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Valuer had no duty of care to buy-to-let borrower

Friday 24th June 2011

The Court of Appeal has ruled that buy-to-let purchasers are not owed the same duty of care by the lenders surveyor as someone purchasing a property for their own domestic use.

This was the finding in Scullion v Bank of Scotland plc (trading as Colleys), which has major implications for buy-to-let purchasers, valuers, lenders and insurers.

Mr Scullion, a buy-to-let investor, lost his legal battle after buying a property on the strength of a valuation commissioned by his lender, only to find that both its value and rental income were lower than had been stated.

The result puts an end to speculation that those who joined the buy-to-let rush in the early 2000s, only to see their property prices plummet, would seize the opportunity to make a claim against valuers.

Marie-Louise Gobbi, the solicitor at Walker Morris who represented Colleys, said: The Court of Appeals judgment clarifies the extent of the duty owed by valuers in buy-to-let situations. The decision is good news for surveyors, and provides a clear basis for resolving similar claims brought in the buy-to-let sector.

Buy-to-let investors are not in the same position as ordinary domestic purchasers, and cannot assume they will automatically have the same rights and remedies. The case also provides crucial guidance on the calculation of damages in rental over-valuation cases.

Mr Scullion had purchased a buy-to-let property, valued for the lender by Colleys. The rental obtainable was only £1,050 per month, compared to the £2,000 stated by Colleys, and the property was subsequently sold.

Mr Scullion claimed Colleys had negligently over-valued both the capital value and likely rental income, and that he had relied on these valuations when deciding to purchase.

When the case first went to trial Mr Scullion was awarded damages of £72,234 based on the negligently high rental value. No damages were awarded in respect of the capital valuation which had not caused any loss.

Fundamental to Mr Scullions case was the assertion that Colleys owed him a duty of care.

However, the damages were never paid as Colleys appealed and the Court of Appeal went on to overrule the decision on the basis that the transaction was commercial in nature.

The courts reasoning was that in ordinary domestic purchases it is highly likely that the purchaser will rely on the valuation, and if it is incorrect they may suffer losses. Therefore it is right that the duty of care extents to the ultimate purchaser ie the modest residential owner occupier.

However, due to the investment nature of the purchase in this case, it was not sufficiently clear that it would have been foreseeable by Colleys that Mr Scullion would rely on its report rather than obtaining his own advice; for similar reasons there was no sufficiently clear proximity of relationship; and in any event, it was not just and equitable that Colleys should be liable to Mr Scullion because the transaction was commercial in essence.

The result was that Colleys owed no duty of care to Mr Scullion, and so had no liability to him in negligence and therefore no damages were owed.

The Court of Appeal also recognised that it was not correct to attribute all loss of revenue which Mr Scullion suffered in connection with the property to the inaccurate rental valuation. Clearly there were periods when it would have been unlet and/or unsold for reasons unrelated to the over-valuation.

The appeal decision therefore goes on to give crucial guidance as to how damages in rental over-valuation cases should be calculated and capped.

The decision is good news for surveyors. The Court of Appeal has made a strong statement that it was wrong in principle to extend the duty of the lenders valuation surveyor to purchasers in commercial cases. Domestic owner-occupier cases are seen as a justified by consumer protection principles, with buy-to-let investors less deserving of protection and more likely to obtain and to be able to afford their own valuation.

Following this decision it is difficult to envisage a commercial case in which the court might be willing to find an implied duty owed by a valuer.

As regards the assessment of damages, the Court of Appeals conclusion focuses attention on the losses actually caused by the negligence.

The explosion of interest in the buy-to-let sector and ownership of property as an investment during the recent property boom and bust has prompted a surge in professional negligence claims.

There will continue to be plenty of scope for dispute and debate, as different facts give rise to cases brought by those hoping to recoup losses suffered. However, it is thought that this case, and the important liability and quantum principles established, will encourage the swift and sensible resolution of many such claims.

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I find I can't disagree with the courts decision.

