Quarterly Case Summaries

We would like to start by wishing you a very happy New Year. In order to help agents better understand how the Ombudsman comes to decisions over complaints, we will be issuing a quarterly case summary review, giving you the opportunity to see examples of real complaints, how they were reviewed, as well as the outcome. These are a collection of case summaries which have been published in the trade press over the last quarter.

If there are any specific topics you would like us to cover, please email media@tpos.co.uk and we will endeavour to cover these in future examples.

Complaint concerning repairs, rent and deposit

A case that The Property Ombudsman (TPO) was asked to review came from a landlord concerning repairs, rent and deposit.

Issue A: Monies paid for repairs and maintenance

The landlord said that he paid £2,300 to the agent for remedial works and improvements to the property, including the repair of the broken banister.

He requested copies of invoices and photographs to show the work undertaken. However, when he gained possession of the property a year and a half later, he discovered that the work had not been completed.

The landlord therefore wanted the return of monies paid.

The 2019 edition of the TPO Code of Practice for Residential Letting Agents was considered with a particular focus on Paragraph 14b. The agent was required to respond promptly and appropriately to reasonable communications from the landlord, particularly where it related to safety regulations. Furthermore, under Paragraph 14d of the Code, they were also required to keep suitable records of repairs and maintenance carried out.

The agent was therefore expected to have kept copies of invoices on file and provided them to the landlord upon his request. No written evidence in this regard was provided by the agent.

The lack of work led the then tenant to contact the local council regarding the condition of the property. The landlord was made aware that an inspection was to take place to determine whether there were any hazards that needed to be addressed. The tenant vacated the property shortly after this and it was at this point that it became apparent to the landlord that the repairs and maintenance had not been completed.

The Ombudsman was not satisfied that the agent conducted the repairs and maintenance requested by the landlord and therefore supported the complaint.

Issue B – Rent

The landlord stated that the agent arranged two tenancies, both of which fell into rental arrears, and neither were addressed appropriately.

Under Paragraph 13a of the Code, the agent was required to use legally acceptable methods to obtain prompt rental payments from the tenants. They were also required, under Paragraph 13b of the Code to have procedures to notify the landlord and the tenants of rent that had become appreciably overdue. Finally, under Paragraph 13d of the Code, they should have drawn the landlord’s attention to a build-up of serious rental arrears and sought appropriate instructions.

From evidence provided, the landlord only received a statement of account for rental payments at the beginning of both tenancies. Thereafter, it was apparent that the tenants fell into arrears.

There was no evidence to suggest that the agent had appropriate procedures in place to communicate with the tenant and landlord in such circumstances. Had the landlord’s attention been drawn to the serious build up of arrears, he could have made an informed decision as to whether to continue with or to end the tenancy, given the tenant’s breach of the Tenancy Agreement.

TPO cannot make an award for rental arrears owed by tenants. However, the Ombudsman was not satisfied that the agent met their obligations to deal with the arrears appropriately and considered they caused undue aggravation, distress and inconvenience which merited an award of compensation.

Issue C – Deposit

The landlord said that a deposit of £650 was taken by the agent for each of the two tenancies, but it was kept and not passed back to him as part reparation for the rental arrears.

A deposit should have been taken as security to the landlord for any damages to the property and/or any unpaid rent for the period of the tenancies. At the end of a tenancy, an agent should communicate with the landlord, to establish whether they wish to make any deductions to the deposit, which must then be communicated to the tenant.

There was no evidence to indicate that the agent communicated with the landlord at the end of either tenancy to ask whether he wished to make any deductions to the tenants’ deposits. Given that both tenancies ended with at least three months’ rent arrears, it was reasonable to conclude that the landlord would have intended to withhold the full amount to compensate for some of the arrears. Likewise, the tenants should have been contacted to advise of the intended deductions.

The landlord said that the first tenant’s deposit was retained and that he was informed the monies would be used to carry out repairs and maintenance of the property. However, he confirmed that he did not authorise this and also claimed that there was no evidence of the monies being used for this purpose, given the condition of the property after the second tenancy.

Due to a lack of communication from the agent, the Ombudsman believed that the landlord was deprived of the opportunity to obtain the deposit to use towards rent arrears and therefore supported the complaint.

Outcome

All complaints were supported and merited an award of compensation.

An award of £4,000 was made to reflect the £2,300 paid to the agent for repairs, the deposits of the two tenants who vacated the property with rental arrears (£650 for each tenancy) and an additional £400 for aggravation, distress and inconvenience caused.

* This Case Study was featured in Property Professional Magazine in 2022

Complaint over probate, tenure and communication

A case that The Property Ombudsman (TPO) was asked to review came from prospective buyers concerned with the performance of an estate agent they were attempting to purchase a property through. Issues included probate, tenure and communication.

