New letting agent law won’t protect landlord cash

The new law requiring letting agents to sign up with an ombudsman scheme for handling complaints offers no financial protection for landlords, warns the British Property Federation (BPF).

The ombudsman scheme provides an independent arbitrator for dealing with complaints – and in some cases, the ombudsman may award compensation, but still does not offer a safeguard over rents and deposits.

For full protect, says the BPF, a landlord should make sure their letting agent is both a member of an ombudsman scheme and a client money protections scheme.

The property sector is still awaiting full details of who will act as the government-approved ombudsman and scheme registration dates for letting agents.

Under a client money protection scheme, letting agents finances are monitored and they should hold client cash separate from money in the business. In the event the letting agent stops trading or rents go missing, the protection scheme compensates landlords.

Client money protection schemes are already running – the main ones are:

ARLA

SafeAgent

RICS

National Approved Letting Scheme

Latest estimates reckon around 10,000 letting agents belong to a client money protection scheme out of around 15,000 firms operating in the market.

The Enterprise and Regulatory Reform Act 2013, requires letting agents to offer a complaints procedure as members of an ombudsman scheme.

“This is in the process of being implemented and will undoubtedly have a welcome influence on raising standards in the sector,” said Ian Fletcher, director of policy at the BPF.

“Landlords need to be wise in their choice of letting agent. Just because the letting agency sector is facing increased regulation does not mean their money will be protected.”

Some unscrupulous landlords advertise they belong to a client money protection scheme but are not members, so landlords are advised to check out their credentials with the scheme before signing any contracts.

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