The valuation was carrieed out on behalf of the lender. There are far to many people who rely on others without accepting responsibility for their own actions. Buying investment property is a business decision and therefore the buyer must carry out his own due diligence.

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From the previous thread about this most will see my stance regarding the opportunists that follow the American style of "make a claim, it's not your fault".

The broad statement that comes from this finding is that we are business men and therefore have a position of increased responsibility, and yes we should have if only to be looking after our own interests.

Where this goes too far is that when we have a disagreement with the poor T's the same principle still seems to be applied in that seemingly they are not expected to have responsibility. A little like the house buyer for his (families) own living purposes.

My comments are perhaps a little off track, but I'm not sure there should be a greater responsibility for us to understand the value of a property, or take advice.

Protect the naive from the unscrupulous yes, but giving the foolish an easy way out after they screw up no.

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Mel, This is very interesting, particularly in view of recent correspondence. I must admit I wasn't aware that this was going to appeal.

From my own prospective, I can see the logic of Colleys case and certainly welcome this change of view, however I am concerned that the Law now appears to be inconsistent in that a Duty of Care is owned to a private purchaser (who is deemed to be in need of a duty of care) but not a buy to Let purchaser (who might be a totally inexperienced individual rather than a seasoned multiple landlord).

Conversley, the Law now implies that the Multiple Landlord with 100 properties is also in need of the duty of care when purchasing his own private residence, but not to his investments- which is crazy. This inconsistency makes for bad law, the law should not treat people differently. The Duty of Care should extend to all purchasers or not at all.

I think this appeal will lead certainly stir up some controversy within the various professions.


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I can see the arguments..... for and against.

This is the crucial bit imo..........

However, the damages were never paid as Colleys appealed and the Court of Appeal went on to overrule the decision on the basis that the transaction was commercial in nature.

I guess it could be likened to this.

You buy a bar of gold for £1000 on Monday.

On Friday gold plummets to £500 a bar.

Whose fault is that then?

Same as stocks & shares really. I lost £2000 when the Bradford & Bingly went bust. So who can I sue for wrong advice given to me by a stockbroker 3 years previously?.....short answer ...Nobody.


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You are absolutely correct.

Just like the Courts bending over backwards to protect the 'naive' tenants from the 'bad' landlords, the Courts introduced the Duty of Care some 30 years ago to protect the purchasers from 'negligent' surveyors, unfortunately it encouraged purchasers to act recklessly by not commisioning a survey on the property but to rely on a simple and brief inspection that was carried out for the lender to determine the value in order to make a lending decision. It was not a survey.

Unfortunately, this viewpoint was encouraged by the lenders and Mortgage brokers who didn't want the buyers to have a survey in case it affected the purchase/mortgage - so you can understand why sometimes the purchasers were confused - particularly that they paid inflated valuation fees (which would have paid for a survey ) if the majority hadn't been kept by the Lender as a hidden charge!


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The answer to your scenario is, it depends on the circumstanes.

When you the buy the gold for £1000 on Monday and the valuer certifies it as worth £1000, because he has checked that is the price gold is trading on the stock market on that day, then he is not negligent if the price falls to £500 on Friday. That is the market.

In the Scullion case, the valuer got the capital value right on the day of vauation (Monday), by obtaining the correct comparables that said the market value was say £800. If Scullion paid £1000 and sold for £500, Then Scullion is partly at fault for paying over the odds and the rest is the fall in the market. The Valuer is not at fault.

However, In the Scullion case the valuer also had to provide a rental valuation and he got that one wrong. On the Monday, The valuer was told the rental value was £1000 pa, he agreed, but didn't/ couldn't prove it with his comparables. Let's say it was worth £700 pa on Monday. On Friday it was worth £500. The valuer was negligent and should have valued it at £700, Scullions loss due to the negligence would be £300 (£1000 - £700). The £200 loss (£700 - £500) is not the valuers fault and is the loss in the market.

As you will have realised from the above, the critical factor is the value of the property at the date of valuation (Monday and not Friday).

Riveting as the above may be, I am in total agreement with all the comments on this topic that we take responsibility for our own decisions in this business, which includes taking the rough with the smooth.



