A case that The Property Ombudsman (TPO) was asked to review came from landlords against a letting agent in connection with the referencing completed by the agent when a tenancy commenced. The tenants had refused to pay the rent and the landlords were faced with losses of £9,171.60.
The landlords said that the agent did not complete the appropriate referencing checks, which resulted in the tenants accruing rent arrears and causing damage to the property. The landlords said that the referencing process did not highlight historic and current debts when considering affordability of the monthly rental commitment. They placed the responsibility for the losses they incurred with the agent. The agent responded saying that they explained to the landlords the tenant’s circumstances and advised them that the tenants had passed the referencing procedures that were in place, and which were detailed in their terms of business.
Under Paragraph 11b of the TPO Code of Practice for Residential Letting Agents (the Code), the agent was required to take references on the tenants appropriate to the circumstances of the application. This included proof of identification, residence, income and a credit check.
The agent’s referencing procedures should usually be by way of a referencing service provider and they were required to provide the landlords with all relevant facts relating to the application, to enable them to make an informed decision, regardless of whether the tenants had met, or failed to meet the referencing criteria. The Ombudsman could not hold the agent responsible for the actions of third parties, for example the tenants and the referencing provider, but considered the agent’s actions in relation to their obligations.
The Ombudsman could not hold the agent responsible for the actions of third parties.
The Ombudsman was provided with the reference report conducted on both tenants. This sought to consider the tenants’ financial ability to afford the property via residence check, credit check, employment check and, where relevant, a landlord reference. The report for the tenants stated that the overall decision was “Accept”. Therefore, in accordance with their obligations under Paragraph 11g of the Code, the agent was required to relay to the landlords the content of the report, and that the tenants had met the required referencing criteria.
The Ombudsman was critical of the agent’s record keeping, as she was unable to conclude with certainty the information they relayed to the landlords in relation to the referencing reports obtained, to show that they communicated all relevant facts (including two young children also occupying the property) to enable the landlords to make an informed decision about the tenants’ application.
The landlords stated that the referencing report did not highlight a mortgage which they say the tenants had at the time of their application. However, the referencing provider conducted a search against the applicants’ credit file and reported that no adverse information was identified – this included a search for County Court Judgements and the presence of a bankruptcy order.
The landlords also commented that no personal references were taken out on the tenants to show their character, but this is not a usual reference for an agent or referencing provider to obtain. Where a potential tenant is in rented accommodation at the time of referencing, a landlord reference should be obtained to check if the tenant has paid their rent on time and to ask the previous landlord how the property had been kept and if they would rent to the tenant again. In this case the application from the tenants indicated that they were living with friends or family which had been checked against the electoral roll.
From the evidence provided, the Ombudsman was satisfied that the agent fully complied with their obligations under paragraphs 11b of the Code, in relation to the referencing they conducted. However, when considering their responsibilities under paragraph 11g of the Code, she was critical of their lack of record keeping to demonstrate that they informed the landlords of the content of the reference reports and that two young children would also be residing at the property.
The Ombudsman supported the complaint on this basis and considered that the shortcomings in service caused the landlords some avoidable inconvenience. However, the Ombudsman did not consider it to be fair or reasonable to direct the agent to reimburse the landlords for the rent arrears accrued during the tenancy.
An award of compensation of £50 was made, reflecting the shortcomings in record keeping that had caused a degree of inconvenience.