Early warning system to be set up after latest collapsed agent
Tuesday 10th July 2012
A new early warning system is to be set up in the wake of the Spencer Knight affair, and a warning shot fired over the bows of agents that take over portfolios from other agents where there is a black hole in the accounts.
The collapsed agent, in Wilmslow, Cheshire, was the subject of a ‘striking off’ notice in the London Gazette back on March 13.
It therefore appears that for two months, no one – landlords and tenants, nor the bodies involved – seemed aware of the situation.
Despite the March 13 warning, the firm continued to be a member of both NALS and SAFEagent until termination on May 10, meaning that Spencer Knight had no client money protection policy in place from that date. The firm was finally dissolved on June 26.
It is also not clear whether NALS or SAFEagent told the Tenancy Deposit Scheme on May 10 that Spencer Knight had been expelled. The TDS makes it a condition of membership that agents must have client money protection in place.
Nor is it clear whether the organisations involved arrange to get alerts from the London Gazette if an agent is, for example, trading insolvently.
The TDS was yesterday afternoon insisting that it will make good all the deposits. We have asked the TDS for further clarification.
Also in a statement yesterday afternoon, SAFEagent insists that its model is working – and that the industry should applaud it.
However, it has agreed that there should be an early warning system, alerting tenants and landlords when a SAFEagent member is expelled, and allowing information to be shared more easily.
The warning system would also alert trading standards and possible creditors, while also deterring agents transferring their assets to another agent, who could wash their hands of the debt.
In the Spencer Knight case, local agent Lime Lettings, an ARLA member, has taken over the management portfolio. There is no suggestion that there has been any wrongdoing of any sort, with managing director Peter Luscombe saying he has been working closely with the TDS to resolve problems.
SAFEagent – which has been fully supported by LAT – said in its statement that some initial press coverage was incorrect. A spokeswoman said that this accusation was not directed at LAT, although both LAT and the Manchester Evening News reported the same discrepant claims of the amount of tenancy deposits that could be involved.
Yesterday’s SAFEagent statement reads in full:
The SAFEagent campaign launched in 2011, with support and backing from the Government, and a large number of consumer and industry bodies. SAFEagent is a logo from which consumers can instantly signpost letting agents who are part of established Client Money Protection Schemes, backed by insurance schemes operated by ARLA, RICS, NALS and the Law Society.
Although the scope of the Client Money Protection Schemes may vary, by using an agent bearing the SAFEagent logo, consumers can be more confident of the service and protection they get. Although the various bodies do much to promote their individual logos, the SAFEagent campaign, launched ‘by agents for agents’ was created in line with market need, having identified that a single badge would serve the consumer better, reducing confusion over what the different organisations represented.
With SAFEagent’s open approach to working with consumer and industry organisations, the campaign has already achieved wide co-operation, acclaim and penetration of the sector. Chaired by Lord Richard Best, at a recent SAFEagent Consumer Stakeholder Forum and attended by the Trading Standards Institute, Shelter, The Property Ombudsman Scheme, OFT, and CAB, it was agreed that an information network could be established to share industry intelligence more readily.
Essentially what we are talking about is creating an early warning system that would allow the Trading Standards to take immediate action should an agent lose membership, alerting creditors at the earliest possible opportunity and ensuring that assets are properly used to reimburse them.
In essence a warning system of this nature will safeguard against situations that we have seen recently from happening again, i.e. a letting agent that has been dissolved transfers its assets without informing creditors to another letting agent who in turn could simply wash their hands of the debt.
Plans are currently being put in place to make this happen, including plans for a method of alerting tenants and landlords when their agent leaves SAFEagent.
Responding to recent publicity in respect of Spencer Knight in Wilmslow, Cheshire, a former NALS licensed firm, which was also SAFEagent registered, John Midgley SAFEagent chair, said: ‘We have all read press reports regarding this firm and in spite of claims which appeared initially, we have ascertained from the letting agent who took over the management of Spencer Knight’s properties that there is NO rental money missing.
‘Where deposits are missing and we also understand now that some monies have already been recovered, those tenants protected under an insurance backed Tenancy Deposit Scheme (in this instance TDS), should contact the TDS as a matter of urgency to seek reimbursement.
‘Meanwhile, it is important to reiterate that SAFEagent is a signpost for consumers to identify firms who are part of an established client money protection scheme operated by ARLA, RICS, NALS or the Law Society.
‘Firms are entitled to use the logo as long as they belong to one of those bodies and this case reinforces the importance in driving consumer awareness of what tenants and landlords need to look for in order to protect their money.
‘In this instance, it would seem that the SAFEagent logo has worked. The facts as originally presented appear to be incorrect and we believe consumers will indeed be able to claim any missing monies back if they were protected by the TDS.’
The firm Spencer Knight based in Wilmslow was a NALS firm until 10 May 2012 when its licence was terminated by NALS due to a failure to complete their annual renewal application.
Accordingly, as per agreed terms and conditions, the ongoing protection under the NALS Client Money Protection Scheme ceased. This is in line with custom and practice within the sector. On the same day the firm was notified that they were no longer entitled to use the SAFEagent logo. Neither NALS, nor SAFEagent, has been contacted directly.
Midgley continues: ‘In breach of this compliance, this matter has highlighted a number of issues in the sector. It has clearly underlined again the importance of collaboration and intelligence sharing within the sector in order to protect the consumer and I can confirm that SAFEagent responded quickly and correctly in respect of removing this agent from the register in order to ensure consumers were not misled.
‘It also highlights the need to ensure that the route to recovery of any missing funds is quickly established for tenants and landlords so that they can seek recompense from whatever source is open to them, as soon as possible. Affected individuals also need to be made aware that if funds have been misappropriated, then it is a criminal matter and should be reported to the police.
‘Furthermore, it also highlights a serious compliance issue for agents taking over portfolios of businesses where the client account is not intact and where that leaves them in their compliance with strict accounting standards set by the body of which they are part of.
‘If a firm was not aware of a hole in the firm’s client account when they take over a firm, even if they have done the correct due diligence, then that it also a matter of fraud which should be reported to the police. We intend to hold discussions on this issue with industry organisations shortly to ensure that any potential loophole is closed.
‘Meanwhile, the SAFEagent model remains robust and we are pleased that the facts appear to show that it has reflected an accurate presentation of the situation to Spencer Knights’ tenants and landlords. That is, that their money would appear to be safe and they will get back any missing funds if applications are made through the correct channels within the specified periods.
‘The industry can applaud what SAFEagent has stood for in this case.’
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