Landlord Law

2.2.1 Conflict of interest

2.2 For agents only: accepting instructions from a landlord
2.2.1 Conflict of interest

Before confirming instructions, agents and contractors must check that they will not have any conflict of interest. If they do, they must declare it and get written permission from the landlord that they can continue to act.

If the landlord gives permission then, at the earliest practical opportunity, and definitely before negotiations begin, the agent or contractor must give details of the conflict of interest, in writing, to the prospective tenant.

It is not always appreciated that the landlord : letting agent relationship is governed by the law of agency.  This is a special area of law which applies when someone is empowered to act on behalf of another as their agent.

Because of the powerful position the agent is in,  he is under what is known as a ‘fiduciary duty’.  These are additional obligations on top of the general duties of a contractor to act with due care and skill etc.

The Fiduciary Duty

This is explained by Lord Millett in an important agency law case, Bristol & West Building Society v. Mothew in 1998:

“A Fiduciary is someone who has undertaken to act for and on behalf of another in circumstances which give rise to a relationship of trust and confidence.

A Fiduciary will have the highest duty of care. He is expected to be loyal to his Principal and not put his own interests first. He must not profit from his position as a Fiduciary unless his Principal consents, and must not put himself in a position where he has a conflict of interest”.

Here solicitor Simon Parrott of Sharman Law Solicitors, explains the fiduciary duty and how it affects agents in this clip of his talk to the Landlord Law Conference 2013.

Running time 2.08 minutes

NB You can see a report of the Bristol & West Building Society v. Mothew case >> here.

Examples of conflicts of interest

  • Where the agent wants to buy his customer’s property for himself
  • Where he wants to rent the landlords property to a friend or relative
  • Where he is being paid an incentive by a contractor to let him carry out works to the landlord’s property

What the agent needs to do

If an agent tells the landlord about the conflict of interest and the landlord is OK with it, then the agent has complied with his duty and is not in breach of his fiduciary duty (provided he has disclosed everything about it).

However the agent needs to be able to be in a position to show that he has disclosed it, in case this is challenged later.  Memories are short and often people remember what they think happened not what actually happened.  So  if you are an agent in this situation you need to confirm that you have informed the landlord IN WRITING of the conflict.

A counsel of perfection would be to have the landlord initial and date a copy of the letter to prove that he has received it.

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