Purplebricks has put aside up to £9m to prevent buy-to-let investors which used its services from being exposed to legal action.
The online estate agent’s share price was down more than 20 per cent this morning (December 13) following the announcement, sparked by news reports the bill could be as large as £30m which Purplebricks has sought to downplay.
“During an internal review the company recently became aware of a process issue in how it has been communicating with tenants on behalf of its landlords in relation to deposit registrations,” the estate agent said.
“In light of the above, the company believes that it is prudent to provide for any potential future claims which could arise under the Housing Act in relation to this regulatory process issue.
“Early provisional estimates by the company suggest a potential financial risk in the range of £2m-9m.”
The estate agent is in the process of finalising the level of provision required, prompting the company to delay the publication of half year results ended October 31, which were due to be published tomorrow (December 14).
“Further enquiries into this matter are currently being conducted and the communications process is now being corrected,” the firm said.
“We will make a further announcement on the date of our half year results as soon as practical.”
Estate agents and landlords are required to serve tenants with legal information within 30 days of receiving the deposit, under the government’s national deposit protection scheme.
This includes information on how the deposit is protected, how to apply to get the deposit back, and what to do if there’s a dispute over the deposit.
If they do not, tenants can take their landlords to court and the courts can order the landlord to pay up to three times the deposit.
The money Purplebricks is setting aside will go towards any claims from tenants which might arise because of this issue.
Purplebricks said it would announce its half year results “as soon as [is] practical”.