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  • Buy-to-Let

    1,018,100 reasons to vet a lettings agent



    Rogue letting agents raided more than £1m from tenants' deposit schemes last year, a BBC investigation can reveal.

    Fourteen letting agents were prosecuted in the UK in 2016 for helping themselves to tenants' cash.

    Despite the Tenancy Deposit Scheme being introduced to protect tenants' money, deposits can still be held in a bank account controlled by the landlord or agent.

    Fourteen letting agents were convicted of stealing £1,018,100 of deposits in 2016:

    • January, £5,000, Manchester
    • February, £225,000, Devon
    • April, £7,750, London
    • April, £27,000, London
    • May, £400,000, East Midlands
    • May, £1,430, Portsmouth
    • May, £7,000, Glasgow
    • June, £1,430, Hampshire
    • June, £220,000, Hertfordshire
    • July, £15,000, Swansea
    • August, £500, East Ayrshire
    • October, £21,000, Essex
    • October, £157,000, Devon

    Source article 

    This is surely another indicator of the need for mandatory client money protection, as advocated by the SAFEagent campaign?

    In response to the Housing White Paper, John Midgley, Chair of the SAFEagent Steering Group said:

    “The 2017 Housing White Paper failed to announce whether or not Client Money Protection (CMP) will be made mandatory. A lost opportunity in a White Paper which claims to protect tenants.

    “The consultation looking into client money protection closed in the Autumn, but we still don’t have any clarity from Government.

    While professional, responsible letting agents already have CMP in place, there is a still a proportion of the market that doesn’t. These consumers are at risk of losing their money

    “The market is huge, with an estimated £2.7 billion held by letting agents in client accounts, but unfortunately there are still too many cases of criminal letting agents stealing landlord and tenant cash.

    Given the amount of money at stake we urge Government to act quickly to ensure all agents must have client money protection to help provide a stable rental market and a level playing field for professional agents.”

    SEE ALSO  -          How to vet a lettings agent ... 12 questions to ask

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    Another example of the government overcomplicating matters. I cannot think of a reason for the existence of an insurance based scheme - it should be custodial only.

    Tenants should pay the deposit directly to the deposit scheme. So landlords/LAs never see the money except at the end if a deduction is made. This should also save time and hassle for LAs. Of course then they wont be able to charge silly admin fees to protect the deposit so LAs may oppose this!

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    https://www.Rentcent.co.uk

    A blog and information source for buy to let landlords

    Why take the cash in the first place - its unesesary. We don't pay a cash deposit when renting a car? Why is renting a home any different? 

    There are products in the market which offer much better protection for agents and landlord on mitigating the risk in the 3% of cases which result in ADR.

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    Ajay Jagota 

    A car hire company will take your credit card details and use them if there is damage (rightly or wrongly!).

    Personally I think the idea of deposits is good - but all parties need to be protected.

    I think there are products out there that offer an insurance against damage (as opposed to a deposit) - but I wouldn't want the tenants to mistreat the property knowing that the insurance will cover it.

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    https://www.Rentcent.co.uk

    A blog and information source for buy to let landlords

    Any credit card payment is for the excess you have elected for not for total damage because that would be a horrendous system right?

    these "products" of insurance as opposed to taking a deposit actually are more robust then the current system because it logs previous claims made in other words their claims history follow them Good or Bad, a bit like your car and home insurance does with you now.


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    Ajay Jagota 

    Yes but they do take the money which is my point.

    What is the incentive for a tenant to look after a property if they bear no risk/cost for any damage they do.


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    https://www.Rentcent.co.uk

    A blog and information source for buy to let landlords

    But they are only credit card details if you elect for a policy that has an excess on it? and they only take the excess payment if you have an accident or cause damage?

    The incentive for tenents lies in the insurers subrogation rights, and for our product also our technology having a platform having the ability to cross reference previous claims history.

    When you take out any insurance does it casue you act with impunity i.e. hire a car drive recklessly and deliberate cause damage ?


     

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    Ajay Jagota 

    I just realised you represent Dlighted. I have no problem with your business model - but as a landlord I wouldn't accept it. Others may see differently.

    "The incentive lies in the insurers subrogation rights" - yes but that's the problem.  They can trash a property with impunity. I'm sure Dlighted try to chase them for the money but I wonder what their success levels would be (especially at the lower end of the rental market). The problem with an insurance based model is that the (to use Paul Barrett's terminology) the good'uns pay for the bad'uns. It will be interesting to see how your business model develops with respect to claims compared to national average.

    "..drive recklessly and cause deliberate damage" - with cars, there is a risk of injury/loss of life (to myself, my passengers or other road users) - that's what keeps me driving sensibly. If I hired a car with insurance that fully covered me including for negligence (which it wouldn't). and I have a guarantee (hypothetically) that I cant harm anyone - yep I would be driving pretty aggressively like I as in a PS4 game.  I have no financial risk and no moral risks.  This is simple human behaviour.

    I think DLighted works for tenants who can't afford a deposit - but as a landlord that wouldn't work for me. Also, there is the question of getting money if there is damage - you are a new company so will be interesting to see how you deal with "deposit" claims as and when they arise.  With the TDS they act as an independent arbitrator (since they don't have skin in the game).  With yourselves, I expect that money comes out of  Dlighted's pockets so results in an interesting dynamic when a landlord makes a claim.    

    BTW - I think its great to see you have started up this business - I love following startups!

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    https://www.Rentcent.co.uk

    A blog and information source for buy to let landlords

    Thank you for your comments and like most forums, it's very difficult to get across a point. but for your information, the policy has been running for 5 years and the claims frequency is 2% which is less than the 3% ADR in current deposit schemes?

    Take any insurance product does it result with you acting with impunity?

    Our policy in addition to damage covers legal (incl.court costs) and rent (nil excess), much more than a deposit!

    if you feel that holding £3.5billion is a smart way to mitigate risk then I'm afraid we will have to agree to disagree.

    the money does not come "out of our pocket" it's an insurance product, therefore, the risk is underwritten.

    Glad you follow startups as I feel this is an area that is in need of reform and will develop and we look forward to the day we welcome you as a customer :-)

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    Ajay Jagota 

    I find it so strange that client money protection isn't already mandatory! Deposits are a significant amount of money for tenants, especially for those looking to save to get on the property ladder later, and they should be able to trust that it's being kept safe and won't disappear.

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    Just about to sign with an LA for my first UK BTL - the PT 12 questions to ask a letting agent was tremendously helpful, thank you Vanessa!

    ARLA registered, CMP and redress through the Property Ombudsman, well established locally, low tenant fees, etc etc - tick tick tick 

    :-)

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