Most landlords are aware of the requirement to register a deposit, when taken in association with an assured shorthold tenancy (AST). However, most landlords are not aware that there are THREE different approved schemes that operate under license by Government to act as registers for these deposits. Each has its own rules and regulations concerned with registration of a deposit. All three schemes are open to letting agents in the UK (although one does now insist on the agent being a member of a recognised scheme e.g. Propertymark, ARLA, RICS, NAEA etc.
In current economical climates, it is clear to see that the Insurance backed schemes offer little advantage over the one custodial scheme since interest on monies held in a bank account are virtually non-existent at present. Nonetheless, many agents prefer to retain control over the deposit monies for various reasons and remain affiliated to one (or both) of the insurance backed schemes.
So, if an Agent ceases trading, what happens to the deposits? Assuming the worst case scenario where the actual deposit monies is no longer available (i.e. gone) and that the scheme used was one of the insurance backed schemes, you would think that this would ‘protect’ the deposit from any situation like this. WRONG.
Although the legislation is designed to ‘protect’ the deposit from unscrupulous landlord or agent when ending a tenancy and deducting unnecessary or unjustified costs, it does very little to help where the monies have gone missing. So who is responsible? Agent? Landlord? Tenant? Scheme?
Ultimately, the responsibility will always fall on the landlord to return any deposit paid and registered even if the landlord never actually received the monies from the agent. There are cases, now, where agents have absconded with this money and the relevant scheme have declared that the deposit is no longer protected as a result of the financial failure of the agent, thereby leaving the landlord open to recompense of not only the deposit itself, but ultimately THREE times the deposit as well as the deposit is no longer protected under the Housing Act 2004 unless they act quickly to re-register it.
In the case of the Deposit Protection Scheme (DPS) where the money is actually held with the DPS and NOT in any agent’s bank account you would think this offers more protection as the money is not with the Agent at all. WRONG. The DPS have several hundred (possibly thousands) of cases where a deposit was registered (this can be done online) but the monies have never actually been sent to the DPS to ‘settle’ the registration. And so, technically, deposits are not registered and therefore not covered or protected. In addition, Belvoir Nottingham have been given information by a current tenant, whose previous agent still managed to get hold of their deposit despite it being registered with the DPS. For legal reasons we cannot explain how this was done, but it involved the tenant not checking the registration information on the certificate and the agent using this information to facilitate a repayment to them. The DPS then denied any wrongdoing and then refused to help the tenant. The agent has, disappeared and therefore the landlord is liable.
So how can a landlord (and Tenant) ensure that the correct registration has been undertaken, and have confidence that the deposit will be returned to the tenant when the tenancy ends?
Belvoir Nottingham recommends the following:-
1. Ensure that the Agent you are using is registered as an agent with one (or more) of the three approved government schemes.
Belvoir Nottingham initially registered with all of the schemes in 2007, but is now only a member of The Dispute Service Limited (TDSL) and Deposit Protection Service (DPS).
2. Ensure that the Agent has registered the deposit with the designated scheme detailed in the AST for any tenancy that has been established, within the first few weeks start of any tenancy.
Belvoir Nottingham send a copy of the registration certificate to the tenant as soon as the deposit is registered. A copy of the AST is sent to the landlord and the landlord is free to call us for a copy of the deposit registration certificate or contact the appropriate scheme direct for verification.
3. Ensure that the Agent operates under a strict regulatory framework of accreditation, where they operate a separate designated client bank account and that this is audited on a regular basis. Such regulated bodies include Propertymark, ARLA, RICS, and NAEA.
Belvoir Nottingham (and indeed all Belvoir Offices) is fully Propertymark accredited and compliant. Accounts are audited and signed off by an ACCA registered accountant on a twice yearly basis.
4. Ensure that the Agent has a valid Professional Indemnity Policy in force.
Belvoir Nottingham have on show in their office at all times, a valid certificate of Insurance and all customers are welcome to inspect this at any time.
5. Ensure that the Agent has a Client Money Protection Policy in force at all times.
Belvoir Nottingham, through Propertymark, is a fully paid up member and subscribes to their Client Money Protection Policy; a certificate of Insurance is available to view at all times. We are also a member of The Property Ombudsman Scheme.
