Over the years that I have been acting for landlords, I have heard many complaints about letting agents (and not a few from letting agents about landlords!). The most common complaint though, is that the agent refuses to allow the landlord to see the references they have obtained about tenants.
Indeed landlords often complain that they find out about prospective tenants only after they have been installed in their property, and have not been given any information about them at all. When they ask for information they either get no response or the agent says it is forbidden under the Data Protection Act.
What is the legal situation here?
People often do not realise that when someone is employed as an agent, this is a specific legal relationship with its own legal rules: the law of agency. In an agency situation there are three parties:
- The principal (ie the landlord)
- The third party (ie the tenant), and
- The agent (ie the letting agent).
Any contract made, will be between the principal/landlord and the third party/tenant. The agent will be the person who negotiates this on behalf of the landlord and who sets it up. However if anything goes wrong, the tenant will (other than in a few specific exceptions, such as tenancy deposits) need to sue the landlord rather than the agent.
The agent is in a responsible position therefore, as he has the power to bind the landlord in a contract, which the landlord knows nothing about. When dealing with an agent, a tenant is entitled to rely on promises made by the agent on the landlords behalf. For example if a landlord says ‘no pets’ to his agent but the agent agrees that the tenant can keep his staffordshire bull terrier in the property, the landlord will be bound by that.
So legally the agent is like an extension of the landlord, and legally, dealing with an authorised agent is the same as dealing with the landlord direct.
Because he is in such a powerful position, agents have what is known as a ‘fiduciary relationship’ with the landlord. I discussed this in my previous blog post here. One of the elements of this is the duty of the agent to account to the principal and also to hand over all documents produced by him for the purpose of the agency relationship.
But where does this leave references obtained by the agent on the tenant? To a certain extent this is governed by the terms and conditions of the agency contract. If the landlord signs an agency agreement which specifically states that he will not have access to any of the tenants referencing, he will probably be bound by this.
However what if, which is probably more common, the contact is silent on this point?
This begs the question of who the reference actually belongs to. I would suggest that it is the property of the landlord, as it was obtained by the agent for the purpose of the landlords property, in his capacity as agent for the landlord. It is also paid for by the landlord, although in many cases the landlord will be refunded by the tenant. However it is the landlord who is ultimately responsible for the cost of referencing. Agents are in the business of making money from their agency work, not being out of pocket by paying personally for referencing tenants.
If the reference is the landlords property therefore, has the agent the right to refuse to let the landlord see it?
Well there is something called an ‘agents lien’. This entitles an agent to hang on to his principals property until he gets paid. However, if he has been paid, then he has no excuse to withhold the property.
What then of the agents normal argument that passing the reference on will be in breach of the Data Protection Act? Well this is quite interesting. If you visit the Information Commissioners Office web-site, you will find on this page, it says:
Can landlords see references which were provided to the letting agents?
The agent can pass this information to the landlord, as long as, when the reference is asked for, they make clear to the tenant and the referee that this will happen.
The qualification here rather seems to go against what I have always understood to be a principle in the agency / principal relationship, i.e. that the agent is merely an extension or arm of the principal, and is obliged to account to him for everything that he does including all the principal’s property, subject to his lien.
There are two important reasons why the landlord should be entitled to see the references if he wishes, in particular before the tenancy is granted:
1. Landlords can suffer massive losses through bad tenants being allowed into their property, both through unpaid rent and through the tenant actually damaging the fabric of the property itself.
2. They may also want to check that the agent has carried out any referencing at all. Sadly it is not unknown for agents to pocket the reference fees and not actually get the reference. I have also known of several cases where the referencing done was grossly inadequate for the type of property being let (for example in in a case involving a high rent property a year or so ago, where the landlord suffered losses of over £20,000 before we were able to obtain an order for possession and evict the tenant).
If the agent is able to say “sorry, can’t tell you anything about the references we got, Data Protection Act”, how can the landlord be sure that this important part of the agents job has been done properly?
So my view is that, notwithstanding the Data Commissioners guidance (which is simply guidance, not legislation) the landlord is entitled to see the references (subject to the agents lien) as:
- They are his property
- He has a right to know about the tenant who is being installed in his property (in view of his potential losses if the tenant is unsatisfactory), and
- He has a right to check that the agent is carrying out his job properly
However to avoid any problems, I would advise landlords to make it very clear, when they instruct an agent, that they will want to see the references, before the tenant is approved.
And also make it clear that it is the agents responsibility to take such steps as are necessary (ie tell the tenants and the reference agency) in order to prevent their being in breach of Data Protection Act by passing references over to the landlord.
You should also check over very carefully your agents’ terms and conditions before you sign them, and make sure that this is written in before you sign (or if necessary write it in yourself before you sign).