Purplebricks PLC to pay millions for lettings deposit lapses

Purplebricks (AIM:PURP) Group PLC said it faces a significant financial hit from how it has been registering tenants’ deposits.

Early provisional estimates by the company suggest a potential risk in the range of £2m-9mln, though reports last night had suggested a total bill of as high as £30mln.

Purplebricks added it has delayed the publication of its interim results, for the half-year to 31 October 2021, while it calculates the extent of the provision.

The problem, which was identified in an internal review, follows a profit warning last month from the online estate agent sparked by a slowing in the UK housing market.

In a statement today, Purplebricks said that during the review it became aware of “a process issue in how it has been communicating with tenants on behalf of its landlords in relation to deposit registrations”.

As a result, it has decided to set up provisions for future claims that could arise under the Housing Act.

The overnight reports suggested the AIM-listed group had not given documents to tenants explaining their deposits had been placed in a national protection scheme.

This rule was introduced in  2007 to stop landlords from hanging on to the deposit money when a rental period ends.

As a result of that legislation, the explanatory documents have to be served within 30 days of a deposit being paid and if they are not the tenant is entitled to claim back up to three times the value of the deposit within a six-year limitation period.