to advice the landlord that the credit check is poor and what it means, along with spelling out the risks?
It will be interesting to see how many more cases like this are brought by landlords over the next year, maybe it will become a new source of income for legal firms.
Happens in the public sector too. Minter v. Mole Valley DC where the council set up a let with a PRS landlord knowing that Minter had a ‘History’ but keeping quiet about. Council had to pay damages
I’d forgotten about that! It was reported on the blog here http://www.landlordlawblog.co.uk/2011/12/12/local-authority-held-liable-for-damage-done-by-tenant/
Ben,
Would a council be expected to make use of ALL the information they have access to including social work reports, school reports etc before telling a landlord that a tenant is OK?
As a letting agent my interpretation of ICO data protection requirements is that having sought permission from the tenant for the letting agent may show, and discuss with, the landlord the results of a credit/ref check this information should not be given to the landlord for storage or use unless they are also registered with ICO as a data controller.
Surely they can give a hard copy? I thought the Data Protection Act was mainly concerned with electronic data, although I am not an expert in this area.
In any event compliances mainly consists of registering with the Information Commissioners Office (ICO) and paying an annual fee of £35. I have been registered for years …
The LA I used to work for would assure landlords that they would put in “support packages” for tenants who had problems or were “problematic”. This amounted to an occasional visit from a support worker; and of course the family would continue to have assistance from other services that were helping the unit. These were often tenants who had been evicted from LA tenancies, but for whom the Council had a responsibility if the family unit included children.
An LA is between a rock and a hard place.with those family units
Luckily none of the landlords who suffered damage made any legal claims
@Ian. No it doesnt work like that. In Minter the council knew the tenant had a history and didnt mention it. There are many times that a prospective tenant is well known to the council but in trying to find suitable accommodation they keep quiet about it or as Gerry Glyde says above they can have support teams in place but increasingly not, as councils trim down everything apart from statutory services like homelessness units. Family support and tenancy sustainment teams are increasingly viewed as a drain on resources in the short term (Councils dont do long term anymore even where it is common sense)
I heard this week that my old council have just laid off their entire challenging family support team to a man.So all those difficult families and their unfortunate landlords are on thier own. This is going on everywhere.