The impact of a rogue tenant on letting agents

While the bulk of the financial losses are felt by the landlord, research from Credas Technologies, the leading identity verification checks provider, has revealed how letting a rogue tenant slip through the AML net can come at a significant cost for letting agents, ranging from loss of income to legal action and a tattered reputation.

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, this isn’t where the cost stops, because a rogue tenant might also cause intentional damage to a property. 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 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. 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.

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 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.

“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.”