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Purplebricks kept multi-million pound bill for paperwork bungle from auditors

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Purplebricks estate agent - Hollie Adams/Boomberg
Purplebricks estate agent - Hollie Adams/Boomberg

Purplebricks only told auditors that it was facing a multi-million pound liability for bungled paperwork on the same day that it was questioned about the issue by The Telegraph, it can be revealed.

The online estate agent admitted on Monday that it could be liable for as much as £9m in costs after failing to properly explain a national deposit scheme to tenants.

It was also forced to delay its half-year results as finance chiefs and auditors scrambled to ascertain the full extent of the problem.

A company spokesman said the firm’s auditor, Deloitte, was informed “as soon as the matter came to light” but would not give further details.

However, The Telegraph understands auditors were told on Friday, the same day this newspaper confronted Purplebricks about the issue.

Shares in the Aim-listed company fell by more than a fifth on Monday after it released a statement to the stock market admitting that tenants were not given legally required paperwork explaining that their deposits are put into a national protection scheme.

These important lettings documents must normally be provided within 30 days of a deposit being paid. Failure to do so allows tenants to claim back up to three times the value of the money, from either the landlord or the estate agent.

The company said its half-year results would have to be delayed while it assessed the scale of its potential liabilities, estimated to be between £2m to £9m.

A source last week said that if everyone eligible to do so claimed money, the liabilities could be in the region of £30m.

The Telegraph understands that the mistake - an error in basic tenancy law - dates 2012 and tenants have a six-year limitation period in which to make a claim against either an agent or their landlord.

Purplebricks said: “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.”

Purplebricks, which was founded in 2012 and floated on Aim in 2015, was heavily loss-making until April this year, when it reported its first full-year pre-tax profit of £3.6m, on sales of £90.9m.

It had £58m of cash on the balance sheet in October, which means it should be able to absorb any claims “comfortably”, according to analysts at Peel Hunt, who have put their rating on the shares under review.

The company has had a tough time in the past few months as it deals with a number of separate problems.

Purplebricks has faced claims it failed to register tenant deposits with a government-approved protection scheme, blaming an IT glitch for the error.

The company is also disputing accusations from estate agents who believe they are entitled to holiday pay and pensions contributions from Purplebricks, despite being classed as self-employed by the company. Last month it issued a profit warning after business dropped.

Its share price has tumbled by 95pc over the past four years and the stock is now worth just a quarter of its float price of 100p.

Deloitte declined to comment.

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