Deposits – My agent holds my tenant’s deposit through one of the insurance protection schemes. I would prefer this to be held in the Custodial Scheme but my agent refuses this citing our agreement terms and conditions. Is there anything I can do?
We’ve had quite a few enquiries on this issue recently and it is a legitimate concern for landlords.
Letting agents should hold client and deposit balances in completely separate client accounts and this money should not be touched under any circumstances.
However, desperate times call for desperate measures and some agents, having found themselves in financial difficulties, inevitably look to these readily accessible client funds to tide themselves over and hopefully bail themselves out of trouble. Others have simply shut up shop and disappeared with funds.
In this situation landlords are ultimately responsible to their tenants for deposit monies and will inevitably be called upon to refund their tenants for missing deposit monies in the event of agent insolvencies or fraud.
A spokesperson for my|deposits has said that sadly, it is the case: “By law, the landlord is ultimately responsible for the deposit even if he uses an agent to protect the deposit.”
However, these incidences are quite rare and there’s a lot landlords can do to protect themselves. my|deposits says: “All agents that use my|deposits are credit checked and evidence of a segregated client account is requested that tallies with the value of deposits protected by ourselves. This request is annual for all agents but some are subjected to a mid-term audit by my relationship managers. This is our commitment to ensure that we only deal with quality agents under the scheme.”
The advice as usual regarding landlords and agents is to use agents with good long-term local reputations to protect, preferably members of recognised professional associations such as NALS, ARLA, NAEA and RICS, and to read carefully the terms and conditions and the fee charges you are agreeing to. Object and negotiate if you are not happy with these.
my|deposits’ advice to landlords, who use agents, is: “ensure that your agent is financially robust…and check that the deposit is being held in a ring fenced account – ask for evidence. If you are unsure, insist that you [the landlord] hold the deposit (and protect it yourself – the agent CANNOT refuse) or insist that the deposit is placed in the custodial scheme – or otherwise, change your agent”
©LandlordZONE All Rights Reserved – never rely totally on these standard answers which apply primarily to England and Wales. Before taking action or not, always do your own research and/or seek professional advice with the full facts of the case and all documents to hand.