A case that The Property Ombudsman (TPO) was asked to review came from a landlord against a letting agent over concerns that he was mis-sold a No Deposit Option for the tenancy.
The landlord was seeking a refund of the solicitor and court costs that he incurred to remove the tenant from his property following the build-up of rent arrears. The landlord considered that the agent failed in their service by recommending a product that was not suitable for him, and as a result he felt they were responsible for his financial losses.
The agent had apologised for any frustration the landlord may have experienced and acknowledged that their communication did not meet their usual high standard. However, the agent did not offer the landlord a gesture of goodwill leading to the case being escalated to TPO.
The landlord felt that he should be compensated for legal costs.
This dispute stemmed from the landlord stating that he was frustrated that he was sold the No Deposit Option (NDO) which he subsequently believed was not suitable. He also felt that communication from the agent about the product and the tenant’s rent arrears was poor.
The Ombudsman noted that the landlord referred to incorrect information he was given about the NDO by the agent during telephone calls. The agent denied this and as the Ombudsman was not party to these conversations, she was unable to determine exactly what was said and therefore could not use this information in her decision.
However, a letter signed by the landlord stated:
“In the full understanding of the situation, the Landlord acknowledges and accepts that: The Proposed Tenant noted above is unable to satisfy the reference criteria of [agent] as detailed above:
- The Premier Rent Guarantee Service will not be available for this Tenancy.
- It has been approved for the No Deposit Option to go ahead on this Tenancy. In the full understanding of the situation the Landlord authorises [agent] to proceed with the letting of the Property to the proposed Tenant.”
Two days after signing, the landlord was sent an email from the agent which confirmed the Tenancy Agreement would include the NDO. The Ombudsman was therefore satisfied, based on the two events outlined above, that the landlord agreed to the NDO for the tenancy.
Paragraph 13o of the TPO Lettings Code states, “Where a deposit replacement product (e.g. such as insurance) is proposed in place of a traditional deposit, the potential advantages and disadvantages of the product must be explained in clear terms to the Tenant and the landlord and both party’s agreement sought before proceeding.”
From the evidence provided, the Ombudsman was not satisfied that the agent had demonstrated that they fully explained the potential advantages and disadvantages of the NDO product to the landlord before he agreed to allow the tenant to use this for the property deposit. This was because the agent had provided a document signed by the tenant that fully explained the NDO product, but no corresponding document was provided to the landlord to enable him to understand the important Terms and Conditions.
Whilst the Ombudsman concluded that this would have caused the landlord undue aggravation and inconvenience, she also took into consideration that the amount paid to the landlord from the NDO product was higher than the standard deposit amount that could have been legally held in a traditional deposit arrangement.
Concerning communication surrounding the rent arrears, Paragraph 14d of the Code states, “The agent must draw a landlord’s attention to a build-up of serious rental arrears and should seek appropriate instructions from the landlord or the landlord’s professional advisers.”
The landlord stated that once the tenant had stopped paying rent, he was always ringing the agent for an update, however they did not keep him informed of the situation. However, from the evidence provided, the Ombudsman was satisfied that the agent kept in touch with the landlord, the tenant and the guarantor during the period of the rent arrears.
That noted, it was observed that there were instances where the tenant had contacted the agent with promises of payments which did not appear to have been relayed to the landlord. Therefore, the Ombudsman considered the agent’s communication regarding the arrears could have been more frequent at times which would have alleviated some of the landlord’s frustrations and the feeling that he was not being kept informed.
The landlord felt that he should be compensated for the court and solicitor costs he incurred due to the tenant not paying rent and the damages to the property. However, paying the rent and looking after the property are contractual obligations for the tenant, as outlined in the Tenancy Agreement. The agent could not fairly be held responsible for the failure of the tenant to comply with the Tenancy Agreement and therefore the Ombudsman did not conclude they were liable to cover the solicitor and courts costs claimed by the landlord.
However, the agent’s failure to provide the landlord with the terms and conditions of the NDO and their shortcomings in not always keeping the landlord up to date regarding rental payments, led the Ombudsman to find that an award of £150 was suitable as compensatory redress.