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Furious landlords pile on to Facebook after letting agent shuts

Tuesday 28th June 2011

A solicitor has warned of the dangers of a Facebook page aimed at organising group legal action against the owners of a lettings agent which has closed down owing money.

Furious landlords and tenants who claim to be out of pocket when Thomas and Company Rentals shut its branches in Milton Keynes and Northampton have been signing up to the specially created Facebook page called Victims of Thomas & Company Rentals.

The firm’s owners, Paul Collins and Louisa Thompson, are believed to have had around 250 properties on their books when they shut down last month.

The Facebook site has given voice to dozens of complaints from landlords who claim they have not received rental payments and tenants who say they have lost deposits which were never protected. One landlord says that at one point they were owed £10,000.

But solicitor Richard Clarke has warned the angry landlords and tenants not to air their complaints on Facebook.

He has told them: “We strongly recommend you stop putting information in a public forum where anyone can read it, including Paul Collins and Louisa Thompson.”

Clarke suggests using Dropbox instead, where access can be controlled.

He has also advised against a group legal action, suggesting instead that the landlords and tenants – who have already organised a public meeting – should issue a lead claim for bankruptcy proceedings.

It is understood that both police and trading standards have been investigating.

The case is one of a rash of disturbing instances where a letting agent has shut down suddenly, with money belonging to tenants and landlords unaccounted for.

It will highlight yet again the need for the SAFEagent campaign to succeed, whereby the public will be encouraged to use only letting agents who display the logo which shows that they have client money protection insurance.

Leaders’ managing director Paul Weller said: “As the private rented sector grows, more people are using letting agents, unaware that there is no proper regulation governing them, and in particular over how they handle client money.

“Over the 28 years we have been in business, we have seen countless letting agents disappear with their clients’ rent and deposits, either by going bust or through blatant theft.”

He said the latest case highlights the “fundamental lack of controls on letting agents”.

He said: “When you consider the many potential risks to the public, it is shocking that any person or organisation can become a letting agent, with no training, qualifications or financial probity.

“Until there is proper regulation in place, unprofessional, unqualified and unethical agents will continue to operate to the detriment of unwitting landlords and tenants. This is particularly worrying at a time when more and more people are turning to the private rented sector for their housing needs.”

If you are a landlord, or an agent with landlords who were with Thomas and Company Rentals, a comprehensive briefing note has been prepared by solicitor Richard Clarke, which advises on landlords’ immediate legal responsibilities. It can be downloaded free online.

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  • 2 weeks later...


Could it be the time to make sure all landlord's and tenant's ensure they are protected?

Landlords up in arms after letting agent shuts

Friday 8th July 2011

A notice has appeared on the window of an agent that suddenly closed down saying that the company is under investigation for criminal fraud and asking for information.

The notice reads: “Warning to all tenants and landlords with Hot Homes UK. This company is currently under investigation for criminal fraud.”

It asks anyone with a complaint or information to ring the police fraud office on 0845 277 7444.

Both police and local Trading Standards are said to be taking an interest in the case. The Hot Homes website says: “Unfortunately due to circumstances beyond our control we have had to close.”

Hothomes UK opened in Plymouth last August, and handled sales and lettings. It also apparently started an EPC business, metroepc, this April, and there are suggestions that the Burridge family, who ran Hothomes, may have had at least one Home Information Pack business, Fast HIPS UK.

Details of HothomesUk.co Ltd at Companies House say the firm is ‘active’ but there is a ‘proposal to strike off’.

Companies House also lists other firms, involved in EPCs and property searches, which appear to have the same director, Jacqueline Burridge, and addresses. A company called EPCworx.com was created in May 2010. An internet forum has complaints from people who claim they paid for but did not receive their EPCs, and DEAs who claim they went unpaid.

Landlords and tenants are now extremely concerned as to their missing deposits and rents, and the whereabouts of keys held by the firm.

On one internet forum, a furious landlord said they were owed £4,630 with allegations that the deposits were not protected.

