When it comes to rogue tenants the bulk of the financial losses are felt by the landlord but they also have a big financial impact on letting agents as well.
Our research has revealed how letting a rogue tenant slip through the net can come at a significant cost for letting agents, ranging from loss of income to legal action and a tattered reputation.
It is estimated that the average rogue tenant occupies a property for up to 9 months. If, during this time they refuse to pay rent, the financial loss to both landlord and letting agent can be substantial. In fact, based on the current average UK rent, it would total £9,927 in lost rental income.
However, this isn’t where the cost stops, because a rogue tenant might also cause intentional damage to a property. The cost of rectifying such damages can run into the thousands of pounds and when coupled with the cost of the legal fees required to go through the eviction process (£1,765), the total cost of a rogue tenant can climb to a gut-wrenching £34,797.
This will, of course, rise and fall depending on the price of rent. In London, for example, the overall cost of a rogue tenant comes in at an average of £41,358.
What damage do rogue tenants do to letting agents?
The financial loss caused by a rogue tenant will often hit a landlord’s pocket the hardest. But the agent responsible for letting and managing the property can also face serious consequences.
First and foremost, there’s a good chance they may lose the future business of the landlord.
It was, after all, the letting agent who allowed a rogue tenant to move into the property. With proper due diligence such as identity verification and a fraud check the agent should have been able to prevent such an ordeal from occurring.
There’s also the very real risk of wider reputational damage, but even if a rogue tenant results in the loss of just one client, the financial repercussions are still significant.
If the agent was responsible for finding tenants and collecting rent – for which the average monthly fee is 8% – the annual loss is an average of £1,059. If the agent was also responsible for full management of the property – for which the average fee is 15% – this annual loss increases to £1,985.
It is also possible that the landlord could file a negligence claim against the letting agent. This might focus on a breach of service contract, or on breaking the Sale of Goods & Services Act 1982. The landlord could then claim that, by allowing rogue tenants to occupy their property, the agent has failed to act with due care and skill.
This could also lead to a complaint being made to the Property Redress Scheme or the Property Ombudsman the result of which can be a fine as well as exclusion from the organisations.
There is not a letting agent in the country who wants to let a rogue tenant occupy their client’s property and it remains one of the most time consuming, stress inducing and costly mishaps one can make.
While in addition to serial offenders to move from property, there are also professional criminal organisations seeking to take advantage of the situation. Organisations who utilise a property as a base for their own financial gain and criminal activity, while often leaving a wake of destruction in their path.
Such organisations have constantly evolved to ensure they appear as legitimate as possible, with forged identities, references and financial histories and these fraudulent personas can be extremely hard to detect for those not professionally trained to flag them.
There is a simple solution to a lot of this. Thorough due diligence using expert service and technology can help prevent letting agents for working with rogue tenants or criminal organisations. Having robust screening processes in place which includes electronic Identity Verification can act as a deterrent and put off potential fraudsters.
For letting agents if others an additional level of protection for both them and their landlords while the costs a ID checks can be as little as £1.50 which compared to £1,000s in loss rent and damages is insignificant.
Photo by Ismael Sanchez