The prospective buyers said they believed, based on the agent’s marketing details, that they were buying a freehold property. However, during conveyancing they found it was leasehold and said if they had known this at the time they would not have looked or made an offer on the property. This impacted their mortgage application and delayed any progress to exchange of contracts. In addition, although the buyers were aware the property was a probate sale, they had not been made aware that two Grants of Probate (GOP) were required and only one was available. The buyers sought a refund of their costs which they claimed to be £2,749.

The agent’s response was that they were a sub-agent for another agent and not made aware of the issues stated. As such they refuted the complaints made against them but made a goodwill offer of £150, which was rejected by the buyers.

Investigation

Probate –Paragraph 5e of the Code of Practice states that an agent should take reasonable steps to satisfy themselves that the seller is entitled to instruct (such as obtaining title information from the Land Registry, Power of Attorney etc).

Despite being instructed as a sub-agent, the Ombudsman noted that this does not abrogate agent’s responsibilities under the Code 5d which states “if you are instructed as a sub-agent or share listings via a website, you must continue to act in accordance with all relevant provisions of this Code of Practice.’

Given the combined purposes of paragraphs 5d & 5e, the Ombudsman would have expected the agent to have carried out due diligence by checking information with the instructing agent before marketing. Whilst the Ombudsman acknowledged that the sale was particularly unusual in requiring two separate GOPs with only one being completed, had the title deed been examined, some discrepancies would likely have been highlighted leading to further questions before marketing commenced.

Tenure – The marketing details described the property as being freehold, however, sometime into the conveyancing, the buyers were advised by their solicitor that it was in fact leasehold.

Although it was apparent that the sub-agent sought and gained approval of the property details from the original agent before marketing commenced, the Ombudsman said that the sub-agent should have checked the title of the property, which would have confirmed the correct tenure in accordance with Paragraphs 7j and 7k of the Code.

The error made by the agent by describing the property incorrectly as freehold impacted the buyers’ transactional decision and caused the buyers avoidable financial loss.

Communication
The buyers complained that communication was poor throughout the conveyancing process. Much of their complaint centred on the difficulty in getting responses from the vendor’s solicitor, which was outside the control of the agent.

When the initial concerns with the probate issues were raised, it was clear from the agent’s notes that they attempted to gain answers and kept in regular contact with both the buyers and the other involved parties.

However, there was a gap in recorded communication regarding a revised offer made to take into account the increased deposit required. Whilst this was during the first Covid-19 lockdown, the Ombudsman would have expected to see notification from the agent of any impact on their service or consistent monitoring of the progress of the sale in accordance with paragraph 12a of the Code.

Outcome

The Ombudsman supported the complaints and considered that the circumstances merited an award of financial compensation.

The buyers requested compensation in the sum of £2,749; £749 being their actual costs and £2,000 for the stress and loss of other potential purchases.

The Ombudsman informed the buyers that the award made was intended to compensate them rather than to punish the agent for the shortcomings in service and as such are set at a level that she considered fair and reasonable in the circumstances.

The Ombudsman made an award of £850 in compensation as full and final settlement of the dispute and advised the agent that where they considered shortcomings arose as a result of the actions of the instructing agent, those were matters for the agents to resolve between them.

*This case study featured in The Negotiator Magazine/Website in October 2022

Complaint concerning a pre-contract deposit

A case that The Property Ombudsman (TPO) was asked to review came from buyers concerned with a pre-contract deposit (a commitment fee).

A pre-contact deposit of £1,000 was paid by the buyers to the agent upon acceptance of their offer.

Investigation

The buyers requested sight of related terms and conditions to outline the specific circumstances covered by the deposit. While the agent responded saying that there was no formal set of terms and conditions, they did set out some written terms regarding the nature of the deposit along with the

circumstances upon which the deposit would be refunded or forfeited. With this agreed, the buyers paid the deposit and proceeded to progress the transaction.

However, they were contacted by their solicitor who told them that whilst the chain below was complete, a Memorandum of Sale had not been issued for their purchase and the details of the sellers’ legal representative had not been provided. It came to light that the sellers had not secured an onward purchase.

After a period of over two months with no progress, the buyers requested the return of the deposit in full due to the fact the sellers were not in a position to proceed.

The agent emailed offering to reimburse £500 of the deposit instead, and said they would return the other £500 should the sale fail to complete within six months. The buyers raised a formal complaint in writing to the agent.

There was no evidence to suggest the agent responded to the buyers’ formal complaint letter until pressed by TPO to do so. Within their subsequent response, the agent reminded the buyers that, while there was not a formal terms and conditions document, they had agreed to the terms upon payment of the pre-contract deposit via email, which stipulated:

‘The commitment fee is refundable if you cannot purchase due to bad survey, ill health, any eventuality that is not directly your own fault. If you do decide to pull out for whatever reason, i.e. you found another property or something that would leave the vendor and myself [the agent] out of pocket you will receive a portion of this back proportionate to the costings involved up to that point.’

In addition to this, the agent also pointed out that the property remained off the market and therefore the sellers had not yet ended their commitment to selling the property to the buyers.

The sellers had been actively seeking a new property to purchase and it was pointed out that there was no time frame when dealing with a property transaction.

