LATEST: Purplebricks admits ‘deposits glitch’ fines could total £9m

Purplebricks is investigating the matter and talking to tenants but says bill will be much less than the £30m quoted by a national newspaper.

purplebricks boards

Purplebricks has admitted that it faces fines totalling ‘millions of pounds’ following its failure to complete the mandatory paperwork for an unspecified number of deposits.

The company has told investors that, although it is aware of the problem, it expects the “actual financial impact to be significantly lower” at around £2-9 million.

This follows claims by an unnamed industry source reported by The Telegraph that the company faces a final bill for the IT glitch of some £30 million.

Based on an average UK rental deposit of £800 – according to HomeLet – this means some 3,700 deposits could be involved, assuming all the tenants whose deposits were not properly processed make a claim for the three-times their deposit they are due under deposit protection regulations.

Deposit paperwork

The £30 million claim by The Telegraph follows weeks of speculation on the number of deposits involved after Purplebricks’ automated deposit protection IT system did not properly complete the deposit protection paperwork within the 30-day statutory limit.

Purplebricks has released a statement saying it is now communicating with the tenants involved about the ‘administrative issue’, that the deposits have remained protected and that it is “investigating the matter fully”.

Statement

It says: “During an internal review the Company recently became aware of a process issue in how it has been communicating with tenants on behalf of its landlords in relation to deposit registrations. Further enquiries into this matter are currently being conducted and the communications process is now being corrected.

 “In light of the above, the Company believes that it is prudent to provide for any potential future claims which could arise under the Housing Act in relation to this regulatory process issue. Early provisional estimates by the Company suggest a potential financial risk in the range of £2m-9m. Purplebricks is now in the process of finalising the level of provision required and associated disclosures and has therefore taken the decision to delay its results for the half year ended 31 October 2021 which were due to be published on 14 December 2021.”

The newspaper article and subsequent announcement this morning are likely to further impact the Purplebricks share price, whose stock, unlike most of its traditional high street competitors, has taken several hits over the past few months.

Contributing factors have included its decision to bring self-employed staff in-house, a potential ‘class action’ by former LPEs and a gloomy trading update in the Autumn.


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