85% of letting agents at risk of breaching TPO Code of Practice
The Property Ombudsman’s latest figures reveal a concerning amount of property complaints and consumer awards, where the overall number of awards TPO instructed agents to pay exceeded £1 million for the first time.
One case study released by the TPO particularly caught our eye at Tenant Referencing UK; The highest award paid by an Agent in 2016, which resulted in the Ombudsman instructing the agent to pay a whopping £21,972 award.
A Costly Mistake: Referencing Case Highlights the Agent’s Role to ID Tenants
This case reviews the actions of an agent that had instructed a third party reference provider to reference the Tenant.
Outsourcing a reference request is common practice for many Agents, but the firm failed to fulfil their responsibilities and verify the Tenant’s identification.
The provider’s report passed the tenant but made clear that the referencing company had not verified the tenant’s ID.
The Agent did not request ID themselves, and neglected to tell the landlord that this had not been obtained. Rather, the agent merely advised the landlord that the tenant had passed referencing.
The TPO Code of Practice clearly states:
- Paragraph 10e of the Code of Practice for Residential Letting Agents requires an agent to verify the tenant’s identity by obtaining valid identification.
- Paragraph 10g of the Code of Practice for Residential Letting Agents, requires an agent to provide the landlord with all relevant facts to enable them to make an informed decision.
The tenancy started, but the tenant failed to pay any rent after the first month. Lengthy court proceedings ensued to obtain possession and the landlord obtained a judgment for £20,972 inclusive of costs against the tenant.
The landlord’s enquiries revealed that the tenant’s previous landlord had provided a copy of the tenant’s passport to the Agent five days after the tenancy had started. This showed the tenant’s real name and date of birth – a different name to that given by the tenant on his application. The previous landlord had also explained that he had obtained a court judgment against the tenant for £12,500 for unpaid rent, but this had yet to be paid.
The complaint was supported. An average landlord would not agree to a tenancy proceeding without a tenant first being able to produce valid identification. This is a basic and fundamental referencing requirement. If the Agent had told the landlord that the ID had not been checked, it was reasonable to conclude that he would not have let the property to this Tenant. The landlord would not have been in the position that he would have been in had the Agent complied with their obligations.
The Agent argued throughout the case that there was a possibility of the tenant settling the debt. The Ombudsman therefore agreed with the landlord to assign the £20,972 judgment obtained against the tenant to the Agent, as part of the overall resolution.
The Ombudsman made an award of £21,972 (representing actual financial loss of £20,972 and compensation for significant aggravation of £1,000).
Through continuous industry research over the last 8 years, at Tenant Referencing UK we have discovered a startling 85% of agents are still relying on 3 point referencing practice. Even more worrying, the firms that these agents are using do not base their referencing on factual evidence but on the basis of hearsay.
Furthermore, authenticating an applicants ID is even more important with regards to Right to Rent Immigration legislation. This meanings that landlords who knowingly rent out property to people who have no right to rent in the UK risk unlimited fines to jail sentences of up to five years.
This is why we have our very own Home Office Compliant TR Immigration Document checking Service integrated into our referencing protocols.
What makes the TR Group referencing different, and why the majority of our customers are landlords, is due to how in-depth and transparent our reports are coupled with 24/7 access to any of these documents within their TR Group account.
Paul Routledge, CEO of the TR Group, said:
‘You may not be aware, but the standard 3 point multi-national referencing companies do not cross reference applicants bank statements – which is common practice at Tenant Referencing UK. Anyone can call an employer and a previous landlord, but if official documentation hasn’t been obtained or cross referenced with bank statements (and any part of the reference is found to be untrue at a later date), then the agent will be held liable for all rent arrears and/or costs associated to a landlords loss.
It’s interesting to note that since the announcement of a Tenant Fee Ban in England, we have seen a notable increase in the amount of landlords ditching their agent and coming to us for the full package; cutting their costs considerably but moreover, providing them with the peace of mind that proper referencing is taking place.
So I urge any landlord who is using an agent to make sure that they are using our 9 point referencing procedures, otherwise they are at risk of a similar situation happening to them.’
Find full information on the proactive TR Group discount packages landlords can access to advertise a property, reference in full and guarantee their rent here: http://www.landlordreferencing.co.uk/welcome-landlord/
Letting Agents please visit: http://www.landlordreferencing.co.uk/letting-agent-letting-services/