The chairman of The Property Ombudsman has expressed growing concern at the activities of ‘fly by night’ letting agents who run off with clients’ money.
Lord Richard Best said TPO recognised that Trading Standards officers did not always have the resources to take action against those who appeared guilty of serious misconduct.
He also said he was hopeful that there could be an industry-wide code of practice for all managing and letting agents.
Ombudsman Christopher Hamer said of one case, where his investigation had revealed systematic misappropriation of client funds affecting at least 64 landlords, Trading Standards and police had to be put under pressure to take action.
Hamer made a fresh call for more control over the actions of residential lettings agents, saying there was appetite in the industry for formal regulation.
Whilst the number of lettings offices voluntarily covered by his scheme climbed to almost 8,000 by the end of 2010, he said he remains concerned that agents who do not sign up to the TPO Code of Practice can continue to operate, potentially to customer detriment.
“Many agents conduct their business by following the TPO Code of Practice but there are still too many who are operating without that commitment to standards and without any external controls over what they do with client money,” Hamer said.
He also revealed that the Code of Practice for letting agents has still not been approved by the Office of Fair Trading despite his submitting it three years ago.
It means that, unlike estate agents, letting agents cannot display the OFT logo.
From this summer, the Code of Practice will include a requirement for lettings agencies to hold a separately designated client account to protect money the agencies receive.
Hamer said: “There can be no excuse for client money not being held in separate and properly audited client accounts, so that it is less easy for unscrupulous agents to misappropriate it. Furthermore, there needs to be an obligation that such monies are protected by suitable client money insurance.
“An appropriate regulatory regime could ensure that the necessary separation of client and business money is enforced.
“An agent who uses client money because they are operating on the edge of viability and needs to bolster the business, or more worrying still is using the money for personal enjoyment, is entirely unacceptable and against the law.”
Last year, Hamer investigated 1,338 new referrals – 646 sales and 672 lettings, with the remainder related to HIPs and residential leasehold management.
It was a record number of complaints – the highest ever recorded in the 20 years of the scheme’s existence and 28% above the previous peak in 2008 of 1,043. They arose from a total of 11,794 enquiries, compared with 11,165 during 2009 and 11,201 during 2008.
The largest single cause of complaint was communication failure between the agent and consumer (214) followed by complaints handling by agents (163) and sales details / advertising / marketing (138).
South-East England was the source of most complaints (26%), followed by South-West England (13%) and the eastern region (12%). Wales generated only 3% of the total, a figure matched by Northern Ireland and Scotland combined.
At the end of 2010, TPO had 8,008 member firms operating 11,321 sales and 7,851 lettings offices. This compares with 7,332 member firms operating 10,577 sales and 7,276 lettings offices at the end of 2009 and 6,322 member firms with 11,215 sales and 5,100 lettings offices at the end of 2008.
Of the 525 lettings cases closed last year, there were 323 awards made to the complainants.
Ian Potter, operations manager of ARLA, backed Hamer’s call for regulation, calling it well overdue.
He said: “The absence of regulation means the consumer is left vulnerable, with nowhere to go when there is service failure or fraud.
“We believe that the Government must look again at introducing regulation, in order to eradicate unprofessional, unqualified and unethical agents from the marketplace and increase protection for both tenants and landlords.”
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Comments
They're all at it!
Don't forget the BELVOIR franchisee from Norwich who wandered off with c.£150,000 of his clients hard earned.
He's probably the exception to the rule in that he's currently enjoying a long vacation at one of her majesty's establishments. Its only because a couple of his stuffees were solicitors and knew how to work the system that he got his well deserved porridge. The Franchisor wasn't interested nor were the police until people in the know started to crank things up.
Unfortunately the law fails to stop companies going into insolvency and then springing back into life and continue trading as a new legal entity but now debt free. In the process writing off tens of thousands of pounds worth of debts, often to contractors, landlords and the VAT/Tax man. Are the police interested, what do you imagine?
It is about to happen in Kingston for the third time to the same firm.....
Are you the O'Boyle in CM12?
Paul, thank you for your suggestions, I have asked my solicitor to look into this, it's these sort of agents that give everyone a bad name. I think Martin & co just want the franchise fee & aren't concerned about the customer if it all goes wrong.
I had a client owed thousands by a Martin & Co franchise outfit and he never got his money back.
I have a solicitor who is about to sue a tenant for me and wants to issue a statutory demand under section 268(1)(a) of the insolvency act. I suggest that you look that little gem up as if they do not respond within 19 days you can make them bankrupt! He did this for me on another who owed me money and boy oh boy did they sit up and listen. It should be settled shortly.
It goes to show if you talk to the right people you can get the rogues to respond but you need to know if they can afford the arrears not paid over in the first place.
I have had personal experience of these problems, I let out 2 properties in Peterborough with Martin & Co, tenants paid rent, but not paid on to me. Martin & co head offfice didn't even wish to discuss the issue & told me as a franchise they had a no responsibility, proves that even going a bigger organisation, you have no more protection than a one man band.
A Landlord in my area recently told me that the letting agent he was using owed him £15,000. They'd been collecting the rent but not passing it on to him. They didn't have the money but proposed paying him a small amount every week to catch up.
At least putting in place legal requirements and some sort of licensing/registration that will slow down any tom, dick or harry deciding to just open up and start trading as a letting agent or estate agent will help in some way? If I wanted to open up as a dentist tomorrow it would be impossible no? So why is it all too easy for dodgy people to enter the property industry?
Not sure how these people say the consumer has nowhere to go when things go wrong. If a letting agent is acting illegally, then both the police and trading standards should take interest. Unfortunately, in my experience, they are not interested until it is too late.
Voluntary bodies are toothless in stopping blatant stealing of client money and I am not sure how a registration system would change this. If someone is going to steal, they will steal.