Purplebricks’ woes have continued this week after the estate agency’s share piece dropped by a further 20% during yesterday’s trading on the London Stock Exchange, to 25p a share.

This followed news that it had set aside between £2 million and £9 million to meet the potential costs of paying fines to thousands of its tenants whose deposit paperwork it is alleged the company has not managed properly in the past.

The hybrid agency was forced to comment after initially refusing to reveal the extent of its exposure to the IT glitch But after the Daily Telegraph published a story yesterday morning claiming it could face a bill of £30 million, the company was forced to reveal some details.

Tenants

But it was also claimed yesterday by legal firm Phoenix Solicitors that there are between six and seven thousand tenants involved.

Spokesperson Alisha Butler told Sky News that these tenants included those who had either not had their deposit protected correctly or have not been given the correct prescribed information. It also claimed that she understood some tenancy deposit paperwork had been pre-signed and therefore had dates starting before the tenancy began.

Propertymark warning

David Oliver (pictured), Head of Propertymark Compliance says: “It is important that any allegation made against an agent be substantiated with viable evidence. As a representative body we take any allegations against our members incredibly seriously and we will be investigating the claims of failure to properly register tenancy deposits by Purplebricks.

“Legal procedures exist to protect both agents and their clients. Performing them properly not only protects agencies but is paramount for consumer confidence, providing transparency between businesses and their customers.”

Agent response

“As a concept Purplebricks – an online national agent with no physical offices, a tiny workforce, and a cash upfront fee model – should be a cash cow that cannot fail given it has low running costs and instant cash each time a property is listed,” says proptech and estate agency industry figure Andrew Stanton.

“But after close to £460 million of investment and ‘cash’ from customers flowing through it in the past six years, its share price has gone from 96p to 568p to 25p. And its ‘cash at the bank’ has dwindled from £180 million to some £56 million, with looming liabilities that could eat all of that money if litigation that seems imminent forces fines upon them.

“And yet it consistently lists more property than any other agent annually in the UK so, clearly, it has a market and yet it’s in trouble. Why?

“Mis-steps by those within the C-Suite, no clear strategy for the past four years, low spend on technology which should have been the key area of expense, a propensity for vanity projects, and worst of all ‘perceived indifference’ to the needs of the vendor-client.”