Check, check and check again... For fraudulent references

Published on Monday, 29 April 2019. Posted in Case Studies

A case that The Property Ombudsman was asked to review came from a landlord concerning the referencing that was undertaken by the agent on the tenants. The landlord explained that she was assured by the agent, before she agreed to the tenancy, that the tenants (Ms A and Mr B) had passed referencing checks. After the tenancy commenced, the landlord stated that the tenants paid no further rent, that Mr B became threatening, and that the tenants harassed the occupant of the first floor flat, the landlord’s sister.

It was at this point that the landlord requested referencing documentation from the agent, and, having received this information, the landlord identified a number of anomalies that she considered indicated that the references provided were fraudulent. The landlord alleged that the agent failed to thoroughly reference the tenants, and that had the agent done so, the tenancy would not have gone ahead.

The agent maintained that the tenants were fully referenced by a third-party referencing provider and passed those checks.

The obligations with regards to tenant referencing are set out in Section 10 of the TPO Code of Practice (the Code). An agent must use due diligence to identify fraudulent applications and must undertake references appropriate to the applicants and their instructions from the landlord.

Proof of address and identity

The agent was obligated to obtain proof of identity and proof of address for each of the tenants.

In this case, the agent obtained proof of identity, in the form of passports, from both tenants, and proof of address was obtained for Ms A. With regards to Ms A, she was found at the current address she had given, and no adverse credit history was identified. The referencing provider also obtained a reference from an individual purported by Ms A to be her landlord, who confirmed that she had been resident at her current address for 4 years and 2 months and had always paid the rent promptly.

No proof of address, however, was obtained for Mr B. Mr B provided the agent with the same current address as Ms A, but advised the third-party referencing provider that he was living with family. As such, the referencing provider did not seek a landlord’s reference. Mr B was not found at the address in question.

No steps were taken to verify Mr B’s address, and as a consequence no credit check was possible. These omissions were not acted upon by the agent, nor was there any evidence that the agent informed the landlord of these omissions.

Referencing reports

With regards to both tenants, the agent advised the referencing provider that the rent was to be paid in full in advance, and as such, the referencing provider did not seek employment references or proof of income. This circumvented the income and employment checks that would normally be conducted. The rent was not paid in full in advance, nor was there any evidence that this was ever intended. The agent provided no explanation for this point.

It was the Ombudsman’s view, therefore, that the agent prevented the referencing provider from conducting thorough referencing against the Tenants, contrary to Paragraph 10b of the Code.

Landlord’s reference

In addition to the landlord’s reference obtained by the referencing provider, Ms A supplied the agent with a written reference purportedly from her current landlord. That reference stated that Ms A had lived at her current address for three years and had paid the rent on time. The reference was signed and contained a mobile number.

It was clear from information the landlord has subsequently obtained that this reference was not provided by the previous landlord and had been faked by the tenants. When the previous landlord was contacted (by the landlord during the complaints process), he confirmed that Ms A had lived at his property for three months, had accrued rent arrears, and had also taken some of his belongings.

In accordance with Paragraph 10c of the Code, when provided with references directly by tenants, an agent must be diligent in validating their authenticity. There was no evidence that the agent sought to validate the authenticity of the landlord’s reference provided by Ms A, and the agent did not identify or act upon discrepancies (the length of Ms A’s residence, and the spelling of the landlord’s name) between the written reference and the information provided to the referencing provider.

The agent did not, therefore, fulfil their obligations towards the landlord under Paragraph 10c of the Code.

Employment references and affordability

Both Tenants purported to be employed; Ms A at a cake shop, and Mr B at a computer café. Both provided letters from their employers and wage slips. The agent had not asked the reference provider to check affordability and the reference provider had not considered these documents. Nevertheless, the Ombudsman considered that the agent should have carefully checked these references.

With regards to Ms A, she had been employed by the cake shop until shortly before she applied for the tenancy. As such, the wage slips and headed paper the reference was written on were genuine. However, again the agent failed to take any steps to validate the reference. Had they made contact with the cake shop they would have learnt that Ms A’s employment had ceased.

With regards to Mr B, it was the case that a relative or friend of his worked at the computer café in question. The wage slips provided to the agent were clearly falsified, by pasting information from a spreadsheet over the top of a genuine or pro-forma payslip. The wage figures were misaligned, were not in a standard accounting format, and the ‘pay-to-date’ figure remained the same over three concurrent months. Had the agent exercised due diligence in validating the authenticity of Mr B’s employer’s reference, the agent would have identified these issues, and realised that the tenants’ application for the tenancy was fraudulent.

In addition, the Ombudsman would also have expected the agent to have assessed whether the tenancy was affordable for the tenants. Acting on the basis that the employment information was true (and it was not) the rent still accounted for 73% of the tenants’ joint income. The usual threshold for affordability is 40%. Had affordability checks been carried out, it was unlikely that the tenants would have passed those checks.




The complaint was supported as:

  • The agent did not exercise due diligence in identifying a fraudulent application for the tenancy.
  • The agent did not undertake appropriate references against the tenants, and actively prevented the referencing provider from doing so.
  • The agent did not take any steps to validate the authenticity of references provided directly by the tenants.
  • The agent did not obtain proof of address for Mr B.
  • The agent did not assess the affordability of the tenancy for the tenants.

The Ombudsman concluded that the referencing carried out by the agent was subject to such serious shortcomings such that the agent acted with complete disregard for the best interests of their client, the landlord.

Had the agent acted in accordance with the Code and with regard for the best interests of the landlord, there was no doubt that the tenancy would not have gone ahead. It was the Ombudsman’s view that the agent was liable for the rent arrears and the other losses sustained by the landlord that have arose as a direct result of the tenancy going ahead. Those losses were rent arrears of £6,243, costs of regaining possession of £655 and costs of replacing the locks, £130, total costs being £7,028.

The Ombudsman also directed the agent to refund the tenancy set up fee paid by the Landlord of £400 and make an additional award of compensation of £1,000 for the substantial aggravation and distress caused to the landlord by the events giving rise to this complaint.

An award of £8,428 was made in compensation in full and final settlement of this dispute.