Mortgage Introducer have reported on research carried out has revealed the cost of rectifying damage caused by tenants can run into thousands of pounds.
It can be seen here, and says:
If a rogue tenant occupies a property for up to nine months and fails to pay rent, the financial loss to both landlord and letting agent would total almost £10,000 in lost rental income, based on the current average UK rent.
Indeed there are many ways that tenants can hurt landlords and letting agents, and the damage that they can inflict can cost so much more.
Research from Credas Technologies has revealed that 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 can climb to an eye-watering £34,797.
Credas noted that this cost will rise and fall depending on the price of rent. In London, for example, the overall cost of a rogue tenant’s damage comes in at an average of £41,358.
The identity verification checks provider also explained that while the bulk of the financial losses are felt by the landlord, negligence on the part of letting agents – such as letting a rogue tenant slip through the AML net – can come at a significant cost for agents, ranging from loss of income to legal action and a tattered reputation.
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.
Credas added that 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 and 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.
Tim Barnett, chief executive of Credas Technologies, said that while probably no letting agent in the country has intentionally allowed a rogue tenant to occupy their client’s property, this remains one of the most time consuming, stress inducing, and costly issues.
“Unfortunately, we’re not talking about the occasional bad apple who refuses to pay their rent, we’re talking about professional criminal organisations. 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,” he pointed out.
Barnett said that such organisations have constantly evolved to ensure they appear as legitimate as possible, with forged identities, references, and financial histories.
“These fraudulent personas can be extremely hard to detect for those not professionally trained to flag them,” he added.
“While customer due diligence may be treated as a legally required box ticking exercise for some agents, it plays a vital role in the war against this illegal rental underworld and can prevent agents from incurring serious financial and reputational damage.”