Landmark case over agent’s responsibility to accept tenants after reference firm checks

In a landmark case, a landlord has won a case in court against a letting agent, after an earlier complaint about the agent to The Property Ombudsman was not upheld.

The case is highly significant for all letting agents and their referencing methods, and where responsibility lies.

The landlord in the case said that the agent supplied unsuitable tenants – despite the tenants having been checked out and deemed satisfactory by a referencing firm.

In the case, the referencing firm has a strong reputation, while the agent belongs to ARLA.

The landlord, Ms Hale, claimed breach of contract under the Sale of Goods and Services Act 1982 by Blue Sky Property, a Bristol firm.

The court was told that Blue Sky Property had agreed to provide a lettings service and “carry out thorough referencing on all prospective tenants”.

However, the landlord claimed that the agent did not perform that duty with due care and skill and that she ended up with tenants she would not otherwise have chosen.

Lost rental and the legal costs to evict the tenants cost the landlord over £4,000. There were also repairs needed that cost another £4,000 to put right.

The agent argued that thorough referencing had been done by specialist firm LetRisks, and that the real reason why the landlord suffered a loss was because the tenants’ relationship broke down and they had not adhered to their contractual obligations.

Juliette Maythan, managing director of Blue Sky Properties, told the court she simply did not agree with the landlord’s claim that her agency were accountable.

After recovering her property, the landlord demanded to see the tenants’ references.

The male applicant had ticked a box to say that he had never had a County Court Judgement against him.

However, LetRisks’ credit check found he had been given a CCJ in 2008 for £826, paid off a year later.

The female applicant had given a previous address, but LetRisks found that she could not be traced to it. The female tenant also gave her earnings, working as a carer. This was confirmed by the employer.

LetRisks put the warning note “refer” against both tenants, but made an overall decision to ‘accept’ both tenants. However, the medium risk credit score was near the high risk threshold.

On the strength of this, the agent acted on this overall decision, without discussing the LetRisks findings with the landlord.

Blue Sky Property argued that it paid LetRisks to diligently check tenancy applications on its behalf, and that it had to be able to accept its findings as it would not be practical to re-check its checks for every applicant.

LetRisks’ had a disclaimer on its tenant assessment reports, warning: “The details continued in this report should not be used as the sole reason for making a decision. LetRisks cannot be liable for any inaccuracy of incompleteness of any information.”

At the possession hearing, the landlord found that the female tenant’s work was fictitious and that she had no earnings. Supposed confirmation of her earnings had been given by a relative.

The county court judge said neither the referencing company nor the letting agents had been thorough in the entire referencing process.

The agent should have reported to the landlord that one of the tenants had had a CCJ against him, and communicated the fact that the medium risk rating was close to the high risk threshold.

The agent should also have requested at least three months of bank statements from both tenants.

The judge found in favour of the landlord, and awarded the landlord the sum owed, plus costs of £520 plus 2% interest.

The only report of the actual court case (see below) appears online, on the website of a referencing company that provided an expert witness for the landlord, and which may be a competitor to LetRisks.

Please also see next story.

3 Comments

  1. Ding Dong

    Not too sure if it is a landmark case, but just confirmation that the agents need to take more care and skill…

    at least the landlord had some savvy to go to court, whereas most just threaten and give up.  From my experience most agents just pay for a basis referencing check (and charge the tenant and landlord the earth).

    In the end, it is all about getting the landlords consent i.e. here are the refs Mr landlord, what do you want to do??

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    1. Woodentop

      Couldn’t agree more. Using the get out of jail small print if something comes up later has always been indefensible. This should be a lesson to the inexperienced agent …. always get the landlord to agree to the tenant based on the information you have to the best of your ability, never use alone a third parties word for it. A declaration by the landlord accepting, goes a long way.

       

      I commented a week or so ago about a district judge saying, “all landlord should accept that one day they will have a bad tenant and accept it”.

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  2. SiCollins

    Coupled with the above, a suitably referenced and qualified guarantor should have been gained as the guarantor would stand for both loss of rent and damages – this would have simplified future risk strategy. Also, landlords need to be aware that an insurance is offered by referencing companies on a ‘pass’ which again covers loss of rent and legal fees in the event of a problem. I think the due diligence part from any agents standpoint is to tell the landlord everything warts and all in an email concerning tenant referencing, offer the insurance and state why this could be a good idea, then, if the landlord opts out yet wishes to take the tenant/s, in writing, then correct instructions have been sought. I know this is also a competitive business in terms of trying to be efficient and get things done quickly, but better to be slower and comprehensive in actions for the protection of all and not take anything at face value.

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