Letting agent gone bust_taking deposit with it

[shoesonyourfeet]

Hi - I am the landlord of a property. We used an agent to find a tenant and part of the agreement was that they would take the £950 deposit and put it in a DPS

I recently found out that the letting agent has folded. Unfortunately it appears that the deposit has gone with them as they used mydeposits.co.uk and so as landlord I will be responsible for repaying my tenant's deposit.

 

I obviously didn't pay enough attention to this and should have put the deposit in a DPS myself but hindsight is a wonderful thing.

 

The letting agent changed their co. registered address to the empty shop address about three weeks before clearing off. The usual phone numbers are not in use and noone responds to email.

 

Can anyone offer any advice please?

[crem]

Surely if they put the money in mydeposits.co.uk then the money should still be there?

[Planner]

Surely if they put the money in mydeposits.co.uk then the money should still be there?

 

Its never been there. With the two insurance based schemes the LL/LA holds on to the deposit and instead buys an 'insurance policy' to cover the amount they continue to hold. If an insurance policy had been bought, it should cough up.

[Steve__M]

For one of the two schemes, the insurance policy doesn't guarantee the money. It is supposed to pay the costs of running the dispute resolution service and pay the legal fees to chase the landlord if the landlord doesn't cough up.

 

For another of the schemes, the dispute resolution was in the tenants' favour, but the tenant was still left to chase the landlord for payment (according to a report here).

 

Can't remember which is which though!

 

Personally, if my agent wanted to use the insurance scheme I would insist on keeping the deposit myself. Or to use DPS and manage it myself.

 

You need to check whether the deposit is still "protected" by mydeposits, and if not, set up alternative protection at your own cost.

[raydetinu]

My deposits is a dispute resolution scheme only, so you should of kept the deposit; you need to take out another insurance backed scheme in your name or place deposit with the DPS.

[crem]

Its never been there. With the two insurance based schemes the LL/LA holds on to the deposit and instead buys an 'insurance policy' to cover the amount they continue to hold. If an insurance policy had been bought, it should cough up.

 

That's what I meant Planner, i.e. the "money" is still available coz it is insured. From the looks of the other posts though, sounds like it's possible it's not there.

 

Seems crazy the government insist the deposit goes into a garuntee system then you find out it actually doesn't!

Edited April 26, 2009 by crem

[shoesonyourfeet]

Thanks for your replies.

Certainly a lesson has been learnt and it's easy with hindsight to know what to do in future.

 

Crem you are right how crazy it is, the deposit is supposed to be protected but it's only protecting the Tenant in this case. If an agent takes out the insurance then surely the agent should be responsible.

 

In the T&Cs on mydeposits website it appears that they may require proof that the deposit has been put in a seperate deposit holding account before they will provide insurance - I'll check this but of course that doesn't give the Landlord any help if the agent decides to plunder the account and go underground.

Not good.

[Sali]

I'm interested in this post. If a tenancy agreement states that the deposit is safeguarded by the Tenancy Deposit Scheme, administered by The Dispute Service Limited, are you saying that the agent holds the money and if that agent folds the LL could be left to pay the deposit?

[Steve__M]

Sali,

 

For this scheme (I've just checked) if the tenant raises a dispute, the Independent Case Investigator (ICE) asks the landlord/agent to send TDS the amount of money involved.

 

If the money is not sent, the ICE makes a claim against the TDS policy, and pursues the landlord/agent through the courts.

 

It is not clear from their documentation whether or not they would pay out to the tenant if the landlord/agent had not properly paid up their subscriptions etc. or whether landlord remains liable if agent was the one holding the deposit.

[Sali]

Thanks for that. I've just done some checking and it seems that if you are with an ARLA bonded agent, the LL's and tenant's deposit are insured against loss loss or theft. There is an ARLA website to check on an agent's membership. To be absolutely sure that the deposit is recoverable, I have emailed ARLA. I'll let you know if and when they reply.

[Annied22]

I think I was with the same Agent. Are we talking the Tyneside area? If yes, PM me. I understand there are some assets, so it would be worth registering your name with the Insolvency Service as a creditor.

[shoesonyourfeet]

Thanks but we are not in the Tyneside area, the agent was on the South Coast but I will investigate if the same situation applies.

 

The agent was not with the ARLA.

 

Latest update is the Agent sent me an email confirming the company has folded and she sent a copy of the Deposit Protection Certificate for the insurance-based Tenancy Deposit Scheme to confirm that the deposit is protected (at least for the Tenant)

 

A second call to mydeposits.co.uk and I was told that they are investigating what has happened to the Agent and once this is understood they will write to both Landlord and Tenant advising how to proceed. I'm told we should hear from them in the next week so I will post again once I know the result.

