A group of angry landlords who had been clients of a letting agent which had used an insured tenancy deposit scheme and who are said to have lost over £60,000 between them, backed a Freedom of Information request.
The request – a generic one about agents without Client Money Protection insurance who use deposit schemes – was put to the Department of Communities and Local Government by industry consultant Laurence Dillamore.
It queries the use of insured schemes when the agent goes off with the cash and has no CMP insurance. Under the 2004 Housing Act, landlords are ultimately responsible for deposit funds, even if they use an agent, and so have to reimburse tenants whose deposits have vanished.
Dillamore’s request noted that, of the four tenancy deposit protection schemes currently licensed by DCLG, there are two, Mydeposits and Capita, which provide a facility for ‘unregulated’ letting agents – ie, agents who are not members of a body such as ARLA, RICS or NALS and thus have no CMP – to hold deposits in their own bank accounts.
Dillamore asked CLG to confirm how many complaints it had received from landlords since 2007, “specifically those who claimed that they had been misled into believing that they were afforded protection” after insuring the deposit should their letting agent abscond with funds.
Dillamore also noted his view that unregulated agents, who do not have CMP in place, should be compelled to use the ‘custodial’ tenancy deposit scheme – ie, bank the actual money, rather than hang on to it and insure it.
The landlords who annotated the Freedom of Information request unleashed their anger against the deposit scheme Mydeposits.
They had been clients of an agent named in the public thread as Barringtons in Chalfont St Peter, Buckinghamshire. There is no suggestion that the firm misappropriated any money, and the firm is not referred to in the Freedom of Information request. The firm converted to become a Winkworth franchise.
One angry landlord noted that “Mydeposits has left me robbed of over £2,000 – an absolute shambolic mess”. Another said he had lost over £4,000 of deposit money, and another that he had lost over £3,500.
Another said the scheme was useless, and that he was at a loss as to what Mydeposits had been doing to protect the money.
Yet another asked why the Government “allowed a flawed scheme” and urged: “Investigate these schemes – licensed robbery”. One landlord said the Mydeposits scheme was “hopelessly flawed”, offering landlords no protection at all.
CLG replied to Dillamore’s request, saying there had been seven complaints from landlords to the department, all complaining they had been misled into believing they were protected under an insured tenancy deposit protection scheme against the possibility of an agent running off with tenants’ deposits.
The CLG letter, signed by a Paul Martin, said that it was the landlord’s responsibility to be “properly informed” of the risks involved in using letting agents without CMP insurance.
Further correspondence between Dillamore and Martin has revealed that all seven complaints were against Mydeposits, and all had experienced letting agents going bust.
Asked by Dillamore if the schemes should not display ‘health warnings’ to “ensure that landlords are fully aware” that insurance schemes “do not provide any protection to the landlord whatsoever”, Martin replied that ministers want to provide choice for consumers.
The Mydeposits scheme, which was launched by the National Landlords Association, was sent the entire thread and invited to comment.
Eddie Hooker, CEO of mydeposits, said: “We understand that it can be a very stressful and costly situation for landlords who have experienced their letting agent default.
“Tenancy Deposit Protection (TDP) is a consumer protection initiative that was introduced to protect the tenant’s deposit money throughout the tenancy. Under the Housing Act 2004 the landlord is deemed ultimately responsible for ensuring they are fully informed about their rights and responsibilities under TDP law.
“In order to further safeguard landlords, my|deposits write to every landlord client of our agent members and we issue guidance which explains the risks of enlisting the services of an agent:
“The guidance sets out the landlord’s obligations and responsibilities and contains specific information and advice as to how they can protect themselves against the risk of fraudulent, insolvent or defaulting agents.”
Winkworth said: “Barrington Property Services, which was a member of a tenancy deposit scheme, converted to an independently owned and operated Winkworth franchise in January 2012.
“The franchise was terminated in the autumn 2012 and we were made aware that the business was to be acquired by Blacktree Properties Ltd. We therefore ensured that all clients were written to by Barringtons and Blacktree informing clients of the changes.
“In regards to the link to the enquiries being made by Mr Laurence Dillamore to the DCLG we do not feel that we can comment on issues concerning the criteria of tenancy deposit schemes.
“Other matters raised are clearly part of ongoing Government policy and the tightening of regulation to cover letting and property management agents which naturally we support in principle.”