A leading PropTech entrepreneur has renewed his call for letting agents to use more technology to clean up their act when it comes to transparency and accountability.
"Cases of rental payment fraud are relatively rare but there are still too many examples of landlords and tenants being left out of pocket by unscrupulous letting agencies These are significant sums of money for consumers so there should always be documentation and evidence of all payments received by agencies" says Neil Cobbold, chief operating officer of automated rental payment service PayProp in the UK.
Cobbold's claim follows the confirmation that mandatory membership of a Client Money Protection scheme will come into force next April. CMP schemes protect landlord and tenant money in the event an agency goes out of business or misappropriates the funds.
From April 2019, agencies that aren’t members of an approved scheme could be fined up to £30,000. There will also be fines of up to £5,000 for agencies that don't display the details of their CMP scheme membership on their website and in their office.
In addition to this initiative, there have been three high-profile expulsions of rogue lettings agencies from The Property Ombudsman scheme.
One was expelled for withholding over £12,000 of rent, another for a range of failings including neglecting to protect a deposit, and the third agency had its expulsion extended after it made no record of a £1,375 deposit and advance rent payment, which it subsequently withheld.
Cobbold says agencies should recognise that technology can help combat this trend.
"The introduction of mandatory CMP membership for agencies will be a crucial step towards reducing the chances of rental payment fraud occurring. This much-needed regulation, combined with an increase in adoption of automated rental payment systems, can improve transparency across the rental sector” he adds.
It is thought that around 80 per cent of agencies are already members of an approved CMP scheme, meaning that the remainder - approximately 3,200 firms - will be required to join one before April 2019.
“Mandatory CMP will ensure that consumers’ funds are protected, but it’s also important that agencies have the systems in place to manage payments efficiently and accurately,” he says.
“An automated, bank-integrated payment system allows agents and landlords to see the live status of a portfolio, providing digital reconciliation which can be vastly more accurate.”
He says they also benefit letting agencies by providing streamlined processes, increased scalability and reduced administration.
PayProp is a bank-integrated automated payment platform which, since launching in the UK in 2015, has grown to manage the payments on more than 23,000 active tenancies.