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Can this landlord claim for losses due to his letting agent’s incompetent referencing?

Horrified landlordHere is a question to the blog clinic fast track from Ian who is looking to help a landlord friend.  Here is the story:

Incompetent referencing

Mr K, a part-time landlord, was let down by his letting agent C. Mr K complained to C, who used spurious defence, referencing agent was an independent body.

Mr K obtained a County Ct Judgement for arrears/costs of £16,307, Feb 20, but was not able to enforce. Tenant (Mr O) abandoned property in a state of disrepair, 25/08/2020.

I want to help Mr K. Total losses £31K. I am not a solicitor/para-legal etc. C’s referencing did not

  • check on claimed prior address. Residential Referee (Ref) not the owner of prior address acc. to Land registry
  • evidence rental payments made to Ref •
  • verify tenure of Ref’s address. Ref was HA tenant
  • check financial Ref, a ‘Director of an accountancy firm’, under notice of being struck off acc. to Companies House records. Ref not Director.
  • Provide evidence of Mr O’s income
  • Carry out credit report check. A later check showed Mr O lived at a different address, also abandoned in disrepair.
  • Carry out an on-line check. 3 mths before the start of the tenancy, police arrested/accused Mr O of hiring a killer to carry out an assassination (Guardian of Nigeria newspaper).

In summary C.

  • acted negligently in failing to reference with reasonable care/skill
  • ignored TPO & ARLA code of practice & its own Agreement
  • failed to prepare for GDPR, undermining Mr. K’s rights
  • breached Pts 1 & 2, Consumer Rights Act 2015

Barriers to obtaining redress

  • Mr K signed a tenant introduction service agreement not full management service
  • Defendant delayed 1st eviction. 6 mths passed before possession without right of appeal was granted. 2nd eviction date fell after moratorium on evictions
  • Most arrears accrued after possession was initially granted, a year before Mr O abandoned

From C Mr K wants the return of his introduction fee, legal/property disrepair costs & compensation for lost rental income.

Advice on strengthening the case & means of obtaining redress welcome.

Answer

So, to summarise,

  • Mr K’s letting agent let him down by allowing a tenant who had not been properly referenced into occupation.
  • The tenant proved unsatisfactory and ultimately abandoned the property after running up a massive arrears debt.
  • A CCJ has been obtained against him but from what you say, payment of the CCJ by the tenant is unlikely.
  • You wish to help Mr K claim against the agent, C.

Liability of C

From what you say, it looks as if C may be liable for at least part of Mr K’s losses.

Assuming that Mr K was a consumer then the agent, C was contractually obliged to perform the contract with ‘reasonable care and skill’ (per s49 of the Consumer Rights Act 2015).

The case of Hale v. Blue Sky Property Group which I wrote about here (although a County Court case) makes it clear that agents can be liable to their landlord clients if the tenants they recommend prove unsatisfactory AND if this is down to poor practice by the agent – ie if proper referencing would have shown the tenant up to be a bad risk.

Now the true culprit and the person primarily liable for Mr K’s losses is the tenant Mr O. The agents will normally only be liable if:

  • It is clear that they were at fault when recommending a tenant to their landlord client – for example, if
  • They have not reported any adverse issues to the landlord, and
  • Did not follow up any discrepancies in the information provided by the tenant and any referencing, and
  • The tenant has defaulted and it is unlikely that the landlord will be able to make any recovery from them.

This seems to be the case here.  So I suspect that were proceedings to be brought against C, Mr K is likely to obtain judgment.

Although note that it will probably not be for the whole of his losses – for example, it is not C’s fault that COVID intervened making the eviction of Mr O more difficult.

Before considering court proceedings, Mr K should also consider the option of

Obtaining ‘redress’

Going to Court for a CCJ is not the only option available to Mr K. All letting agents should be registered with one of the two Property Redress Schemes.  Landlords, if they have failed to resolve a dispute with a letting agent, can apply to them.

Mr K may want to try this, although note that the maximum financial award they can make is £25,000 and I understand that the most common award is in the region of £5,000. Which falls considerably short of what Mr K needs.

If the Redress schemes do not, or cannot, help, the other option is obtaining a CCJ at Court. As I say above, I think Mr K has a good chance of success in obtaining an award. However you first need to consider

Obtaining payment under a CCJ

One of the big problems with obtaining a CCJ, which is not often realised, is that many CCJ’s go unpaid. The figure of approx 30% comes to mind although I don’t have any official figures to back that up.

The problem with CCJ’s is that if the judgement debtor fails to pay voluntarily, the court procedures for enforcing payment are pretty poor. I discussed them briefly in this post in 2014 and so far as I understand they have not changed much since then.

County Court Judgements work best if your debtor is anxious to avoid one being made in the first place. For example, individuals and businesses with CCJs on their record will find it hard to obtain bank loans and other financial services.

Having a CCJ is also often viewed (sometimes unfairly) as a symptom of fecklessness and bad practice – so not something a reputable business will want to have.

So if C is anxious to be viewed as a responsible business they will probably be anxious to avoid a CCJ.

But are C a responsible business? Although many letting agents are excellent, many are not and some are downright criminal. Before contemplating spending any money on bringing a claim against C, you really need to do a bit of research into them to see if they would be good for payment.

For example are they a member of one of the agents regulation bodies such as

  • The Association of Residential Letting Agents (ARLA)
  • The Royal Institution of Chartered Surveyors (RICS), or
  • Safeagent (formerly NALS)?

Then if C are a limited company, what do their accounts filed at Companies House show? You may want to get them checked out, perhaps obtain a credit report on them.

There is no point in spending money on obtaining a CCJ against an organisation that has no assets and so is unlikely to pay your debt. And if you want to persuade solicitors to act under a conditional fee agreement, they will only be willing to do this if it is clear that the agents are financially sound.  Otherwise, they could end up doing a lot of work for no pay.

And finally

Mr K may be successful in obtaining compensation from C if they are anxious to avoid a CCJ and also if they have sufficient funds (or access to funds) to satisfy any judgment debt Mr K may obtain.

However, from what you say, it looks as if C may not be good for the debt. In which case spending any money on bringing a claim against them will just be throwing good money after bad.

So checking out C is the first thing you need to do and Mr K’s chances of recovery really depend on what your investigations show.

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