In 2012 brothers Michael Bruce and Bruce founded a completely new estate agency. Instead of shiny suits and stuffy offices, it was a service that was 100% online. They called it Purplebricks. Their vision was to be for the property what Uber was for Taxis and Airbnb was for holiday rentals.
In 2021, according to the Times, it is the biggest estate agency in the UK, with 4% of the total market share. They dwarf established powerhouses like Savills, Foxtons and Connells. That doesn’t, however, mean everything is fine and dandy. A fiasco relating to tenants deposits has hit the online firm in the pocket hard.
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Protect The Deposit At All Costs
One of the biggest causes for disagreements between tenants and landlords is the dreaded deposit. Unfortunately, it is often the elephant in the room heading into the final months of a tenancy.
There were reports that Purplebricks had made major failings in sending legally required documents to tenants. These documents, a legal requirement, explain to tenants that their landlords have put their deposit into the deposit protection scheme.
After realising its errors, Purplebricks announced that it faced claims of somewhere between £2 million to £9 million.
However, The Telegraph suggested that the bill could be as high as £30 million if every eligible tenant made a claim.
Legally, landlords must put deposits in a government-approved tenancy deposit scheme (TDP) if you rent your home on an assured shorthold tenancy that started after 6 April 2007.
In England and Wales, deposits must be registered with one of the followed accredited partners:
- Deposit Protection Service
- MyDeposits
- Tenancy Deposit Scheme
The basic rules of deposit protection
- Deposit must be returned within ten days of both the landlord and tenant agreeing on the amount that will be returned.
- If Landlords are in dispute with tenants, then the deposit needs to be protected in the TDP scheme until the issue is resolved.
- Landlords aren’t required to protect a holding deposit (money that is paid to ‘hold’ a property before an agreement is signed). However, once tenants officially sign for the property, the holding deposit becomes a full deposit, that the landlord must protect.
- The essential documents must be given to tenants within 30 days of them paying the deposit. If they aren’t, tenants are entitled to claim back up to three times the value of their deposit.
Customer Service Is King
Anthony Codling, a former analyst at Jefferies, said: “The fact that they [Purplebricks] have lost market share adds weight to my argument that the model isn’t the game-changer it claims to be and that traditional agents add more value to the process than Purplebricks gives them credit for.”
The real difference between online agents and traditional estate agents, is that high-street estate agents are able to offer a genuine customer service experience.
Traditional estate agents aren’t quaking in their boots
In what seems to be a trend for disruptive tech-centred platforms, Purplebricks has also faced legal action over their employees’ holiday pay and pension contributions. The law firm bringing the class action suit believes that as many as 2,500 agents working for the company could qualify for payment.
Many rival estate agents admitted to be, initially, worried about Purplebricks’ dominant presence as a ‘disruptor’ in the marketplace. However, traditional agents have reported becoming much less threatened by Purplebricks’ presence as the years have gone on.
In an attempt to reverse its falling market share, the company introduced a “no sale, no fee” option during the summer of 2021. This move brought Purplebricks much closer to the traditional agents it claimed to be so different from.
A ‘rival’ said to The Times that if Purplebricks is on the other end of a deal, ‘they will try to bypass them and go straight to the other side’s solicitors in order to accelerate the process’. That’s a statement that may make prospective homebuyers feel uneasy. Without proper representation, buyers and sellers may seem more vulnerable in a property deal than those with an experienced agent at their side.
And when it comes to lettings, a key benefit of using an experienced, professional firm should be that landlord’s minds can rest at ease with the knowledge that all required processes will have been followed precisely, so all the t’s have been crossed and the i’s dotted. However that doesn’t seem to be the case in this instance!