An upset tenant wrote: “I started renting through them a month ago. I paid a two hundred pound insurance policy, £675 deposit and £675 rent up front. I struggled very hard to get all this together and now when I went to pay the rent today they have gone.

“My landlord has not seen a penny so I have just paid him directly. This still leaves me £875 out of pocket and my landlord £675 out of pocket, no wonder they liked you to pay in cash!!”

The Westcountry Landlords Association said it has been receiving calls from worried landlords across the city since the weekend when businesses reported people removing items from Hothomes’ office.

Hothomes’ directors appear to be Jacqueline Burridge and her daughter Kayleigh Burridge, but it is understood the business may have also involved Mrs Burridge’s husband Tony Burridge and others. There are suggestions on the internet that Tony Burridge had been bankrupt.

Hothomes, which was thought to have employed up to eight people, was also involved in commercial sales, conveyancing and financial services.

According to the local paper, the Burridge family moved to Plymouth from North Devon in 1998 and started a business producing EPCs in 2007.

A year later they started a business producing more than 100 HIPs a week.

They started Hothomes after HIPs were scrapped.

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Could it be the time to make sure all landlord's and tenant's ensure they are protected?

What are you suggesting that landlords and tenants could do ?

It already makes perfect sense not to pay in advance wherever possible and to ensure that when paying for anything you use a credit card.

When agents handle deposits there is a set process and reciepts and documents have to be issued. So landlords should be able to check that the process has been handled correctly.

Its perfectly reasonable to have tenants pay landlords directly.....even when agents provide full management.

etc etc.

Part of the problem is landlord apathy. Many employ an agent without recommendaion or simple checks and then bury their heads in the sand expecting everything to be handled correctly.

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Could it be the time to make sure all landlord's and tenant's ensure they are protected?

What are you suggesting that landlords and tenants could do ?

Read the article is a good start Richlist and then to make up their own minds of the best way forward.

I suggest nothing other then for ALL landlords and tenants to be vigilant on who they are dealing with when they let or rent a property as clearly, as it has been shown on many occasions on this forum that there are rogue LA's and non informed landlords blissfully unaware of the pitfalls they may face if a company goes belly-up.


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I read with interest everybodies opinion on this matter, I will not comment further, save to say, that I believe Scullion is appealing in the SC. The following are a snip of objectors to the CA ruling:

Nicholas Davidson QC

Patrick Lawrence QC

Mark Simpson QC

Michael Pooles QC

Katy Manley PNLA

Simon Monty QC

Not least for reason that Smith-v-Bush now contradicts the decision in relation to the liability of the surveyor to the borrower, most say, the status quo is bad law!

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Story going around from another property website........

Tax system ill designed

The essence of the current tax system for residential property is to treat renting out residential property as an investment. In other words; as a passive activity and not a traditional business. What is needed is a taxation system that encourages landlords to actively manage and invest in their property just as the system of capital allowances encourages manufacturers to invest in plant and machinery. Now Im no tax expert; but an idea that springs immediately to mind would be allowing landlords to off set improvement costs against rental income or even their personal income from other sources.

Landlords now provide accommodation for an increasing proportion of the countries population at little or no cost to the taxpayer. Unless we get sufficient tax breaks to improve our property; many of us will lack the financial incentives to improve and upgrade our properties. To me this is the unpalatable truth of buy-to-let and not the odd slum property.

End of..........

This was me 5 years ago when I was considering selling a rental property to raise some money for another project coming my way. The height of the property boom 2006....or near enough.

I thought at the time it was pretty stupid that I was not permitted to install double glazed windows or a spanking new bathroom suite or a new kitchen and claim some form of tax relief for doing so but if I went on and did these improvements and sold up then I could claim tax relief for the improvements on selling.

I couldn't really re-let this property in it's current state as everything was beginning to look tired and in need of replacement.

In the end I sold up....got a cracking good price as everything was nearly new and professionally carried out. My accountant at the time did the business and everyone was happy.


