Purplebricks saw its share price drop by 21% yesterday as pressure continued to pile up on the online estate agent after it warned it could face costs of up to £9m after failing to follow basic tenancy law.
The company has delayed the publication of its first half results, which had been due this week, to “provide for any potential future claims which could arise under the Housing Act in relation to this regulatory process issue”.
The move followed a report in the Telegrapgh on Sunday that Purplebricks could potentially face a bill of as much as £30m after it allegedly put thousands of landlords at risk of being fined after failing to follow basic tenancy law.
EYE revealed last month that the online estate agent had failed to properly serve legally required documents to tenants explaining their deposits have been put into a national protection scheme.
Shares in the AIM-listed firm dropped 20.9%, or 6.60p, to 25p yesterday. At the start of January the shares had been 103p, and the company floated at 95p in December 2015.
Purplebricks issued this brief statement on Monday: “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. Further enquiries into this matter are currently being conducted and the communications process is now being corrected.
“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. Purplebricks is now in the process of finalising the level of provision required and associated disclosures and has therefore taken the decision to delay its results for the half year ended 31 October 2021 which were due to be published on 14 December 2021.
“We will make a further announcement on the date of our half year results as soon as practical.”
Last month, Purplebricks said the six-month period to October 31 had been “challenging”, following a strong period for the UK housing market buoyed by the stamp duty holiday.
It said adjusted earnings before interest, tax, depreciation and amortization would be below previous expectations.
Purplebricks faces a ‘more challenging’ market as instructions fall sharply
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