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Forums > Active > The Netrent Forum
Subject: Who is responsible for the depsit if an agent goes bust?

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Author Messages
Lizzie
Posts:25
26 Jul 2010 16:43:47 Alert 
Pretty much as the title says. If a letting agent goes bust is the landlord responsible for the return of the deposit?
Bill the Landlord
Posts:18
28 Jul 2010 18:39:28 Alert 
the landlord, it's always the landlord.
pinkies
Posts:1
03 Nov 2010 02:31:24 Alert 
Hello Lizzie
We are in a similar situation and I am happy to share with you what we are doing at this point in time about the Letting Agent going bust!

The company who we were first with changed their name to another, they then changed their name to yet another one. During this process we gave notice and ended our working relationship with them. We then were able to let the property to a reputable company with tennets who have lived in the properry for two years now thus cutting out any agent. We employ a maintainence manager who is available for all queries that the tennents might have and checks the property once a month. Anyways just a little bit of history:)

We agreed that the company who pay us the rent persue the £1000 deposit that the tennents had paid originally from the agents who went bust. The agents were happy to refund the deposit and would pay into our goverment deposit account that we had up and running, only problem was that the new manager of the same letting agents with a new name did not have any records of where this deposit was being kept! Needless to say it took many months to try and establish where the deposit had gone to. Anyways to cut a long story short . . . The tennents deposit was not going to be paid to us!

The matter of our/tennents deposit was registered with the official recievers office who were dealing with the business and still are. Please see relevent information attached and i have removed specific names ect

"I have reviewed the file relating to (the agents) (In Liquidation) and note that the examiner dealing with the case had received emails from tennents regarding the deposit. Unfortunately I had not been copied into these emails and as such was not aware that you were waiting for a response. Please accept my apologies for this and the delay that you have experienced in getting information regarding your tenant’s deposit.

Having looked at the file I have established that at the date of the Winding Up Order there were no funds held in any bank accounts in the name of the company and it does not appear that your tenant’s deposit was being held as it should be. This means that it is not possible to return the deposit and either you or your tenants should be included in the list of creditors of the company (depending on who the loss falls to – i.e. you would be the creditor if you return the deposit from your own funds and the tenants would be the creditor if you are unable to meet the costs of returning the money to them).

Failure to hold deposits securely is a matter that the Official Receiver takes seriously. The case has been allocated to an examiner to consider the conduct of the directors of Property Centre Lettings Ltd in order to establish if disqualification action under the Company Directors Disqualification Act 1986 is appropriate. It is possible that we may require further information from you as our investigations progress – would you be happy to assist in our enquiries if necessary?

The last email was recieved in August and to date the person we were dealing has passed on the case to another person who is dealing with the case, we are waiting to hear back from her as a matter of urgency. I think the point of the excercise is painfully slow and the wheels of progress are even slower. I do not think that we are likely to see the deposit again and now my question is

"What do we the Landlord do next"
I hope the infomation is of help to you and good luck to you:) Perhaps you can let me know if you do find a way 'legally' :) to have the deposit refunded to you.
Regards Pinkies
Lizzie
Posts:25
08 Nov 2010 06:32:35 Alert 
Since I asked the original question I've done a lot more research and it seems that Bill is right, it's the landlord who is liable for the deposit - EVEN IF THE AGENT HAS BANKED IT !!!!!!

It seems that landlords are expected to monitor their letting agent 24/7. If that's the case just what use is an agent ??????
angelspropertyservices
Posts:12
02 Mar 2011 07:36:58 Alert 
Lizzie,

I tend to agree with you. Most times there is little point in using lettings agents. Most don't know their arse from their elbow. But to have them go bust and take your deposit down with them is reprehensible. ALL agents should have TWO or THREE bank accounts.

1. Office account - to run their business
2. Client account no. 1 - receiving rents, holding deposits and any money that doesn't belong to them initially i.e. they hold it on trust for someone else (tenant or landlord)
3. Client account no. 2 - keeping deposits in on a long term basis.

No 2 and 3 above should be known as Ringfenced client accounts. Their bankers should acknowledge this so that in the event of the bankruptcy of the letting agency business, client funds aren't swallowed up and lost when the bank tries to minimise their losses.

I would encourage landlords and tenants to ask letting agents to prove this by requesting sight of the letters from the bank. I can offer such evidence because I've done this. It is a condition to become a member of NALS. Ask if the agent had Professional Indemnity insurance too. You might be able to claim against it for the fraudulent activity of the agent (ie false and erroneous accounting for your deposit).

It also proves that landlords should either use MyDeposits or the DPS. Never ever ever trust the agent that can't provide proof of client account segregation for funds received.
Bill the Landlord
Posts:18
04 Mar 2011 05:41:21 Alert 
As I said, it's the landlord, always the landlord. Even the biggest letting agent chains have had problems with their members going bust and owing landlords money
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Forums > Active > The Netrent Forum > Who is responsible for the depsit if an agent goes bust?


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