Red faces for Purplebricks as problem could be nine times larger for

On Jan 16, 2022

Any “no-fault” eviction notice issued by a landlord using the online estate agent, and who was not served the correct documents, is likely to be anulled

Purplebricks Group PLC (AIM:PURP) looks to be in even deeper financial trouble with its landlord customers, according to reports that errors by the online estate agent could lead to tenants claiming nine times their deposit as compensation.

Initially, it was calculated that the company faced around a £30mln bill for systematically failing to provide tenants with the correct documents for the government’s deposit protection scheme.

This oversight will result in its landlord customers having to pay up to three times the deposit as compensation, which will in turn be billed to Purplebricks.

On top of this, the Telegraph reported that any “no-fault” eviction notice issued by a landlord using Purplebricks, and who was not served the correct documents, cannot now face a court-sanctioned eviction.

Under the Section 21 rules, where landlords need to go to court to evict tenants, the landlord must show that the tenant’s deposit has been properly registered.

For all those occasions where Purplebricks has failed to serve the correct documentation this will no longer be possible.

What’s more, for Purplebricks all the tenants that have been evicted via Section 21 notices that were invalid can now claim back up to three times their deposit.

As this covers any time the lease was renewed and proper documentation was not served, it could mean those whose leases were renewed twice could claim nine times their deposit as recompense and cost landlords at least £5,000 on top of the fines for inadequate deposit documentation, the Telegraph found.

Lawyers suggested courts were likely to rule in favour of the tenant for any ongoing eviction.

Purplebricks, which said it immediately stopped serving new Section 21 notices as soon as the mistake was identified, acknowledged the problem at the start of this week, calculating a potential risk in the range of between £2mln and £9mln.

However, red flags were perhaps raised for some investors when the company’s chief financial officer, Andy Botha, stepped down in October, with replacement Steve Long appointed to join in the first quarter of 2022.