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 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 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 references report and tenants 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.
You can read the original report of this case here.