Here is a question to the blog clinic from Alison (not her real name) who works for a letting agent
I work in a letting agents and recently the tenants at one of our properties told us that they had received a letter saying the property is being repossessed and they are going to be evicted.
The tenants are quite savvy and have questioned why they were not notified that the property was subject to a mortage – we produced the tenancy agreement on behalf of the landlord and they were not asked to sign a Ground 2 notice.
They are threatening legal action against us, but our lettings manager says they have no case because this is the landlords problem.
Have we or the landlord been negligent by not advising the tenants?
Normal rule – agents are not liable
The quick answer is no you are not. Your lettings manager is quite correct. Under agency law, an agent makes a contract on behalf of the principal (here the landlord) but are not normally themselves liable under the contract.
So if a tenant has a claim in respect of the property – for example for disrepair, or as here, the fact that they are being moved out – which is essentially a breach of the ‘covenant of quiet enjoyment’ – then it is the landlord that they sue. Not the agent.
Which in this case will be a fat lot of good for the tenant as the landlord clearly has no assets – otherwise he would have paid his mortgage on the rented property.
When an agent IS liable
There are only a few situations where a tenant can sue an agent. One of these is for breaches of the tenancy deposit regulations. This is because the regulations themselves specifically provide for agents to be liable.
The tenant may also have a claim against an agent for ‘breach of the agents warranty of authority’. This is basically where the tenant relies on something the agent said, where the agent had no authority to say it. I talk about this in the blog post >> here.
Should agents be liable?
However this all begs the question – is it right that agents should escape all liability for this sort of thing? Should they make more investigations when taking on a property, for example to make sure that no problems like this are likely to occur?
After all when a tenant chooses a property to let from the window of a swanky agency office, the very last thing that crosses their mind is that they will be evicted because the landlord has not paid his mortgage.
In many cases it is going to be impossible for the agents to know for example that a landlord will fall on hard times months or even years on into the tenancy.
However should they run credit checks on landlords (as well as on tenants) to guard against this sort of thing happening in the short term? And should tenants be automatically informed whether or not the landlord has a mortgage on the property?
Will the tenants lose possession before the end of their agreement date?
If not, what loss have they suffered?
The lettings manager may be a bit too gung ho on this and I think there is potentially a bit more to it than this. There certainly is for the Landlord as it is a clear breach of quiet occupancy. What makes you think there is no equity Tessa – there could well be, just arrears and inability to service the loan. It may only be 50% LTV.
On the face of it the agent isn’t liable, shouldn’t be and won’t be if they have done their job properly and not let the Landlord and themselves down in any way, or open to a claim.
But what if the agreement that was signed was prepared by the agent as you say it was? And what if that contained, as it should do, the standard clause whereby the Landlord affirms that they have all the necessary consents. There is no Law though that says the existence of a loan must be declared to a tenant, only that if there is consent should be sought as per the mortgage deed.
Who signed the agreement – agent on Landlord behalf in which case who confirmed that all consents existed?
The question doesn’t focus on consents, only the ground 2 which does not have to appear in an AST and arguably for a BTL Landlord should not do so.
If it is a full AT then of course the Ground 2 notice must be served. Most lenders demand a ground 2 on ASTs as well but unless the Landlord has previously lived in the property they cannot serve and rely on a valid ground 2 notice as to be valid Ground 1 also has to apply. Ground 2 cannot stand alone this is buried in an obscure clause in the 1988 Act – clause 16 I think but memory may be wrong.
Interesting point from HB Welcome but only if notice had been served. Tenants are being turfed out prematurely