Here is a question to the blog clinic from Brian who is a landlord:
We have had 2 properties under management by an agent since August 2012, referred to as 108 & and 96.
Our complaint concerns both properties. We pay 15% + VAT management fee, including rent loss cover.
On 16th April 2013 we discovered that no rents for either property had been banked with us since 24th July 2012. The agents were e-mailed immediately. In the e-mail reply on the 19th April a staff member explained that all the rents had been paid back into the account of the tenant in 108.
We warned the agent on 19th April that although they had repaid us, their error had endangered the 108 tenancy and that we would expect redress in this event.
Unable to afford repaying the agents, the108 tenant left without notice at the end of June 2013.
Despite numerous viewings by the agent the property remains untenanted. It was discovered that the agents had not inspected or cleaned after the tenant left.
We visited the agent’s office outlining our dissatisfactions with the standards of management and the costs we had incurred i.e. lost rentals, utilities, council tax and a 15% management fee paid where no apparent management had taken place. We were told that senior management was absent and not expected back in the office.
A week later an e-mail from a member of staff rejected our request for redress asserting that the blame lies between the tenant and the landlord, the agent refusing to accept responsibility for its shortcomings.
We wrote to the agent’s CEO To date we have had no reply. The 96 tenant is unwaged and receives housing benefit.
Do we have redress for:
1. misdirection of rents?
2. Loss of tenancy & rental & payment of council tax?
3. Mis-selling of rent protection for unwaged tenant?
You also mention in your email that you live overseas.
First off, I am a bit surprised that you did not detect that the rent had been paid to you by the agents between July 2012 and April 2013. It is generally a good idea to try to keep on top of these things.
If you had got wise to this situation in, say, August, and notified the agents, the problems would have been less. This may affect any award that might be made to you in any compensation claim.
However there is no doubt that these agents have not acted in your best interests and if I were you I would be looking around to appoint another letting agent in their place.
Lets have a look at your question. You ask if you have a claim in respect of the following items:
1. Misdirection of rents.
If the agents received the rent from the tenant and then paid it back to the tenant rather than paying it over to you, then they are certainly liable for any losses you may have suffered in this regard.
However, it looks from your question as if the agents have actually paid you the rent. In which case, as you have suffered no loss, you would not be entitled to any compensation.
2. Loss of tenancy
There are two elements to this.
- The original tenant leaving early and
- The failure to find a new one.
It is arguable that the tenant leaving early is down to them. However if a new tenant had been found promptly, this would not have been a problem.
It looks as if a possible reason for a new tenant not being found is the poor condition of the property.
We have not seen the terms of your agency agreement, but if this includes getting the property in a proper condition for re-letting, then the agents will be in breach of contract if they failed to do this.
I suspect the agents would be responsible for this – as you are living abroad it is not something you can do personally. That is presumably why you are using agents.
If a Judge in a claim were to find that they were in breach of their agreement with you here – what sort of award would he make?
The normal measure of damages for breach of contract cases is to put the claimant in the position he would have been in had the contract not been broken.
The Judge would also take into account the fact that they are your agents (and therefore owe you the greater duty of care that is imposed on agents under agency law) and that you are totally reliant on them as you live abroad.
So you would probably be awarded a percentage (probably a fairly high percentage) of the rent you would have got had they done what they should have done. The percentage would reflect the Judge’s view on their actual responsibility for the property remaining unlet.
3. Mis-selling of rent protection for unwaged tenant.
I assume from the question, that if this tenant fails to pay rent, you would not be able to claim under the rent protection policy as he is on benefit – this presumably being an exclusion under the terms of the policy.
If this is the case (and it would have to be checked) then if the tenant failed to pay rent, I think you probably would be entitled to claim against the agents – always assuming that they were aware that the tenant was on benefit at the time he signed the tenancy agreement.
They are the ones who found the tenant and should be aware of the terms of the rent guarantee policy they sold you.
However if the tenant lost his job and went on benefit after he moved into the property, then I don’t think the agents can be held responsible for this.
Unless maybe they failed to explain to you that the rent guarantee policy had this exception.
What to do next
FIrst of all, if you have not done this already, you should write a comprehensive letter to the agents setting out all your claims with details of their breaches of their agency agreement and your resultant losses.
If they fail to respond to this satisfactorily, you then need to check to see if they are a member of any redress scheme. For example if they belong to the Property Ombudsman’s scheme, you can then refer your complaint to them. The Property Ombudsman has the power to award compensation.
If the agents are not a member of any scheme, then you would need to bring a court claim. As you live abroad, you would need solicitors for this.
In which case you should be careful to choose a firm which is experienced in housing / landlord & tenant work as this is a fairly esoteric area of law and not all firms handle it well.
Note that Anthony Gold, the solicitors associated with my Landlord Law service would be a good choice.
What do readers think about this case?
NB: Landlords who are having problems with their letting agents my be interested in my online guide on >> dismissing letting agents.
Brian Hinchcliffe says
April 14, 2014 at 11:16 AMThe misdirection of rents was hidden by the landlord’s monthly statements, which often had to be requested. The statements do not identify a receiving bank account reference. The misdirection was discovered by us during a bank reconciliation.
The agents continued to assure us that the property was in good, clean condition for reletting, despite prospective tenent’s feed back that parts of the property were messy.
Jamie says
April 14, 2014 at 11:47 AMYou may live overseas but with modern technology you really should have checked your rent account sooner.
Having said that, the agent has clearly made some big mistakes.
You have had your rent paid back (luckily!) but I think you’ll have a hard job proving any of your claims.
Do you have a Non Resident Landlord approval number? If not, you might want to reconsider taking this much further if you haven’t paid income tax on the rental income and the agent didn’t deduct it at source.
In the grand scheme of things I think any losses you might claim are fairly small and could have potentially been a lot worse. It might be worth a complaint to the ombudsman if the agent is a member, but from a commercial perspective I’d consider myself lucky and cut my losses rather than taking expensive legal ction.
Jamie says
April 14, 2014 at 12:35 PMOK, so you’re clearly an accountant or financial advisor managing the landlord’s affairs. I hope you’re not managing it on a full-time basis otherwise you could possibly have been accused of negligence for failing to spot the discrepancy sooner.
I still think you’re on a sticky wicket proving any of this. How are you going to demonstrate to the judge the property was ‘messy’, or that the agent hadn’t done their job and that is why the property wasn’t let sooner? Could you get written statements from the prosective tenants or photographs to back this up? Did you inspect the property yourselves?
Assuming the insurance was mis-sold, all you could claim is the cost of the insurance, you can’t claim for a potential uninsured loss in the future. The premium is possibly £10-£20pm. Does that include other insured elements, e.g. maintenance, or just a rent guarantee?
You need to weigh up any potential damages and compare this to the cost of pursuing it, especially if you charge fees on top for doing so. I don’t think it will be worth it.