Annual Report: Tenant Referencing
A costly mistake - this referencing case summary highlights the Agent's role to ID Tenants. Read more about this and another fundamental issue missed by the agent, which resulted in the Ombudsman instructing the agent to pay a £21,972 award. (The highest award paid by an Agent in 2016 - see page 15 of the 2016 TPO Annual Report)
The complainant was a landlord. He instructed the Agent to source and reference a tenant.
The Agent instructed a third party reference provider to reference the tenant. The provider’s report passed the tenant but made clear that the referencing company had not verified the tenant's ID.
The Agent did not request ID themselves, and neglected to tell the landlord that this had not been obtained. Rather, the agent merely advised the landlord that the tenant had passed referencing.
The TPO Code of Practice states:
- Paragraph 10e of the Code of Practice for Residential Letting Agents requires an agent to verify the tenant’s identity by obtaining valid identification.
- Paragraph 10g of the Code of Practice for Residential Letting Agents, requires an agent to provide the landlord with all relevant facts to enable them to make an informed decision.
The tenancy started, but the tenant failed to pay any rent after the first month. Lengthy court proceedings ensued to obtain possession and the landlord obtained a judgment for £20,972 inclusive of costs against the tenant.
The landlord’s enquiries revealed that the tenant’s previous landlord had provided a copy of the tenant’s passport to the Agent five days after the tenancy had started. This showed the tenant’s real name and date of birth – a different name to that given by the tenant on his application. The previous landlord had also explained that he had obtained a court judgment against the tenant for £12,500 for unpaid rent, but this had yet to be paid.
The complaint was supported. An average landlord would not agree to a tenancy proceeding without a tenant first being able to produce valid identification. This is a basic and fundamental referencing requirement. If the Agent had told the landlord that the ID had not been checked, it was reasonable to conclude that he would not have let the property to this Tenant. The landlord would not have been in the position that he would have been in had the Agent complied with their obligations.
The Agent argued throughout that there was a possibility of the tenant settling the debt. The Ombudsman therefore agreed with the landlord to assign the £20,972 judgment obtained against the tenant to the Agent, as part of the overall resolution.
The Ombudsman made an award of £21,972 (representing actual financial loss of £20,972 and compensation for significant aggravation of £1,000).