After discovering that it could be responsible for millions of pounds in paperwork errors, Purplebricks delayed its half-year results.
After confirming that the Telegraph article about the failure to inform tenants that their deposits were being put into a national security scheme, shares in the online estate agency fell by more than 5%.
Tenants are legally required by law to be notified by agents within 30 days after a deposit is paid.
This error in basic tenancy law could also lead to thousands of landlords being fined.
Purplebricks informed the stock market that it would delay publishing its half-year results on Tuesday in order to assess the extent of its potential liabilities. These are estimated to be between £2m and £9m.
“The company discovered a problem in the way it was communicating with tenants regarding deposit registrations. It said that further inquiries into the matter are ongoing and that it is currently working to correct the communication process.
Sources with knowledge of the situation say that Purplebricks could have liabilities up to £30m if every claimant made a claim.
According to The Telegraph, the error has been going on since 2012. Tenants have a six-year limitation period for a claim against their landlord or agent.
Purplebricks was established in 2012 and floated in 2015 on Aim. It was heavily losing until April of this year when it posted its first pre-tax profit of £3.6m from sales of £90.9m.
Peel Hunt analysts said that the company had £58m in cash on its balance sheet in October. This means that it should be able “comfortably” absorb any claims. They have “under review” their rating of the shares.
As it has been dealing with multiple problems, the company has faced a difficult time in recent months. The company has been accused of failing to register tenant deposits under a government-approved protection program. It blames an IT glitch.
Estate agents claim they are entitled to vacation pay and pensions contributions from Purplebricks. However, the company considers them self-employed. It issued a profit warning last month after business fell.
The stock has fallen by 95pc in the last four years, and it is now worth only a quarter the 100p floating price.
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