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Letting agent pays landlord for reference failure

16 February 2016

reference failureA letting agent has had to pay a landlord more than £4,000 compensation for allowing unsuitable tenants to move into a buy to let home.

Despite carrying out a credit check, Blue Sky Property, of Bristol, failed to make further inquiries when the reference came back as ‘refer to landlord’.

The couple moved into their buy to let home, ran up rent arrears of more than £3,000 and allegedly caused another £4,000 of damage to the property.

The landlord repossessed the property after taking the couple to court.

When the letting agent passed the credit reference to the landlord as part of the evidence for the case, the landlord spotted the reference agency had flagged the couple as possibly unsuitable tenants.

The landlord demanded compensation from the letting agency, which refused to pay, so the matter went to Bristol County Court.

The landlord claimed the letting agent had failed in a duty of care under the Sale of Goods Act and claimed compensation for the rent arrears, property damage and court costs.

The reference showed one of the tenants had a paid court judgment for £826 and the employer reference for the other was from a relative she looked after.

The court ruled that had the landlord known this information, the likelihood was the tenants would not have been accepted for the rental.

The letting agent was told that they should have told the landlord about the CCJ, that the application form contained lies and the risks highlighted by the credit agency.

The judge also suggested that if the letting agent had asked for three month’s bank statements from the couple, their true financial circumstances would have been revealed.

“If the letting agents had done these things, the application would have been rejected and the landlord would not have lost money as rent arrears, nor would she have incurred court costs or interest,” the judge said in court.

He added that the Property Ombudsman code tells letting agents what to do when carry out referencing.

“Regardless of whether a third party referencing provider is used, the agent remains duty bound to consider the results and highlight any potential areas of concern to both the landlord and tenant to allow both parties to make an informed decision as to whether they wish to proceed with the tenancy on the terms previously agreed,” he said.