Letting agents may soon have to take steps to safeguard landlord cash if they agree to sign up to a new scheme with The Property Ombudsman.
Letting agents are not regulated and have no legal obligation to protect rents collected for landlords.
Several high-profile letting agencies have gone out of business and disappeared with hundreds of thousands of pounds of rent due to landlords. Landlords have had little chance to recover their cash as the firms have nothing of value to recover through the courts.
Courts have sent several letting agents to jail for fraud after their businesses collapsed.
Now, The Property Ombudsman (TPO) wants to make letting agents take out compulsory client money protection insurance as part of the TPO code of practice for letting agents.
“TPO membership requires residential sales and letting agents to abide by the TPO codes of practice and have professional indemnity insurance. While estate agents holding client money must deposit money in a separate client account, it does not currently require residential letting agents to hold client money protection cover,” said Bill McClintock, chairman of the TPO operating company.
“Given that the code of practice is generally accepted as the primary standards document in the industry, the omission of such an important aspect needs to be addressed.
“This is something the board and Ombudsman Christopher Hamer have been considering for some time and recent incidences of both landlords and tenants suffering financial loss means action on protecting client money is imperative.”
The TPO is polling more than 9,000 letting agent members about client money protection. This number is around two-thirds of the estimated letting agents in the UK.
McClintock wants them to take out insurance and disclose their client money protection policy to landlords and tenants when they sign up to let a home.
“TPO and its codes of practice are part of a consumer protection regime with the firm objective of raising standards in the industry,” said McClintock. “While TPO cannot force agents to sign up to the code, firms should see the codes as enhancing the reputation of the industry and for those that are already members of TPO the addition of a clause requiring client money protection will enable them to demonstrate to landlords and tenants that their money is protected.
