Not so ‘Guaranteed’ Rent and Repairs

The issues the Ombudsman examined related to: 

• Repairs  
• Rental payments  
• Routine visits  
   

INVESTIGATION 

The landlord had a Guaranteed Rent Agreement with the letting agent and during the tenancy, a fire broke out at the property, which was later found to have been caused by the cultivation of illegal drugs. The property was left requiring extensive repairs to make it habitable again.  

It was the Ombudsman’s understanding that the Guaranteed Rent Agreement was for a period of 12 months and at the end of the term, it continued on a periodic basis until the landlord terminated the agreement.  

The letting agent did not supply their company file to The Property Ombudsman, despite requests to do so, and failed to respond to requests for information, therefore, the review was conducted based on information provided by the landlord. 

 

Repairs

Following the fire, the landlord said the letting agent failed to complete the necessary repair works they had committed to. As a result of this, the property was left in an uninhabitable state, with lost rental income and significant repair costs. The landlord’s insurance policy did not cover the repairs as the damage had been caused by illegal activity.  

A letter sent by the letting agent to the landlord following the fire stated that the property was under the day-to-day care of a third-party management company. The letter claimed the landlord was aware of this arrangement, which the landlord denied. The Ombudsman found no evidence supporting the landlord's awareness.  

The Guaranteed Rent Agreement, which was between the letting agent and the landlord, gave the letting agent discretion in finding suitable tenants. The Ombudsman determined the agent was obligated to seek the landlord's approval before involving another agent, but there was no evidence of an agreement with the third-party company. 

Following the fire, a letter from the letting agent to the landlord referenced the third-party management company’s involvement, stating that the company had agreed to uphold the guaranteed rent owed and fully refurbish the property.  It went on to say that the letting agent would conduct regular site checks to ensure work was ongoing.  

The Ombudsman held that, despite instructing the third party for repairs, the letting agent remained responsible under the Guaranteed Rent Agreement. Thus, the landlord reasonably expected the agent to oversee and ensure the repairs. 

The Ombudsman would expect an agent to respond promptly to communication they receive from tenants and landlords, particularly where issues relate to repairs and maintenance. It is best practice for an agent to proactively update landlords about ongoing repairs and maintenance issues that have been reported. In this case, an approximate timeline for the repairs including a start date would have been appropriate, as well as continued monitoring progress of the repairs being undertaken by the other agent they had involved.  

After a period struggling to contact the letting agent, a meeting took place between the landlord and letting agent where the agent said the repairs would be completed by the following month. The landlord complained every month for a further three months after the date he was told works would be completed.  

The Ombudsman was not satisfied that the letting agent made reasonable efforts to ensure that the repairs to the property were completed within a reasonable timeframe.  

As the property was unhabitable due to the damage, the landlord independently sought for the repairs to be carried out at the property at considerable expense and inconvenience to himself.  

While the extent of the third-party management company’s involvement was unclear due to insufficient information, the letting agent’s letter to the landlord suggested that the third-party was sub-instructed for day-to-day care, repairs, and tenant management. The letting agent, without the landlord's consent, engaged another agent to find tenants who subsequently caused significant damage to the property. The Guaranteed Rent Agreement lacked a provision absolving the letting agent from repair responsibility in such cases. 

If the letting agent did not intend to be responsible for such a situation, it should have specified this in the Agreement or outlined its responsibilities more explicitly. Instead, by listing what they would not be responsible for, instead of making it clear what they would be responsible for, the letting agent set a precedent for repairs needed outside of the actions they have stated they would not be responsible for. 

Consequently, in line with their business terms, the Ombudsman supported this element of the dispute and determined the letting agent cover the cost of the works to the property. The landlord provided evidence that works carried out totalled £20,186. 

In addition to unpaid rent, the landlord also requested to be compensated £4,800 for the loss of three months rental payments when the property was vacant due to repairs. The Property Ombudsman’s Terms of Reference allows the award of ‘actual, proven, financial loss’. Any potential loss of rent is speculative, and the Guaranteed Rent Agreement specifically excluded periods where the property was uninhabitable therefore the Ombudsman did not direct an award in respect of loss of rent.  

 

Rental Payments 

The landlord said that the letting agent owed £8,000 for five months' unpaid rent under the Guaranteed Rent Agreement, specifying a monthly payment of £1,600. However, a clause in the Guaranteed Rent Agreement absolved the letting agent from any liability of rent payments if the property was unfit for habitation until the property had been fully reinstated by the landlord. 

While the damage was not caused by the landlord, and he suffered financial loss due to property damage, the letting agent was not liable for the rent within the Agreement's parameters and therefore the Ombudsman did not uphold this part of the complaint. 

 

Routine Visits 

The landlord said he requested routine property inspections from the letting agent for several months before the fire, but they were not conducted. The letting agent claimed to have inspected the property once but did not provide a report despite requests.  

In accordance with the Code, the frequency of routine visits should be agreed upon with the landlord, and records of such visits should be maintained and shared with both parties. 

The Guaranteed Rent Agreement did not include any specific clause on routine inspections, and there was no evidence of a written agreement on the inspection frequency. Without this clarity, it is uncertain whether the landlord and letting agent agreed to a schedule for routine visits. Since there was no proof of a discussed schedule in the agreement, the Ombudsman did not uphold this part of the complaint. 

 

OUTCOME 

The Ombudsman supported aspects of the dispute, and based on the provided reasons, made an award of £20,636.30 (£20,186.30 for financial loss in respect of the repairs and £450 for distress).