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Landlords 'refusing to take people under 34' ahead of housing benefit cut

The chief executive of homelessness charity Thames Reach says private landlords are already refusing to take people under the age of 34 ahead of further housing benefit cuts which come in from January 2012.

From that date, single people under 35 will be paid a shared room rate rather than a rate for a full flat, after the Government announced plans to extend the shared room rate in the Comprehensive Spending Review (CSR).

The plans will mean those under 35 and living in even a modest one-bed flat will have to find a room in shared accommodation which they can afford.

Housing charity Crisis warns that 88,000 people affected by the move are at risk of homelessness.

Jeremy Swain, chief executive of London's Thames Reach, told this month's 24housing magazine that the changes are already beginning to have an impact on how landlords act.

He said: "Already our schemes that work to help people find private rented sector accommodation are experiencing landlords refusing to take people under 34 on the grounds that though they are eligible for the one-bed rate now, this will not be the case next year."

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A subject which is discussed very often on the Forum.

Taxpayers bail out tenancy deposit scheme

Friday 22nd July 2011

The Deposit Protection Service is costing taxpayers £12.7m it has emerged.

The revelation about the bail out came in a reply to a question in Parliament, asked by Chris Kelly, Conservative MP for Dudley South.

He asked about financial payments or guarantees that had been made or underwritten by the Government when it renegotiated its agreement with the DPS in August last year.

The DPS was set up as a free service, being funded out of the interest paid on all the deposits that it banks.

However, while the original agreement was set up at a time when it could never have been envisaged that low interest rates would fall to 0.5%, the agreement did provide for a guarantee of Government support if necessary.

This week, answering Mr Kellys question, housing minister Grant Shapps revealed that the original agreement would have left the taxpayers liable for over £30m by next year, when the original contract was due to end.

Shapps revealed that a new, revised agreement was drawn up. This removed the guarantee and all associated liabilities, and incorporated a payment of £12.7m. The revised agreement also extended the original agreement by four years.

The DPS has been invited by Letting Agent Today to comment.

News of how much the DPS is costing taxpayers may come as a shock to the Scottish government, which is introducing compulsory tenancy deposit protection.

It has banned insurance-backed schemes such as the TDS and Mydeposits in favour of services such as the DPS, which physically remove tenants money from landlords and agents for the duration of the tenancy.

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Well Mel I really can't see what principle can be applied by the HB to justify their view that you need to be over 35 to be worthy of extra privacy. I've got to wonder if the infamous European Human Rights will become involved at sometime.

I don't intend to bar applications from those below the 35 age limit as I do for 25's presently. They are at an age where reprehensibility is more natural, I don't take unemployed but can't keep their job for them. If they can't pay S21.

The DPS costing us taxpayers £12.7m is a surprise, this on top of costing us LL's the extra chew and reduced likelihood of gaining benefit of deposit in an abused situation.

I really expected the DPS funds to be invested in a way that created revenue.

It's a bit confusing how a new agreement can be drawn up with new terms that extends the original agreement for four years, surely that's just a new agreement that utilises some of the original terms.

It's a shame they don't investigate the true value and effect this has to the industry prior to assuming it does good, as I'm less sure of this than many.

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As a agent who has a bit of expierence with housing benefit tenants I think the reasoning behind the decision to raising the age to 35 is to encourage some of these full able bodied single people to get jobs.

I have a number of tenants who are single and i know of no reason why they cant have a job but if all they can now (or in the future) get is room in a house as a lodger it may give the a kick up the jacksee to get down the job center. It is not as if they will be homeless but they wont be able to have a nice one bedroom flat.

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I see an increasing trend to discourage 'them' from taking the easy route but fail to see any reason for a threshold within the working age of an adult, adult being 21 for my argument.

In the past I have taken the unemployed not wishing to tar all with the same brush, nice sentiment but from a business perspective I have learned expensive lessons. It is necessary to be selfish so now I tar 'em and stuff 'em.

