(Reuters) -Purplebricks warned of a potential financial hit of 2 million pounds to 9 million pounds ($2.7 million to $11.9 million), after the online estate agent found a “process issue” in communications with tenants about deposit registrations.
Shares slumped about 18% to 26 pence in early trading on Monday, as the company also said it would delay its interim results as the matter is probed.
The company, Britain’s biggest online-only estate agency, said it was correcting how it communicates with tenants on behalf of landlords to avoid claims under UK laws.
While the company did not provide details about the internal review, the Telegraph, which first reported https://www.telegraph.co.uk/property/buy-to-let/purplebricks-faces-30m-payout-tenancy-rules the news, said Purplebricks had failed to provide documents related to deposits to tenants.
Estate agents, under British laws, must provide documents to tenants within 30 days of a deposit being paid to show their money has been put into a national scheme, which was introduced in 2007 to prevent landlords from keeping the money unfairly.
Purplebricks should be able to absorb any potential claims since it had a strong net cash balance, Peel Hunt analysts said in a note. A source told the Telegraph that Purplebricks’ historic liabilities could be as high as 30 million pounds.
The estate agent, which currently manages 6,000 tenancies, had issued a warning on its full-year profit in November after a fall in new property listings.
The company’s shares have lost nearly 75% of their value so far this year.
($1 = 0.7560 pounds)
(Reporting by Sinchita Mitra in Bengaluru; Editing by Sriraj Kalluvila)