The agent added that the purpose of the ‘commitment fee’ was that the buyers were expected to remain committed to their purchase regardless of the time taken.

They repeated their offer to refund half of the deposit and the other half upon completion; or allow them to re-market the property and refund the other half of the fee once another buyer was found.

The 2019 edition of the TPO Code of Practice for Residential Estate Agents was considered, specifically Paragraph 11a which states that agents:

‘…should not generally facilitate pre-contact deposits. However, if instructed to do so, agents must ensure that before a deposit is taken, the circumstances under which the deposit is to be held, refunded, forfeited or used towards the purchase, are clearly stated in writing, agreed by the relevant parties and a copy of the agreement provided to those parties.’

As it was evident that the agent took a pre-contact deposit they were therefore required to clearly state in writing how it was going to be held and used.

While there was no formal set of terms and conditions, the Ombudsman noted that the agent’s initial email had set out the written terms regarding the deposit. However, it was not reasonable that no time limit was specified within which both parties would agree to complete the transaction. As it stood, without a timescale one party would be able to lock the other party into the agreement for an indefinite period of time.

The buyers were entitled to expect to complete their purchase within a reasonable period of time. On average, the period to reach completion of a sale following formal agreement is approximately two to three months. In this case, the transaction remained live for around eleven months after the deposit was paid.

This was an unreasonable length of time to expect the buyers to wait for the sellers to be in a position to proceed.

While the agent did offer to refund half of the deposit and the other half after a further six months if the transaction had not moved forward in that time, the time limit had since elapsed, and the Ombudsman therefore concluded that they were entitled to receive the return of the full deposit.

Outcome

The Ombudsman supported the compliant and directed the agent to return the deposit in full to the buyers.

*This Case Study featured in Property Professional Magazine in 2022

Complaint concerning the agent’s survey and valuation service

As well as dealing with complaints about agency services, The Property Ombudsman (TPO) also deals with complaints concerning surveys provided by member businesses. In this case TPO was asked to review a dispute from buyers who were concerned with the agent’s surveyor’s survey and valuation service.

The buyers complained that the surveyor failed to identify damp in the property as part of the inspection which led to a missed opportunity to renegotiate the sale price to take into account the damp issue.

The agent’s surveyor responded saying that, as per the RICS Building Survey Practice Note, they carry out random damp tests and that “where only random damp tests are carried out, damp may be located in other areas of the property which are not randomly tested.”

In this case, the Level 2 RICS HomeBuyer Report prepared by the surveyor was considered. The report provided an observation on the overall condition of the property on the day of the inspection.

Investigation

The buyers provided TPO a photograph of one of two areas that showed damp, which was taken after they moved into the property.

However, within the content of the surveyor’s report, there was no mention of damp being visible at the property at the time of the inspection and did not refer to any damp tests being undertaken.

During the course of this complaint’s procedure, the surveyor conducted a re-inspection of the property and subsequently confirmed in writing to the buyers that “the Area Director has confirmed that, at the time of his re-inspection, dampness was noted in the hallway (on the left hand external side wall) and on the wall between the kitchen and the sitting room”.

As well as failing to record evidence of any damp testing having been done, the surveyor was unable to provide any photographic evidence of the condition of the property when they carried out the inspection.

The buyers were seeking financial compensation in respect of unquantified remedial costs. With a lack of evidence from the surveyor, the Ombudsman was however unable to conclude with any degree of certainty what the condition of the property was at the time of inspection and, therefore, whether there were damp issues that should have been reflected within the report.

Nevertheless, the buyers should have been able to expect the report to clearly state, one way or another, whether damp testing had been undertaken or to have provided a warning so that further investigations could have been carried out.

On top of failing to do this, there was the absence of any photographic evidence to show the property and its condition before the buyers moved in.

The Ombudsman was critical of this.

The surveyor did make a goodwill offer of £1,000 in respect of the complaint which was rejected by the buyers.

Outcome

The Ombudsman supported this complaint and considered that the circumstances merited an award of compensation.

From evidence provided, the Ombudsman was unable to establish whether or not the damp was visible to the surveyor during the property inspection. As such, the award did not reference any direct financial loss which may have been incurred for remedial work. However, the award reflected the avoidable aggravation, distress and inconvenience caused to the buyers as a result of the issues identified.

Taking all the circumstances into account, the surveyor’s goodwill offer of £1,000 was considered to be an appropriate figure in respect of significant aggravation, distress and inconvenience caused to the buyers on discovering the damp issue at the property and the fact that they were denied the opportunity to attempt to negotiate a price reduction with the sellers in respect of any remedial work.

An award of £1,000 in compensation was therefore made.

From 1 June 2002, TPO’s Terms of Reference have been updated to ensure that if a TPO member makes an offer that the Ombudsman considers to be reasonable in the circumstances, the consumer will be advised to accept the offer and the case will be closed without the need for a formal investigation.

*This Case Study featured in The Negotiator Magazine/Website in August 2022

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