As these days there are many more unemployed through no choice, and more relevant to some areas than others, I say I won't consider the 'intentionally' unemployed. This is difficult to assess though, many of us hear the excuses that are just habitual conversation for 'them'. Get it wrong and we pay the price, so to err on the side of caution becomes intelligent.

But is there a human rights issue here that will cost the tax payer to defend again ?

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I don't generally let to people who tick any one of the following boxes.....unemployed, single (mums or dads) with kids, don't speak English/ view my properties with an interpreter in tow, on housing benefit, old or infirm, under 25, can't afford the deposit, are unable to string a sentence together (there are more of these people than you would imagine), pregnant, don't qualify for rent guarantee insurance OR who cannot produce a home owning guarantor, those who look like they are going to move lots of their friends into my property, those that want a company let, those that want a longer initial contract than 6 months, those who's appearance lets them down, anyone seriously late for the viewing appointment.......I hate it when people turn up half hour late without a good excuse, anyone who fails their 5 minute interview...... This is not a complete list its just those I could remember.

Therefore my tenants tend to be professional, higher earners, comfortably off often with their own house elsewhere and seem to be reasonably well behaved.

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Trenners is one of our expert DSS Landlord's and resident LA's on this forum and has been for a long time and not only that I know him personally as well.

I never let to DSS and would concur with Richlist comments about who I would let to.

Now it so happens I have a shared interest of a flat that Trenners is the LA for and he recently found a tenant for us, a single man, clearly unemployed, but hardly rushing around to find a job it would seem. (The previous tenant was just one of life's big waster's and he got the big boot didn't he Mark....lol)

I never could understand why I and you as taxpayers and ratepayers have to ensure that young, single people deserve a flat when a shared accomodation should be sufficient for a roof over their head.

I can see why this government has brought in this new legistlation.

Just my opinion.


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  • 2 weeks later...

'I was vetted – so why aren't landlords?' asks tenant

Friday 5th August 2011

A lettings agent is to start running checks on landlords after a tenant lost his flat when it was repossessed because the landlord was in mortgage arrears.

Daniel Thomas, boss of The Property Shop, said his company will in future insist that landlords produce evidence that they have the correct permission to rent out mortgaged property.

Landlords with the Midlands agency will either have to show that they have a buy-to-let mortgage or a letter of authority from their mortgage lender, acknowledging that they know the property is being let out. Either would give the tenant some protection should the landlord go into arrears.

The check is being introduced after tenant Mathew Hall discovered that the flat he was renting was the subject of repossession proceedings just three days after he picked up the keys.

Initially, The Property Shop advised him he could not legally withdraw from his six-month tenancy agreement and it was still possible the landlord would settle his arrears. But three weeks later, a court order was sent to the flat advising that bailiffs would repossess it on July 26.

Mr Hall – who had himself been subject to tenancy referencing checks – moved out and was refunded his £500 deposit by The Property Shop which also released him from the tenancy agreement. It has also refunded him his first month’s rent plus £200 application fee.

on However, Mr Hall had spent £500 on carpets and decorating. (really!?... Mel.)

Mr Hall said he was “staggered” to learn that although he had to undergo credit checks by the lettings agent, landlords are not vetted.

He told his local paper: “I went through a lettings agent because I thought I would get some protection. It doesn’t seem right that it’s not standard practice to check that the owners are paying their mortgages. I think things need to change.”

Mr Thomas said: “We are members of the Association of Residential Letting Agents and it is not their policy for mortgage checks to be carried out, nor is it standard practice within the industry.

“However, we view this issue very seriously and are contacting the association to find out why it’s not policy. If we can instigate changes then that will be something good coming out of this.”

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Mr Thomas said: “We are members of the Association of Residential Letting Agents and it is not their policy for mortgage checks to be carried out, nor is it standard practice within the industry.

It is not Arla's policy to do a lot of things, such as check the qualified person (who took the arla exams) still works at the company. I know of 2 agencies in my area, one has arla stickers all over the window displays, headed paper and web site but they got chucked out of arla a long time ago. Also another company with about 10 offices over 3 counties but it is the same qualified person for each office, talk about spreading yourself a bit thinly.

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