Here is today’s conundrum, and we’d be interested in your views.
The question was posted on an ARLA forum last week. It’s simple enough, but we suspect the answer is far from straightforward.
“If an agent disappears with rents and deposits, who do you report it to? I have told the police and the Trading Standards and guess what? The misappropriation continues. How do you stop it? Frustrating!”
The latest Greener Homes Attitudes Tracker from NatWest and S&P Global,...
Shortly after the Leasehold and Freehold Reform Act was granted Royal...
The real estate industry is one of the industries hardest hit...
It’s no secret – 2023 is a difficult year for the...
Introduction The lettings market is no stranger to the complexities and challenges...
Interim inspections are a necessity if you want to avoid property...
Who are you and what does it say on...
Who are you and what does it say on...
Who are you and what does it say on...
Comments
please read between the lines. I am not saying it is right I am explaining why Yvette Cooper and DCLG didn't seemingly mange to think through the legislation they rushed into place in 2007.
Invested in what? if one had access to a large pot of cash say enough to buy an average property or two and one was fairly certain those properties would double in value every 7 years how wrong would it be to invest in a good investment? Given that incoming tenants often handed over a deposit a few weeks ahead of the return of the deposit to the old tenant, deposit cash flow was rarely an issue.
What consent? the traditional client would hand over their entire property affairs to their land Agent and trust them to invest wisely. Some thought this practice extended to new clients as well as their old ones.
I'd go along with a custodial scheme if a) it came with a Government backed guarantee, and b) they found someone responsible to operate it.
Sorry can you explain more - used the money for what?
And what consent?
Sorry but two wrongs never make a right - so because of past issues future generations of tenants must have their deposits continue to be at risk - is that what you are saying?
I acknowledged that agents inability to pay deposits into a custodial scheme if compelled to would cause massive problems so I don't quite see your point.
As ever solutions to problems are fairly easily - it is the will or ability to implement those solutions that is usually the issue.
you asked
"where on earth is there any logic in letting anyone else other than a custodial scheme hold the money? "
The logic is that to do anything different would cause severe embarrassment for a great deal of the long standing RICS firms who have invested and used client monies and tenant deposits quite happily ( with client consent and instruction) for generations, hence the reason why pre 2007 deposits need not be protected or held in any scheme.
Glad to see a few comments stating the bleedin' obvious that a starting point in terms of tenants deposits would be for them only to go into Custodial schemes.
Given that the whole idea of TDP was to protect deposits that apparently, according to CAB, were being abused wholesale, where on earth is there any logic in letting anyone else other than a custodial scheme hold the money?
A properly backed Govt safety net scheme (if we can afford £85Bn to bale out banks I'm damned sure we can afford £2Bn for deposits and it can be stol loss insured anyway) underpining a well run custodial scheme is the answer on the deposits front.
Always has been and always will be and all those who ever advocated and lobbied for any other schemes, including Capita now, and those in CLG and elewhere in Govt who caved into them should hang their heds in shame.
I have seen all the choice and competition arguments many times, put forward of course by the same vested interest groups, vested in everyone except the tenant. The arguments always come back to how the schemes worked in Oz and delays in payouts OK then get proper systems.
In terms of agents the fear is of course what has happened in Scotland would pale into insiginificance in terms of missing money if it all had to be paid in by November this year.
In terms of rents the answer is for tenants to pay Landlords direct and agents to invoice for their fee. It will never happen but again the only way is to prevent handling of the money by any other party - if you actually want to remove the temptation.
I have to agree with Robert to a certain extent.
I've worked as as a letting consultant in the past helping other agencies to set up, offering advice and support and I've seem perfectly respectable agents, as honest as the day is long, who had deficits in their client accounts but never realised until I showed them how to carry out reconciliations between their bank accounts and their software accounts.
One had been paying an ex landlord for almost a year without realising it because of a recurring error in his software and was over £12000 short in his bank client account but his software said he was fine. He put the money back in within 24 hours of me pointing out to him where it had gone; he still hasn't recovered all of it from the ex landlord.
Its easy for anyone to come on here and say they've never made a mistake or that its not rocket science, but errors do get made sometimes and if they go unnoticed you can be out by a lot if you don't know how and where to look for it.
I'm amazed the Police don't take more notice when agents start getting reported by landlords in their droves; we had one in MK recently, that makes all the recent reports in the press seem like small change, that was reported to the Police by over 40 landlords that we know of and yet there is still no sign of this guy and his partner being prosecuted for theft, fraud or any other crime.
The TSO in MK is not really interested until after the event so not much joy there either.
