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, research from identity verification checks provider, Credas Technologies, highlights that this isn’t where the cost stops, because a rogue tenant might also cause intentional damage to property. The cost of rectifying such damages can run into 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 AML due diligence, which is in itself a legal requirement, 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.
Tim Barnett, CEO of Credas Technologies says: “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.
"Unfortunately, we’re not talking about the occasional bad apple who refuses to pay their rent, we’re talking about professional criminal organisations. Organisations that utilise 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.
"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.”
