I’ve stumbled across this community as I have become desperate for help in what I think is an unusual case……
In 2021 we let our property through an agent to a couple who had just sold their own home for over £2M. Tenants passed credit referencing and no CCJs. They paid a years rent up front £50,400 plus deposit scheme. Tenants owned their own Ltd property development company and were Directors. After first year, tenants continued paying monthly on time for a further 19 months. Then they started being late and stopped altogether 5 months ago. Turns out they have got into financial difficulties. Section 21 was issued in July, section 8 issued also and they should’ve vacated in September. Our insurer (DAS) has covered us for the legal work and eviction so far (awaiting court date). However, our RGI has refused our claim on the grounds of lack of a reference from a “financial source”. They say we should’ve got evidence to prove ongoing affordability. They obviously didn’t have employers references because they weren’t employed. Even if they were employed, these references don’t guarantee a future job indefinitely so how is this any different? They paid a year upfront! An employee could be out of a job within a year. Am I justified in taking this further? We are owed £20k and we are not risk takers and neither are our agents. Where do I go from here? ?
You say they passed credit referencing, so I would have thought that was acceptable. Who did that credit reference? Do you have a copy of it?
Yes, we have a copy of the credit reference from Rent4Sure. No adverse history found and a high credit score, low risk
Have your insurers said that isn’t acceptable? Presumably it would have included some sort of verification of income? What is the wording in your insurance schedule etc about referencing requirements?
It says……
The reference must include; a written reference from a previous managing agent or landlord, an employer (or any other financial source) and a credit history check (including the enforcement of judgements office, county court judgements and bankruptcy).
Ok, so you need to check if the reference included that. If it didn’t, you aren’t covered, as they have declined your claim on the strength of the terms you agreed to.
If it did include all that required, you are justified to take it further & prove it to them.
There was no previous landlord - confirmed by letting agent testifying tenant owned their own property prior to tenancy starting.
It comes down to what is defined by ‘other financial source’
Did you have written proof of their income? How did you and/or your referencing company prove their income? A copy of a HMRC tax return / proof of payment, might be acceptable as a written evidence, but the big question is was anything done to prove income and ongoing affordability.
Just because someone can afford 12m upfront from selling a house, doesn’t mean they have 5 cents of monthly income to pay rent, once the pre-payment runs out. This I suspect is what the insurers need to know you checked before allowing them to move in.
Did the reference agency obtain their financial info re earnings since they were self employed?
In my case, my tenant got approval on the basis that she paid six months rent in advance and would continue to do so throughout contract term.
After the first six months she took it upon herself to pay monthly, did so for a couple of months then stopped paying completely. My insurance asked the agency for any financial paperwork, however there was none in existence so I was refused RGI. They agreed to pay for legal letters and eviction, however.
Check for any specific financial docs including proof of savings that would have been submitted during referencing; the insurance should consider this. In my case, there was nothing to show, unfortunately.
Oh I’m sorry to hear that.
Has there ever been any comeback to letting agent being negligent in carrying out adequate checks?
They usually have a clause in their contract negating their responsibility
If they didn’t most would be out of business
Did the agent arrange the RGI? If they found & referenced your tenant, and also arranged the RGI, you would expect them to have made sure this was all compliant with the insurance rules. If they haven’t, I would argue you could try & hold them liable, subject to their written T & C’s that you likely would have signed.
If you arranged the RGI, I suspect you could only try & hold them liable, if you had told them what the insurance obligations were, and hence what you expected them to do for their money.
Regretfully, I suspect (as many people do) that you or the agent probably just took the insurance without actually reading its T & C’s.
Hi Lainy, you say they “were” Dirs. Have you checked Companies House to see exactly how many appointments they have/had and in which Cos? You might find that they ARE still active? And discover other possible Co’s/sources of income? Even if its share dividends? Just need their names to start search, then, from the results, scan down to check corresponding DOB’s (which you’d have had at outset doing R2R checks, etc.) It will only show Month/Year of Birth, but the area their Registered Office is in might help? Also, with some of the older-established Co’s, if you go to the Transaction History, the earliest document on the last page (Incorporation Certificate) may allso show Day of Birth.
N.B. The first match you find may show just 1 Appointment, but you do need to carry on searching as Co’s House notoriously never audit or combine all entries relating to the same person. When you open their entry, it should give a list of all Directorships held (and Co. Secreary roles), You could also search by Postcode of the Co’s Reg’d Office - for any other based here.
There are other businesses that provide more data, including some financial re: the Co. e.g. Turmover, etc.each year. [Endole springs to mind, which used to be in the public domain,if still operating?] Or you could pay for such data.
I think alarms bells would have rung for me due to the fact that they were running a property development company yet are renting!! Also Insurance companies will wriggle out of claims in any way that they can, it sounds as though yours are being particularly awful. Best of luck and I hope you are successful. Agents also will not be liable for anything in anyway.
I have nothing useful to offer other than to restate what I have always claimed about RGI - not worth the paper it is written on (paraphrasing a more toilet based reference involving wiping ones bottom).