Discuss the nature of relationship between a land owner and an estate agent.
(20 marks, 2012 Q4)
The term 'agency' is used in law to describe the relationship between the principal, (in housing this is the landlord) and the agent.
The principal agrees (expressly or impliedly consents) that the agent should act on their behalf in legal relations with third parties (in housing this is the tenant, and any other party that the agent needs to deal with in managing a property, for example workers undertaking repairs). The agent also agrees to act on the landlord's behalf.
Where an agent is used, actions carried out by the agent on the landlords behalf are treated in law as if they had been done by the landlord. Landlords are bound by any agreement or contract made by their agent on their behalf with a third party (i.e. a tenant).
If the agent agrees to something which the landlord had not authorised, the landlord is still bound by the agent's action, unless it is something obviously outside the authority of a normal agent in these circumstances. This means, for example, that if the agent is acting as managing agent for the property and fails to carry out a statutory duty, such as ensuring an annual gas safety inspection is carried out, the landlord will be held liable for the failure as well.
A landlord will also be ultimately liable to the tenant for the return of the damage deposit and will be obliged to pay this to the tenant, for example if the agent were to go bankrupt or abscond with the money.
In view of this, a landlord should be very careful when choosing an agent, and choose one who will carry out their responsibilities properly. The landlord should also be very clear when giving agents any special instructions (such as 'no pets') preferably putting these in writing.
If the agent has acted properly and in accordance with the agreement with the landlord, an agent will not be liable for a contract entered into on behalf of his landlord.
If the agent has acted contrary to instructions (for example allowing pets where the landlord specifically said 'no pets') it is likely that the agent will be liable to the landlord for any losses which may flow from this. Liability may depend, amongst other things, on the precise instructions from the landlord and subsequent correspondence or conversations.
An agent may be personally liable to the tenant if the agent has not told the tenant that they are acting for a third party and the tenant believes the agent to be the landlord. The agent is also liable in respect of claims for the damage deposit money where the agent has held this as 'stakeholder'.