Landlords could face fines after Purplebricks fails to protect tenancy deposits

Buy-to-let landlords who recently let their properties through Purplebricks could potentially face fines running into thousands of pounds after it emerged that the online estate agency failed to comply with basic legislation by placing tenants’ deposits in a government-backed tenancy deposit scheme.

When renting out a property, Purplebricks, like most letting agents, opt to take a deposit from the tenant prior to the tenancy starting. The deposit gives a level of protection to landlords and means that should the tenant breach the terms of the tenancy agreement, such as causing damage or not paying rent, their client (the landlord) can then make appropriate deductions from the deposit.

However, yesterday it transpired that a number of deposits taken on assured shorthold tenancies by Purplebricks were not registered with any one of three government-backed insurance based or custodial deposit protection schemes operated by MyDeposits, Deposit Protection Service (DPS) and the Tenancy Deposit Scheme (TDS), in accordance with the rules.

A Purplebricks spokesperson said: “Due to the introduction of a new lettings IT system, a small number of tenant deposits were not paid into an authorised deposit scheme. As soon as we identified this issue, we took action and have now registered these deposits.”

Some landlords could now face fines due to Purplebricks’ error if it emerges that that the deposits secured were not protected with a government recognised scheme within 30 days.

Tenants can apply to a local county court if they think their landlord has not used a deposit protection scheme when they should have, and if found guilty, the court can order the landlord to pay up to three times the deposit within 14 days of making the order.

Landlords could also face penalties if their agent failed to comply with the tenancy deposit regulation.

If a landlord, or their agent, fails to protect a tenant’s deposit and it is reported, they may not just face substantial fines, but could find that their position is considerably weakened where a dispute does arise, whether it is over property damage or rent arrears.

Landlords should also bear in mind that it is possible that a judge may not grant a landlord a possession order when trying to evict a tenant if their deposit has not been protected within the required 30 days.

The Purplebricks spokesperson added: “We are currently communicating to the affected landlords and tenants.”

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11 Comments

  1. Bosky

    This demonstrates the problem with PropTech in general; one becomes so heavily reliant on such systems, presumably because they have bought into the fallacy that automation removes any need for human involvement of such tedious activities and one can focus on the primary job, being getting new instructions and viewings.

    We use property management software, but also I use other, more basic tools, as a backup to ensure all compliance issues are attended to in the required timescale.

    Plan for the day:- smirk in the knowledge that we are on top of admin.

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  2. Robert_May

    “Due to the introduction of a new lettings IT system”  whoever said that….  give yourself a talking to. IT systems are binary; if an operator is setting up a new tenancy deposit monies WILL have  routine to cope with legislation that’s been in place  for 14 years.

    Transitioning from an old system to a new one is probably the least complacent and most focused period a lettings and management business goes through; EVERY file gets looked at in detail.

    Blaming IT for a fundamental breach of lettings regulation should raise more eyebrows than the failure to comply.

     

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  3. GeorgeHammond78

    A bit of hyperbole in the article – provided all affected deposits are now protected, there’s unlikely to be any court cases in reality. PB may have to make a few goodwill payments to a couple of persistent whingers via the TPO  but going to court for an admin error subsequently rectified will take a lot of neck. PB’s problem with this will be where tenants have now vacated and the deposit wasn’t protected for the whole life of the tenancy. For £60 (or, whatever money claims online costs now) there’ll be a few punters out there among the great unwashed who had big deductions for dilaps.

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    1. Bosky

      Let’s not forget, it is the tenant that benefits from any fine a landlord gets for deposit protection breaches.
       
      I can see some tenants not wanting to raise a complaint for such a breach during a tenancy, not wishing to create animosity, but, my understanding is that tenants have up to six years post tenancy end to deal with this issue; also, some might well initiate proceedings if they are unhappy with how landlord/PB are dealing with issues during a tenancy. Or they might just need the money.
       
      Courts can fine landlords up to three months rent, but, assuming PB have indeed now rectified their error, a judge might opt for a lower fine, minimum one month’s rent.
       
      The problem a landlord has is if a tenant does wait a while before a claim, where does the landlord stand for subsequent action on PB for breach on contract, needing to recoup there fine and legal expenses, if PB are no longer with us!
       
      I wonder if PB have notified the affected landlords, as well as their professional indemnity provider?

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  4. AJL20

    Blaming IT system when your entire business premise is basically an IT platform is rather alarming. Any IT system is only as good as the operator and/or data entry process. There is simply no substitute for the diligence and intellect of a human being.

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  5. Bosky

    PIE stated above:- 
    Landlords should also bear in mind that it is possible that a judge may not grant a landlord a possession order when trying to evict a tenant if their deposit has not been protected within the required 30 days.
    As long as the deposit is either subsequently protected or returned to the tenant, then a landlord can rely on a Section 21 when instigating eviction proceedings. I guess it is possible if the judge was stupid!

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    1. Woodentop

      Correct.

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  6. Chris Wood

    Purplebricks…. Breaking the law?! Surely not?!

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  7. Woodentop

    Considering the agent has to issue a ‘Prescribed Information’ which the tenant has to sign  within 28 days of paying the deposit and has to notify the tenant of the process before asking for the deposit to be paid … Come on, this wasn’t an IT failure, a red herring as usual to  duck from some very poor working practices.

     

    Tell me an agent who doesn’t know what happens with deposits!

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  8. PeeBee

    Twitter is positively alive with customer complaints about Purplebricks at present.  Not that this in itself is unusual – but what screams out loud is that not one trade publication nor teaditional journalistic source seem to want to investigate the trouble at t’PurpleMill.

    This begs serious questions as to how – and why – these particular emperors are being allowed to hide their winkies behind a teflon coat.

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    1. Robert_May

      it could lead to a right hassle

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