In response to a consultation being run by the government, the PDPLA has put its weight firmly behind the introduction of a scheme to regulate letting agents, forcing them to protect any monies they receive from landlords or tenants.
We stated, "There is general agreement that CMP is a necessary evil. In a small survey of agent members only one felt that he was already overloaded by regulation and CMP was not justified.
In Portsmouth alone members and tenants have lost thousands of pounds when four specific agents ceased trading.
One of our members is an experienced landlord who is cautious and streetwise. He manages his own rental properties but occasionally uses an agent to find tenants. A local firm that he had used before (Professional Tenant Finders) found him tenants for two properties. They took two deposit and the landlord ('W') assumed they had protected them as required but they had not. 'W' ended up having to repay the tenants £14750 deposits out of his own pocket."
Read on for more of our feedback on the consultation....
A number of our members have lost thousands of pounds in this one example. The police spent a couple of years on the case but a prosecution was rejected by the CPS much to the annoyance of the officer, landlords and tenants. More details and news coverage of this example here:
Another member was having similar problems with a Gosport based agent (Holmes and Company Gosport Limited), when rent was not handed over and he suspected deposits had not been protected. The agent was impossible to contact. He raised the issue with the Property Redress Scheme. They said that he would have to put the complaint to the (uncontactable) agent and wait 8 weeks before they could take any action. In the mean time the agent was taking on new business. He eventually disappeared without trace. Helped by our intervention this member did get the deposit back from another agent who had lent her name to the new Gosport agent as a friendly gesture. (Holmes and Company of Fareham) She had so much aggravation from tenants and landlords, defrauded by her former friend that she had to change the name of her well established business. We know others were not so lucky.
Taylors of Portsmouth took members deposits and went bust before protecting them.
We have heard that a 4th agent was prosecuted after 3 years. The losses were not recovered and he got off lightly. http://www.portsmouth.co.uk/our-region/portsmouth/estate-agent-spared-jail-for-30-000-fraud-1-7391846
In each case we only know about the cases that were brought to our attention.
Looking at the specific questions
Q 7. Does an agent offering CMP affect your decision on whether to use that agent either as a landlord or a tenant?
We do not think many landlords or tenants are aware of the risks.
Q 13.In addition to insurance based schemes, are there any other CMP models?
(please describe them, including pros and cons)
In the yacht charter industry we became liable to CMP under new package holiday regulations. The Then Yacht Charter Association created a members scheme using members funds to protect small claims and insurance only for major crashes. This cost mush less than ATOL or ABTA type schemes. Members of voluntary trade associations are lower risk than those who are here today and gone tomorrow. Agent associations such as ARLA and NALS may consider similar schemes exclusively for members.
Q 14.Should Government make CMP mandatory? (please give reasons)
Even well informed and sensible landlords and tenants can become victim to incompetent or criminal agents.
The amounts involved and the regularity of agent failure justify legislation.
The fact that individual losses are often numerous but only for perhaps under £2,000 each means that individually recovery action from the directors of the agent is not cost effective.
Tenants may not lose out financially, but the end result is that frustrated landlords end up evicting them.
If CMP was a legal requirement agents could be prosecuted for the simple failure rather than the complex cases we have seen in Portsmouth and must be occurring everywhere. It should be easier to hold directors to account.
Q 15.What would be the impact on rents in the PRS?
A legal requirement for agents to have CMP would add to the costs of agents but they come and go rapidly a bit of regulation may generate some stability.
There are a lot of agents about, with new ones springing up regularly. This would indicate they could afford a small extra overhead.
Q 16.Would tenants be prepared to pay an additional fee if agents offered CMP?
No, should be a standard overhead as ABTA and ATOL protection is for holidays.
Q 17.How should membership be enforced?
Lots of publicity first, conformity must be shown in agents literature, then some reliance on customer checks supported by spot checks paid for by fines for non conformity.
One not unsurmountable problem is the landlord and friend or family member who manages one or two properties for another. They should not have to pay a fee for CMP that renders the arrangement unviable. Perhaps there should be a starting threshold. Most landlords only have one property and many of these will be managed by friends or family perhaps while they are away. They should be exempt or only pay a very small premium.
Another advantage of a CMP scheme is that it may help tenants from overseas or for other reasons unable to check a property they want to rent in person. If they could check that the agent they are paying had CMP they could avoid being scammed. (We have just assisted a Malaysian student who is only one of many who have arrived in the UK to find they have handed over money to someone who does not have a property to let and is uncontactable.)
Written & oral information and advice from the Portsmouth & District Private Landlord's Association is given in good faith, but no responsibility whatsoever is accepted by the Association or it's officers for the accuracy of it's information & advice nor shall the Association be held responsible for the consequences of reliance upon such information.