Purplebricks faces investigation over tenant deposit failures
Online estate agency Purplebricks is reported to have set aside millions to cover a blunder which may have affected its lettings business tenants.
The company has recently warned that its lettings management business may face claims for a historic failure over deposit registrations, and that it was finalising the amount it would need to cover those claims, estimated to be between £2m-£9m.
In a statement released on Monday, Purplebricks said that the potential claims are related to an alleged failure to legally inform tenants that their deposits had been put into a national protection scheme.
“During an internal review the company recently became aware of a process issue in how it has been communicating with tenants on behalf of its landlords in relation to deposit registrations.
Further enquiries into this matter are currently being conducted and the communications process is now being corrected.
In light of the above, the company believes that it is prudent to provide for any potential future claims which could arise under the Housing Act in relation to this regulatory process issue.
Purplebricks is now in the process of finalising the level of provision required and associated disclosures and has therefore taken the decision to delay its results for the half year ended 31 October 2021, which were due to be published on 14 December 2021.”
Purplebricks’ statement on Monday followed a story published by the Daily Telegraph which revealed that the cost of liabilities could, in fact, be around £30m and dated back to as early as 2012.
As a result of the news, shares for Purplebricks fell by 21% on Monday. Shares in the year-to-date period had already fallen by 70% due to the slowing and insufficient supply of new instructions. Purplebricks released a statement in November commenting that:
“This imbalance has resulted in new instructions coming to market being approximately 23% below the comparative period last year.”
Propertymark has since announced that it is launching an investigation into Purplebricks for potential tenancy law breaches. David Oliver, head of Propertymark Compliance, said:
“As a representative body we take any allegations against our members incredibly seriously and we will be investigating the claims of failure to properly register tenancy deposits by Purplebricks.
Legal procedures exist to protect both agents and their clients. Performing them properly not only protects agencies but is paramount for consumer confidence, providing transparency between businesses and their customers.”