Emma Slade, a solicitor who specialises in Professional Negligence law, considers negligence claims against Letting Agents
The services of a Letting Agent seem an ideal option for busy landlords. The Agent will take responsibility for sorting out the tenancy agreement, the deposit, rent collection and will be the first port of call when the Tenant has any problems. The biggest headache can be finding the right tenant. Letting Agents invariably promise in their terms and conditions that they will find a “suitable tenant”, making sure that references and the like are taken out.
In reality the service provided by the Letting Agent often fails to deliver and ends up causing the landlord more headaches than it saves. We are regularly contacted by landlords who are dissatisfied with their Letting Agent and the vast majority of these involve a complaint that the tenant was not suitable. In most instances, there is little that can be done. There is only so much one can do to check the suitability of a tenant at the outset of a rental agreement and it is often with hindsight that the tenant turns out to be a poor choice.
However, one of the other oft-held complaints we hear is that the Letting Agent promised to take up references but failed to do so or didn’t check a reference properly. Until recently, there hasn’t been any case law testing whether or not a negligence claim can be made against a Letting Agent for failing to take proper care when investigating a prospective tenant. In Hale –v- Blue Sky Property Group (2016), Bristol County Court heard a case against the a Letting Agent who had promised to “carry out thorough referencing on all prospective tenants”. The Defendant argued that they had carried out “thorough referencing” which was done by a third party referencing agency and that the subsequent rental arrears and damage to the property was as a result of the breakdown in relationship between the Landlord and Tenant rather than the anything to do with the references. The Court disagreed.
On looking at the Defendant’s file and the tenants’ application forms, the Court found:
• One of the tenants had stated in his application that he did not have a County Court Judgment (CCJ) against him but the returned reference said that he did have a CCJ against him. This should have set alarm bells ringing as the tenant’s credibility was clearly questionable
• The same tenant had said in the application form that he had lived at his last address for three months; the landlord from that property came back and said it had only been for six weeks. The landlord also said he had only been that tenant at the property – not the second tenant as she had claimed
• The other tenant claimed that she was in employment with a salary of £7,800pa but her “employer” had the same address. The Court found that the “employer” was in fact a relative, primed to answer the questions by giving false information. The tenant’s employment was clearly fictitious
• One of the tenant’s credit scores came back as borderline. The report from the referencing agency contained the warning “Refer” for both this tenant and his girlfriend
Importantly, the Landlord claimed that the Defendant had done nothing to determine the ability of the tenants to pay the rent regularly. Had the Letting Agents called for the tenants’ last three months bank statements (as they were entitled to do), they would have seen that, not only had the tenants lied about their income but that the male tenant had numerous long standing debts that he was paying for.
The Court had no hesitation in concluding that the Letting Agents had breached the terms of their own contract as well as the Sale of Goods & Services Act 1982 in failing to act with due care and skill. Interestingly, the Court also felt there was a breach of The Property Ombudsman’s own guidelines on referencing, which suggests therefore that the Defendant had not acted to an industry standard. There were clearly differences between the referencing report and what the tenants had said. Some simple further checks would have elicited more information and the agents had a duty to the Landlord to undertake those investigations. They seem to have relied on the referencing company’s conclusion without reviewing it themselves, without disclosing it to their Client and without seeking her approval.
This is a heartening outcome and gives hope to Landlords who suddenly find that it wasn’t just the tenant who was unsuitable. Although this was only a Small Claims Court decision, it does potentially opens up the gates for more claims against Letting Agents.