 

As it's an insurance company I'm not expecting positive news but if anyone can shed any light from a legal perspective on whether we are likely to have to pay the deposit it would be useful.

 

Many thanks.

[shoesonyourfeet]

mydeposits.co.uk confirmed that they will seek to reclaim the deposit from the Landlord if the Agent has folded.

 

This just seems completely unfair!

We are not commercial Landlords, average people letting out our home whilst living elsewhere for a period of time. We have tried to abide by these new tenancy deposit regulations in order to do the right thing. We put our trust in what seemed like a professional agency and have been taken for a complete ride it seems. We certainly can not afford to pay £950 to our tenant who leaves in June.

 

Does anyone have any information on where we could go to seek advice - other than a costly legal service?

[Planner]

Surely by definition any landlord is a commercial landlord? you are running a business after all!

 

Im a little unsure about the response you have got from mydeposits - Am i right in assuming that if you dont cough up in June they will pay the tenant and seek to claim the balance from you? If you really cant afford it in June then let them pay the tenant out and deal with them over the coming months, maybe they (mydeposits) will accept three installments or something? (although I dont think I would like one of the TDS schemes (or their insurers) coming after me!

 

I doubt you are going to get 'free' or cheap legal advice anywhere, as even thought you dont think so, you are a business not the consumer and places like Shelter and CAB are geared up (rightly so) to serve the consumer.

 

Does your household insurance policy/credit card insurance policy etc not have legal cover that you could look to use? (again you are likley to run into the obstacle of being a business rather than a consumer/individual).

[shoesonyourfeet]

A commercial landlord would lease a property used primarily for business.

A residential landlord, residential property.

A residential landlord does not always rent for profit. For example we just want the house occupied and looked after until we can return to live in it ourselves.

 

I was simply making the point that we are not large scale landlords, it is not our main business and therefore we have simply made an error by putting our trust with Agents who we believed to be the professionals. I was not suggesting that the usual landlord obligations don't apply to us.

 

The law is there to protect both Landlords and Tenants but in this situation the TDS appears to have failed both Tenant and Landlord.

We had agreed a reduction in rent with our tenant to help ease their financial burden in this current economic climate, but as it is looking like we will have to pay the deposit taken by the Agent we can no longer affford to do this. Our Tenant can not afford to pay the higher rate rent so now has to leave, which neither of us wants. The only person to benefit is the Agent who appears to have plundered the so called 'ring-fenced' account which our deposit (and other Landlords) should have been held in.

 

We do have Landlords Insurance which I will check but I'm not holding out too much hope there as I know we are legally responsible ultimately.

 

I've been advised by joining a Landlords Association you can receive free and unlimited advice and support.

 

For anyone interested or who finds themselves in the same position you may be interested in the request from a journalist I've just found on the Residential Landlords Association website:

RLA : Residential Landlords Association

[Tawnyowl]

Maybe this will be of some interest-seems a complicated matter and a problem that is building.Tenancy Deposit When Agent Goes Bankrupt - House Price Crash forum

[shoesonyourfeet]

Thanks Tawnyowl this is very useful, it's a shame the initial poster hasn't come back on to say what the outcome was but there is some good information in this thread all the same.

[Tawnyowl]

You might be interested.RLA : Residential Landlords Association

[shoesonyourfeet]

Thankyou.

 

Also interested to hear from anyone reading this who has any knowledge of a case where mydeposits has pursued a landlord after an Agent hasn't paid back deposit. Or the outcome of any cases where a landlord has taken legal action against mydeposits????

 

I intend to take legal action if they chase me for the deposit in the coming weeks so will update with more info if it comes to this.

[shoesonyourfeet]

I have received Court papers today and intend to submit a defence. Firstly I intend to submit the Acknowledgment of Service form to allow more time to prepare.

Papers were issued by Central London County Court, I reside in Scotland and am finding it difficult to get advice as this is a matter for English law. I can't afford to employ a solicitor so will attempt to defend myself - not holding out much hope but I can't roll over and accept this either.

I have looked online for other cases since I first raised this issue in 2008 but can't find anything to indicate that a Landlord has been successful in a case against Mydeposits.co.uk when an agent has gone bust and taken the deposit.

 

I accept fully that the law states that the Landlord is ultimately responsible for the return of the deposit but at the time when this insurance was taken out there was nothing on the mydeposits website to show this - in fact the first time they sent documentation to indicate this was once the agent had defaulted. Indeed the website gave the impression that the Landlord was covered too. This has all changed now and it is clear on the website that the landlord is responsible.

 

Has anyone any advice to offer on this situation i.e. does anyone know of a case that has already gone to court? Do I stand a chance given that I feel I was misled not only by the Agent but also by the information and practices of mydeposits.co.uk at that time? If the Landlord is ultimately responsible then surely they should have had some form of correspondence with me prior to the Agent going bust.

