The Property Redress Scheme has expelled an agent operating a guaranteed rent scheme which failed to pay £150,000 to a former landlord client.
The agent was then required to pay the landlord £25,000 by the Property Redress Scheme - the maximum the scheme can award - and has now been removed from the scheme for refusing to abide by the ruling.
The landlord is now seeking to recover the £150,000 via the courts - and for that reason, the Property Redress Scheme says it cannot name the agency involved.
The case involved rent to rent arrangements for eight properties, which the agency allegedly struggled to fill due to the pandemic.
The landlord agreed to reduced rent payments whilst the agent tried to find tenants, but the agency then apparently failed to comply with its contractual obligations to the landlord.
The agency was also found to have used an unregistered handyman following a gas leak, resulting in the landlord reporting the incident to Gas Safe and the HSE.
This all amounted to a significant financial loss for the landlord, says a statement from the PRS.
Following the decision Sean Hooker, head of redress at the Property Redress Scheme, states: “Guaranteed rent, or rent to rent, operators are becoming more and more common in the private rented sector, as it offers a lower barrier to entry into the property market.
“Whilst there are reputable operators who have been providing the service for many years, there is a significant proportion of the market who are less experienced and need to make sure they fully understand their obligations and responsibilities.”
The Property Redress Scheme has also reported a 43 per cent increase in complaints relating to guaranteed rent since 2018.
It says this data represents a warning to any landlord contemplating rent to rent; problems such as loss of rent, damage to property and sitting tenants do occur regularly, mainly because the parties have not fully understood the complexities or made proper legal provisions in the arrangement.
Paul Shamplina, founder of Landlord Action and also the chief commercial officer at Hamilton Fraser, says: “In my view, if the rent to rent arrangement is not carried out diligently the landlord loses control of what is happening at the property and this is where the problems begin. With many years’ experience of dealing with evictions I would advise any landlords entering into such an agreement to tread very carefully.”