Landlord vs Letting Agent: A Compliance Conundrum

The Ombudsman’s findings

Complaint A – Referencing

The first complaint raised concerning referencing and whether the agent carried out suitable due diligence checks, contained aspects which fell outside of the period that TPO was permitted to consider under its Terms of Reference.

The first concern was about the agent incorrectly including one of the tenants’ overtime pay when assessing their ability to afford the rental payments.  However, the tenants' email indicated the landlord was aware their rent struggles were due to a loss of overtime. The Ombudsman raised the point that if the landlord disagreed with including overtime pay when considering the tenants’ ability to afford the rent, it should have been raised at that time.

If the landlord expected details of prospective tenants and referencing checks, it should have been requested beforehand. Raising concerns at not seeing such information only after issues arose and some time after the tenancy started fell outside TPO's review period.

Based on the evidence submitted, the agent demonstrated that they undertook referencing checks and submitted evidence to support their claim that the tenants’ previous tenancy, which they also managed, held no concerns in terms of rental payments and treatment of the property.

The Ombudsman made the point that referencing checks by an agent provide a snapshot in time and do not guarantee an applicant’s position will remain the same. The tenants consistently paid rent on time for around 10 months, indicating no direct correlation between referencing and subsequent issues. Also, the interruption of rental payments was due to one tenant being made redundant, an event unlikely to be predicted by referencing. Consequently, this complaint was not supported.

Complaint B - Deposit registration

The Ombudsman upheld this element of the dispute as the letting agent admitted failing to register the deposit as required by law and 13i of the Code.

The agent cited a misunderstanding of the rules when transferring the deposit between tenancies, but this explanation did not absolve them of breaching the Code. Consequently, the failure to register the deposit led to the tenants successfully claiming against the landlord and a court awarding the tenant a sum of £7,200 in damages and £2,270 in costs, which the Ombudsman deemed a direct financial loss to the landlord. The Ombudsman supported the complaint and concluded the agent's failure to register the deposit caused financial harm to the landlord.

 

Complaint C - Handling of Tenants’ deposit registration claim

The landlord stated that the letting agent failed to properly deal with the tenants’ deposit complaints, mishandling the matter initially by insisting that the deposit dispute did not concern him and related to the tenants’ previous tenancy with Mr B. Even after the claim was lodged against the landlord, the agent maintained this stance, causing costly delays in repossession proceedings.

From evidence submitted, the Ombudsman reviewed key dates and events which highlighted when late rental payments started, the issuing of Section 21 Notices, the tenants’ first mention of a counter claim, the landlord’s instruction of a solicitor and the eventual court award to the tenant in damages and costs.

Despite legal advice to the contrary, the agent's misunderstanding persisted, leading to prolonged legal proceedings and significant distress for the landlord. The Ombudsman found the agent's actions directly contributed to complications in the repossession process, warranting compensation for the aggravation, distress, and inconvenience caused.

Complaint D - Inspections

The landlord explained that the agent’s refusal to conduct inspections after a certain point constituted negligence, potentially voiding his malicious damage insurance policy.

The agent used a third-party company for inspections, funded by the management fee. While the agent initially covered inspection costs when the rent payments stopped as a goodwill gesture, they then ceased inspections without adequate communication to the landlord.

Despite the agent’s belief that the landlord had no issue with this, the landlord raised concerns in his formal complaint.

The Ombudsman criticised the agent’s lack of transparency and failure to provide forewarning of when they would cease conducting inspections, which breached best practice expectations. This lack of communication caused avoidable aggravation, warranting compensation. The Ombudsman supported the complaint.

Conclusion

The Ombudsman was persuaded that the agent’s shortcomings identified under complaints B, C and D led to significant aggravation to the landlord. She upheld the complaints and awarded compensation.

The agent was directed to pay £9,470 for failing to register the deposit, leading to a successful claim by the tenants against the landlord. Additionally, the Ombudsman awarded £1,000 for the agent’s shortcomings, causing significant aggravation to the landlord.

The overall compensation awarded was £10,470.