There is an interesting article in the most recent (July 09) issue of Property Investor News about rogue letting agents.
For example the journalist (Donia O'Loughlin) interviewed Paul Shamplina of Landlord Action. He reports a huge increase in instructions from landlords seeking to recover money from their agents, and it looks as if many of these are using landlords and tenants money to cover their own debts. For example there is a report of one landlord being owned some £24,000 (over 12 months worth of rent). Another case involved an agent defrauding over 30 landlords and tenants. The article even mentions a case where an agent had an online gambling problem!
To a certain extent agents using clients' money improperly, particularly tenancy deposits, has always been a problem. One (reputable) agent is reported as saying: "using the deposits happens a lot, and its not just small players either. Its looked on as an interest free loan." He goes on to say that since the introduction of the tenancy deposit scheme this sort of conduct has become harder, although 'not impossible'.
A number of those interviewed support recent suggestions by the government to introduce regulation for letting agents. As Mr Shamplina says in the article, "This can only be a good thing. It will stop decent letting agents getting a bad name due to the rogue agencies that often tarnish this industry". I am sure a lot of reputable agencies will agree with that!
So what can a landlord do to protect himself? The answer is to use a company which is a member of one of the recognised agents associations, i.e. ARLA, NALS, RICS or NAEA, as most of the problems occur with unregulated agents.
Although these organisations are not perfect (the article highlights some criticism of NALS, for example, regarding delays) cases are being dealt with, and affected landlords and tenants will (eventually) receive a full reimbursement. Assuming of course that the agent is a member of NALS. Whereas where an agent is unregulated there is often no redress for the landlord, who at best will be able to claim as an unsecured creditor. It seems that even if rogue agents are constantly shutting shop and reopening again, the police, and even trading standards sometimes, are not really interested.
The article ends with some very wise advise from Lucy Morton, president of ARLA
"ARLA would recommend that landlords do their own homework on letting agents and ask questions such as ‘Are they licensed? What protection for client money do they have in place? Is there a route to redress should something go wrong? If not then ARLA would recommend looking elsewhere to be certain that their money is protected."Landlords should also consider the points made in my earlier post with tips for landlords on agents going bust.
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