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?