The industry needs a body who have the power to step in and investigate when things start to go wrong regardless of whether the agent is a member of RICS, ARLA or anyone else. The existing bodies are too slow to act if they act at all
Thank you for the suggestion Paul, I am not an accountant and live quite happily in the real world. As for my agenda, I am waiting for the weather to warm up enough to go outside and finish painting my gable wall
I am now comfortably outside the industry but that doesn't stop people from valuing/employing my expertise.
If you don't like the fact that someone might have a significant experience of this issue and how to resolve it that is down to you. Perhaps you should have a word with Ros Renshaw and ask her not to pose questions whose answers or contributors might not be to your liking.
Anyway.. 5 degrees and rising is warm enough for the paint so I am off and will leave you in peace now.
Got one locally who 'dont do deposits' it then gets passed to the landlord and they dont give a rats as to what happens then as they dont manage and in their limited opinion wash their hands of it.
No way of knowing about a rogue until he has scarpered with the dosh.
@Robert May
One thinks you should get off your soapbox and live in the real world! I'm sure you have an agenda here. Are you by any chance an Accountant??
I have shown at length on here with actual (name changed) examples how it is possible for perfectly honest people doing all the right things to lose client's money. Not steal it, lose track of it.
Because there are no set definitions, there are no rules for developers to follow and so with things as innovent as rent calculations there can be errors which become impossible to fathom.
Tell me Yarrum95 do you operate "separation of duties"?
If you don't or don't know what that is, then even with the very best intentions in the world, doing all the right things as you have described you stand a very good chance of becoming what you describe as a crook. There are things outside of your control which will lead a lot of software reliant agents down a costly unexplained path.
Robert May is quite right to say that most are "accidental" crooks who have no idea or who to turn to rectify their problem. ARLA do have the requirement for an annual audit and if carried out by a Chartered Accountant, with knowledge of the profession, is probably as reliable as one could get. However, it should be remembered that no system will prevent every real crook.
“If an agent disappears with rents and deposits, who do you report it to? I have told the police and the Trading Standards and guess what? The misappropriation continues. How do you stop it? Frustrating!”
The answer of course is there isn't one!
@robert How can you blame lack of software...it is simple .....it is not their money therefore don't spend it on yourself....put depsoits into protected account, pay rent to Landlord when you recieive it.....basic stuff not rocket science. In my opinon if you spend your client's and tenant's money it is theft and therefore your a crook
"Go with a reputable firm that have a long history of being in business"
Premier Places in Worcester fitted that description Paul, the touble with "reputable" is that it is only hindsight which reveals thet the reputation is not well founded.
It's easy, follow the structure in Scotland. No holding client deposits for a start. Don't always go for the cheapest agent, so many small firms setting up offering rates of 5% management fees. Go with a reputable firm that have a long history of being in business. Once a crook always a crook!
Identify them before they go rogue, provide help and assistance before whatever situation gets out of control.
Bear in mind that I have been doing this since 1994 and one of my responsibilities was to identify which problems were software problems and which were customer generated issues. I have investigated more of these issues and customers than anyone who could possibly post on this forum.
Since 1994 I have identified just two properly crooked agents, the others who went on to fold and run off with what was left of the client account were accidental "crooks" who were victims of a situation that got out of control. It is madness to think that £200,000 is going to last very long and certainly won’t buy a new life on an exotic beach ,so in reality the average agent isn’t going to turn to a life of crime for such a relatively small amount.
Too many agents are running client account systems that are fundamentally flawed . Too many software firms do not have enough staff experienced enough to successfully reverse ledger entries that are incorrect and too many software firms are providing client cash accounting training that is inadequate. (The standard of trainer is not high enough or the client “knows Sage and will get by thank you”) But this is not just about the software being used; None of the regulating bodies properly understand what is required to regulate computer assisted client account book keeping , none have updated their code of practice to account for the fundamental change in the number of agents and type of personnel who are now dealing with clients money. None of the regulating bodies are willing to regulate or define a minimum standard of practice for the software suppliers to adhere to.
Every Agent should be audited annually, with over 40 software systems available to look after client cash accounts it is impossible for auditors to understand 2 or 3 main ones let alone all of them. Many issues which go bad have been building up un noticed for years and very few large scale thefts would be possible at all if the auditing system were more robust.
It is easy to identify the agents with problems once the problems are evident to those affected, by then it is too late. If you folk as an industry really want to stop “crooked Agents” then you need to look at the catalogue of problems that cause the problems, address them and then find a system of rescuing situations that are “out of control” rather than criminal. The immediate assumption that an Agent is crook stops many from seeking help. Embarrassment and denial play a part too.
Agents with problems are the product of an industry wide lack of understanding of Client cash accounting and why it is fundamentally different to nominal ledger accounting.