Any advice appreciated. Thanks.

[MrShed]

Why would you have correspondance from mydeposits? In relation to the tenancy, the agent was a legal agent of yours, and as such (legally) it was yourself submitting the info. Ultimately, I guess you could deny all knowledge of the agent (its not like they will show up to say otherwise) but you will still have to pay the deposit to the tenant. I am a little confused as to what you hope to get by defending?

[Ed999]

I accept fully that the law states that the Landlord is ultimately responsible for the return of the deposit

 

 

That is a correct summary of the law in England and Wales. Any dispute is solely between you and your agent; you have no legal basis for any dispute with the tenant.

 

Therefore you should complete the Acknowledgement form, stating that you admit liability.

 

 

at the time when this insurance was taken out there was nothing on the mydeposits website to show this - in fact the first time they sent documentation to indicate this was once the agent had defaulted. Indeed the website gave the impression that the Landlord was covered too. This has all changed now and it is clear on the website that the landlord is responsible.

 

 

MyDeposits are not Solicitors. They do not hold themselves out as providing legal advice. You are therefore not entitled to rely on them for advice; if you need legal advice you must obtain it from your own Solicitor.

 

In my opinion, the court will not accept your arguments as disclosing any defence capable of being valid in law, and would be justified in granting summary judgement against you.

 

If your dispute is with the TDS, it is an abuse of the county court procedure to seek to victimise the tenant. Indeed, it may be grounds for a costs order against you.

 

 

Complaints about DPS

 

The proper forum for complaints about the DPS service, and/or about breaches of the TDS rules by the DPS, is -

 

The Housing Ombudsman

Norman House

105-109 Strand

London WC2R 0AA

Tel: 020 7836 363

Edited July 24, 2011 by Ed999

[shoesonyourfeet]

My tenant has his deposit back - he claimed it back through the insurance co (mydeposits).

I never saw the deposit, it was taken by the agent and the insurance was taken out by the agent. I had no say in the deposit scheme as the agent was acting for me and the mydeposits website at the time was misleading to say the least in allowing landlords to belive that they were covered should an agent go bust.

 

The dispute is not between me and the tenant, the dispute is between me (landlord) and mydeposits who are now seeking to reclaim the cost of the deposit from me. There is no victimisation of the tenant so therefore I assume no abuse of county court procedure.

 

mydeposits is the only scheme which does not protect the landlord when an agent goes bust and at the time this insurance was taken out their website info was misleading. Given that mydeposits hold the landlord responsible for return of deposit when an agent defaults, I fail to see why a landlord can not expect some form of correspondence from mydeposits when the insurance is first taken out to advise a) that the insurance has been taken out by an agent and b) that mydeposits will hold the landlord responsible for paying the deposit back should the agent default.

 

Some may suggest that mydeposts were deliberately misleading landlords into thinking they were protected because had I and others realised they were so exposed they would have used an alternative TDS. Interestingly mydeposits is the only insurance based scheme which uses agents who are not members of a professional body, it does not ensure the deposit is placed in a ring-fenced account as is specified in it's rules and is therefore completely open for abuse by unscrupulous agents.

 

I will contact the Ombudsman so thanks for this info. But I can not roll over and accept liability and I have contacted mydeposits solicitors to see if we can resolve out of court but I'm advised it needs to go through the court unless I want to pay the full amount. Even if I wanted to pay, I do not have the money so I do not have an option but to let this go to the court as far as I can see.

 

 

 

Thank you for the Housing Ombudsman info.

[Steve__M]

While I sympathise, the fact that a landlord is responsible for the deposit has always been the case, so there would be no reason for mydeposits to have any information on this.

 

I see that mydeposits say on their website that agents should hold deposits in "segregated" bank accounts. Perhaps you can ask what checks they've done to ensure that this is the case.

 

In the future I suggest you insist on using DPS (which is what I use). With DPS the funds are lodged with the scheme and it's free. For a landlord with one property the insurance schemes aren't good value.

[shoesonyourfeet]

Yes it is written in the law that the Landlord is ultimately responsible but...

 

mydeposits (at the time the insurance was taken out) gave misleading information on their website that allowed landlords to believe that the insurance would pay out should the agent go bust and do a runner with the deposit! SO landlords happily leave the deposit in the scheme chosen by [causing problems] 'agents' who have every intention of taking as many deposits as possible and then folding.

 

ONLY when the agent has disappeared are landlords then sent the FULL information which was previously never available on the mydeposits website which states clearly that the landlord is NOT covered.

 

as previously stated the other insurance based scheme does cover the landlord if the agent goes bust and also only uses agents who are members of a professional body. A much better system.