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Yet another letting agent has closed, leaving hundreds of landlords and tenants in financial difficulties. Based in High Street, Kings Langley, Hertfordshire, Pendley Estates has closed and appointed insolvency experts to handle a voluntary creditors liquidation.
Landlords and agents in the town reckon Pendley Estates managed around 300 homes, with tenant deposits worth around £325,000 for more than 200 properties unprotected.
They say rent collected for landlords has not been paid and that money handed over for gas safety certificates, energy performance certificates (EPCs), and tenancy agreements have also gone missing along with the documents.
The company has ceased trading, and administrators Buchler Phillips explained work was underway to assess how much the company owes before returning any money to landlords.
Landlords take a considerable risk when they hand over management of letting property to an agent.
If the agent is managing the property, they collect:
As most landlords know, these payments can add up to thousands of pounds, while homeless charity Selter estimates the average cost of starting a tenancy is £600 for a renter.
Agents should have a client money protection account (CMP) that keeps client money ring-fenced and insurance that should cover the loss if cash goes missing. However, the vast amounts sitting in CMP are tempting for some agents, especially if the business is financially faltering.
Although CMP rules designed to protect landlords and tenants came into force on April 1, 2019, agents are still going to the wall leaving huge unrecoverable debts.
An example is Ash Residential Property Management Ltd (ARPM), liquidated in October. ARPM managed 8,000 properties and stacked up debts of £1.5 million, and one landlord is said to be owed more than £300,000.
Letting agents regularly close for many reasons, including theft and fraud of client money. Insolvency Service figures published in December 2021 show at least one agency closes every day - and the data does not cover self-employed agents. But, of course, not every agency closes because of criminal activity: rising rents and running costs, disruption from the coronavirus pandemic and myriad other reasons are also to blame.
To reduce the risk of losing money, letting agents must:
Check if a letting agent is registered with a redress scheme
Other letting agent trade bodies include the Royal Institution of Chartered Surveyors (RICS)
Landlords should check whether the agent is registered with an online search or by phoning the organisation to confirm the registration is valid.
Always check important jobs that could lead to a fine have been done on time as these are among the ‘extras’ that swallow cash and are easily overlooked. These jobs would cover placing tenant deposits on protection and getting safety certificates on time.
Your contract with the agent should include a clause stating when rent collected for a landlord should be paid - and make sure any charges or deductions on statements come with proof of payment.
A tell-tale sign your letting agent is in financial trouble is delaying paying rent. This money should go through a CMP account and directly to a landlord on payment. If it doesn’t, you must act immediately by moving your letting property finances to another agent.
Once a letting agent goes bust, there’s little a landlord can do other than bring the matter to the attention of the authorities. If theft or fraud is involved, report the case to the police.
Trading standards act as a consumer watchdog and enforce Tenant Fees Act rules. The redress schemes that can order compensation payments are:
The insolvency practitioner handling the liquidation can advise landlords who are owed money.
Other than trusting official bodies, the only recourse a landlord who has lost money has is through the courts - but there is little they can do while police and insolvency experts investigate.
Once a letting agent has introduced a tenancy on a full management contract, the accepted principle is that the tenant and any associated fees stay with the tenant until the tenant leaves.
However, most contracts will have a break clause allowing the landlord to end the arrangement after giving notice or paying a fee. If a letting agent is in administration but still trading, take legal advice about your next steps.
If the agency has closed and stopped trading, switch rent collection and services to yourself or another agent to stem losses.