A landlord has won a breakthrough case in court against a letting agent over how thorough its referencing checks were when selecting tenants.
The case will be hugely significant to all letting agents regarding their referencing processes and where responsibility lies.
The landlord, Ms Hale, believes that her letting agent, Blue Sky Property, had supplied unsuitable tenants, despite the renters having been checked and considered satisfactory by a referencing firm.
The referencing firm in question, LetRisks, has a strong reputation and the letting agent is a member of the Association of Residential Letting Agents (ARLA).
Hale claimed breach of contract under the Sale of Goods and Services Act 1982 by Blue Sky Property, a Bristol-based firm.
The court heard that the agent had agreed to provide a lettings service and conduct thorough referencing on prospective tenants.
However, the landlord argued that the agent did not conduct this duty with due care and skill, leaving her with tenants that she wouldn’t otherwise have chosen.
Unpaid rent and legal costs to evict the tenants cost the landlord over £4,000. She then needed to carry out repair work that cost another £4,000.
Blue Sky Property argued that LetRisks had undertaken thorough referencing and that the real reason the landlord suffered rent arrears was because the tenants’ relationship broke down and they did not comply with their contractual obligations.
The Managing Director of Blue Sky Property, Juliette Maythan, told the court that she did not agree with the landlord’s claim that her agency was accountable.
After repossessing her property, Hale demanded to see the tenants’ references.
The male applicant had ticked a box to say that he had never had a County Court Judgement (CCJ) against him. However, LetRisks’ credit check found that he was given a CCJ in 2008 for £826, which was paid off a year later.
The female applicant had given a previous address, but LetRisks could not trace her to it. She also specified her earnings from working as a carer, which was supposedly confirmed by her employer.
LetRisks added a refer note next to both tenants, but made the overall decision to accept them. However, the medium risk credit score was close to the high-risk threshold.
The letting agent then placed the tenants in the property, without discussing LetRisks’ findings with the landlord.
The agent argued that it paid LetRisks to thoroughly check applications on its behalf, and that it is not practical to re-check every reference.
At the possession hearing, Hale was informed that the female tenant’s employment was fictitious and that she had no earnings. Her relative had supplied the supposed confirmation.
The county court judge said that neither the referencing firm nor letting agent had been thorough in the referencing process.
They added that the agent should have informed the landlord that one of the tenants had a CCJ and explained that the medium risk rating was close to the high-risk threshold.
The letting agent should have also requested at least three months’ bank statements from both tenants.
The judge found in favour of the landlord, and awarded her the sum owed, plus costs of £520 and 2% interest.
Have you ever had problems with tenants as a result of an inadequate referencing check? Remember that rent guarantee insurance is the best way to protect your investment against rent arrears.