In law, is a landlord responsible for the actions of their agent?
The question of who “holds liability” (or who “is liable”) imagines a situation where something has gone wrong. In that case, which party is legally responsible? In other words, which party will the law consider to be at fault for whatever went wrong? The party that is found to be liable may have court proceedings started against them, may have to pay damages to compensate the victim of their action or omission, may face a fine or may be penalised in some other way. The question of liability is a very important one, and this article tries to answer it in the context of landlords and letting agents.
What defines the relationship between a landlord and their letting agent?
The relationship between a landlord and a letting agent is defined by 2 main things:
- The contract between them i.e. the terms of business. This contract is what authorizes and empowers the letting agent to act on behalf of the landlord. Many letting agents get their terms of business templates online, but as previously discussed, these templates often leave out several key clauses such as the division of liability, therefore creating uncertainty about who is liable for what.
- The law of agency i.e. the branch of law concerned with fiduciary relationships where one person is authorised to act on behalf of another party in order to enter into a legal relationship with a third party. The Commercial Agents (Council Directive) Regulations 1993 is the leading UK legislation on this matter.
Under the law of agency, the principal (landlord) is treated in law as if they are the one who carried out the actions of the agent (letting agent). This is necessary, otherwise the agent would not be able to enter into tenancy agreements on behalf of the landlord, which is one of the main tasks that a letting agent is hired to do. A landlord is therefore personally liable for the actions or omissions of their letting agent. This means that if a letting agent agrees to take on certain duties for the landlord (e.g. carrying out an Electrical safety inspection, conducting a Legionella risk assessment, sending the tenant a copy of the government’s ‘How to Rent’ guide) but does not do these duties or does them to an unlawful standard, then the landlord will still be liable. If there is a fine to be paid or the tenant is looking to sue, it is the landlord who will have to face these consequences.
What are a landlord's responsibilities after contracting a letting agent?
It is very important for a landlord to realise that they remain legally responsible for all that a landlord is responsible for, even when they contract with a letting agent.
Let’s say a landlord hires a ‘let only’ letting agent to find a suitable tenant, sign a tenancy agreement and service the beginning of the tenancy. The terms of business contract authorises the letting agent only to rent the property, but the agent veers off the agreement and does something else i.e. arrange for mandatory inspections a year into the tenancy. The letting agent does not pick up something obvious during this inspection, and the tenant is put at risk. Who is liable? The landlord is liable, even if the letting agent was acting outside the scope of the agreement because ultimately, the letting agent was acting within the authority of a normal agent. This means that as long as the letting agent is doing what a letting agent is normally expected to do, the landlord will be bound by their actions and be legally responsible for them.
When is a landlord not liable for a letting agent's actions?
On the other hand, if a letting agent is acting outside the scope of authority given to any letting agent, then the landlord will not be liable for their actions. This is also known as working outside the remit of one’s “ostensible authority”. An example would be where a letting agent demolishes part of the property or grants someone a long lease where they themselves do not have a deed agreement with the landlord. In these cases, the landlord is not liable in the eyes of the law for the actions of an agent who acted outside the scope of things a normal letting agent does.
One key area where everything discussed above does not apply, and a landlord will not be liable for any of their letting agent’s actions is where the letting agent has failed to protect the tenant’s deposit in a government-approved tenancy deposit protection scheme. Under the Housing Act 2004, letting agents who do not protect deposits are legally responsible in their own right, and can be sued along with the landlord.
A good terms of business agreement is one that allows a letting agency to protect their liability in case something does go wrong, and ensures the landlord is aware of what they could be personally liable for. Legislate offers just this to its users, as you can see in our tutorial.
The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.