Northwood backs all-custodial deposit protection...

Northwood UK has called for all tenants’ deposits to be kept in a custodial scheme.

Blogging for campaign group Generation Rent, Northwood managing director Eric Walker questions why letting agents ever need to hold client money and calls on politicians to regulate letting agents.

He wrote:
“Professional agents do an immense job and provide a valuable service to help protect consumers from the small minority of rogue agents. MPs call for regulation every day, yet the only group which can change the law is in fact the politicians who refuse to do so.

“This Government wants agents to regulate themselves. Their reason is in no small part due to the horrors which would be uncovered if agents were forced to regulate. Clients' money should be held in a ‘ring-fenced’ client account, but while this may protect money from creditors, it is not ring-fenced from the agent. If their business is struggling, there is little point in seeking bank assistance and as such, clients' money is a very tempting resource.

“Ideally, all deposits should be held in a custodial rather than insurance-backed scheme as they are in Scotland. The deposit scheme providers would welcome this, but the law doesn’t allow this obvious answer to be imposed. In Scotland, when such a law was introduced, millions of pounds were found to be missing. Imagine the ‘hole’ in the much larger English and Welsh private rented sector and you will appreciate why the Government is reluctant to change things. Landlords would lose money. Landlords are also voters.

“I have wondered why, with interest rates so low, an agent needs to hold clients' money. The truth is there is no real benefit in doing so. It is simple logic for agents to pay money which belongs to others into a custodial scheme. The only reason that the endless procession of Housing Ministers have failed to enforce this is the stark reality that many millions of pounds are not where they should be. It’s easy to blame agents as a generic pantomime villain, but the consumer unwittingly perpetuates this issue. As long as landlords continue to avoid agents which have voluntarily joined a regulatory body such as ARLA, NALS, NAEA or RICS and instead chase the cheapest fee from agents not burdened by the costs associated with such regulation, then the situation will not change.

“Believe me, the vast majority of lettings agents want change through strict regulation. Those agents already have immensely high standards and detest the fact that anyone can open up as an agent and undercut us and in so doing tempt consumers into their risky, murky and unregulated world. There is no point in more rules and red tape until someone polices and enforces those regulations which are already in place. As an example, look at your local agent and see if they publish their tenant fees on their website. The corporates do, we do, regulated agents do too, but many ignore such regulations safe in the knowledge no one actually bothers to check. Some of us in the industry started a campaign, SAFEagent, to raise consumer awareness and promote consumer protection – we didn’t have to, but now with over 3000 members, no one can tell me agents don’t care. We do.”