Dianne Hayter on ensuring all lettings agents properly look after clients’ money
Anyone’s who has ever bought a house probably knows that when the money is paid over to their lawyer it goes into a separate ‘client bank account’ rather than the solicitor’s own business account. A situation very different from the one used for letting agents where, almost unbelievably, there is no statutory requirement for such a separate account.
So, for example, those well known high-street letting agents ‘Taker, Hoarder & Dash’ can take in deposits or rent from tenants and put the money into their own account before later passing it on to the landlord. But should the company go bust or do a runner, such rental income may then either go to creditors or away with the erstwhile agent to the Bahamas. Neither therefore, back to the tenant nor on to the landlord – leaving both in financial trouble.
When the 2015 Consumer Rights Act was still making its way through Parliament, Labour tabled amendments that would put a mandatory duty on letting agents to have proper ‘Client Money Protection’ (CMP). This would require both a separate bank account for money simply being handled by the agent (not a fee for its own service) and insurance that – in the eventuality of a company going out of business – would see the protected money would go to the landlord. Or back to the tenant, where it was a deposit.
Sadly, we failed to persuade the Coalition government of the wisdom of this approach. Instead, they merely agreed to make letting agents state whether they had CMP in place. Since all the good agents had it anyway and publicised this fact, this tiny concession from ministers has made little or no difference.
Unreliable letting agents continue as before, operating with just one account – mixing their own and their clients’ money. Given that anyone can set up as a letting agent, with no qualification, references or experience, all too many take in vast sums of money with no guarantee of it finding its rightful home. Some £2.7bn is paid via agents in rent – perhaps a third of which through agents without CMP. Often it’s landlords who lose out, which is why they, as well as tenants, are demanding a change in law.
Labour will again make the case this week, through an amendment to the Housing and Planning Bill that would require every letting agent to have CMP. In earlier legislation, we managed to make it mandatory for every agent to belong to an Ombudsman Scheme. Should the government accept our proposed change, it would be another major step in chasing the cowboys out of the market, to the benefit of all – landlords, tenants and decent agents – who find themselves undercut by fly-by-night rogues.
Baroness Dianne Hayter of Kentish Town is a member of Labour’s frontbench in the House of Lords. She tweets @HayteratLords
Published 14th March 2016