Tenancy Deposit When Agent Goes Bankrupt

[johnny5thumbs]

The insurance covers the tenant, not the landlord.

If the tenant asks mydeposits for his money back, mydeposits will pay it back, and then try and recover it from the landlord. If the landlord is bankrupt with properties in negative equity, then mydeposits will end up out of pocket, and that is the eventuality the insurance policy covers.

In the meantime, let's hope that mydeposits doesn't decide to go belly-up too under the weight of multiple claims or class action. Or at least that their public liability insurance (or whichever insurance policy that protects their clienty) is up to date.

What a shame for this to happen just as green shoots are popping up all over the place and the propertymarket was about to take off again.

(edited: typos, typos, typos)

Edited April 19, 2009 by johnny5thumbs

[maryc]

Markbill - we have also found ourselves in an almost identical situation!

Have you or anyone else reading this heard of a case where mydeposits has taken legal action against a Landlord or a Landlord against mydeposits?

[Good Will]

My views on this scheme are that the tenants done is to swap a landlord or LL who won't pay up, for an insurance company who won't pay up. Most Tenant Deposit schemes will sign up any slum area, disreputable letting agent, and as for mydeposits returning the tenants deposit they'll reply in a roundabout away that ''being an UK based Insurance Scheme this means that like all other UK Insurance Companies, we will find an legal loophole to avoid ever having to pay out any form of compensation to anyone, including property owners and tenants?.

The drawback to this scheme is the financial weakness involved by allowing the letting agent retain the deposit, for many of them once they get a few £100k together they don't go bust, they simply close down and set up another company elsewhere', and rest assured they know how to ring fence their assetts from siezure. To be viable the deposit should be protected for both the owner / landlord and the tenant. All mydeposits are doing in practice is to protect the Letting Agents 'Sherwood Forest Right' to hide, or to flim-flam is way out of being held responsible.

Anyone care to bet that within 12 months the Police are going to be looking for a letting agent who dissapeared with over 500k in deposits and this loss won't cost mydeposits a penny piece?

Edited May 20, 2009 by Good Will

[afcone]

also interested in the above topic.

My situation is as follows:

Property advertised in a letting agency. Deposit and first months rent paid to agency, from that point on all dealings were to be with a management comapny (Commercial Property Management, Portfolio Investment and Property Accounting).

Letting agency has gone bust and I have been contacted by the liquidators to inform me that all the records have been destroyed.

They have traced accounts where the total amount of deposits declared in the scheme was 71k, but that the actual balance of the account they were supposed to be held in is 14k, the agency has another account 7k short which the bank is looking to offset against the 14k credit.

the liquidator appears to believe the money is gone.

I am unsure of who is negligible and where I stand, I have 3 months left on my contract, and would consider extending, so time is not a concern.

Does anyone know if this falls to a legal battle with the estate of the agents, the management company, the landlord, or if my deposit has in fact just gone up in smoke?

many thanks for any help

Bumping this thread as just found it whilst searching online for a solution to my current problem - like the poster above I'm coming at this issue from the opposite side as the OP (i.e. as a tenant).

Landlord has just informed me after ten months in the property that he has been trying to get confirmation from the letting agent that the agent protected our deposit. The letting agent appears to have gone to ground now that we (and other tenants of the same landlord) have started asking questions about our deposit and the fact it's not in a TDS.

If the letting agent is acting as an agent of the landlord (they took the deposit and first month's rent, and even signed the contract on the landlord's behalf), then is the landlord - as the principal to the contract - liable to return the deposit to us, even though he never received it? The landlord states in his letter that he has no liability to return the deposit to us at the end of the contract as it was not his responsibility to protect it, it was the letting agent's - is this correct?

Should I be continuing to try to track down the letting agent (who has large debts and few assets), or is this my landlord's problem?

Thanks in advance

[HPCbeliever]

Your landlord is wrong. He is responsible for the deposit. He will have to refund it and then pursue the agent for the money and take the hit if necessary. Your contract is with him. The fact he decided to outsource his responsibilities to a letting agency are his problem. There are others on this site that are far more learned than me on this issue (I am thinking here of Flopsy, Lettings Lady and Matt Hensen not of course our resident ignoratus L2M) who may be able to advise you further.

[angrypirate]

Your landlord is wrong. He is responsible for the deposit. He will have to refund it and then pursue the agent for the money and take the hit if necessary. Your contract is with him. The fact he decided to outsource his responsibilities to a letting agency are his problem. There are others on this site that are far more learned than me on this issue (I am thinking here of Flopsy, Lettings Lady and Matt Hensen not of course our resident ignoratus L2M) who may be able to advise you further.

Just to reiterate what HPCbeliever says, your contract is with the LL and the LL has a contract with the LA.

You persue the monies owed to you from the LL and he in turn persues the monies owed to him by the LA. This is the way the law works.

Ignorance is not an excuse - if the LA hasnt protected the deposit on behalf of the LL, then the tenant can persue the LL for 3x the deposit from the LL. The LL would then persue the LA reimbursement of this and legal costs as the LL has employed the LA to do this for him and the LA broken their side of the contract

[albanaich01]

Bumping this thread as just found it whilst searching online for a solution to my current problem - like the poster above I'm coming at this issue from the opposite side as the OP (i.e. as a tenant).

Landlord has just informed me after ten months in the property that he has been trying to get confirmation from the letting agent that the agent protected our deposit. The letting agent appears to have gone to ground now that we (and other tenants of the same landlord) have started asking questions about our deposit and the fact it's not in a TDS.

If the letting agent is acting as an agent of the landlord (they took the deposit and first month's rent, and even signed the contract on the landlord's behalf), then is the landlord - as the principal to the contract - liable to return the deposit to us, even though he never received it? The landlord states in his letter that he has no liability to return the deposit to us at the end of the contract as it was not his responsibility to protect it, it was the letting agent's - is this correct?

Should I be continuing to try to track down the letting agent (who has large debts and few assets), or is this my landlord's problem?

Thanks in advance

just got an update from management company today:

"I have established that XXX agency placed your deposit in the ‘My Deposit Scheme’ not the ‘Deposit Protection Scheme’, as we had been told, and as the letter attached explains the signs are not promising.

I have been trying to touch base with xxx’s Liquidator, asking them to transfer £1,500 (your deposit sum) to our firm, which we will hold throughout your term and release accordingly once your term ends.

However, they have not responded to my numerous letters, emails and voice messages. I will keep chasing them and hope to report back to you with progress soon."

So it looks as though the management company feels as though I am unprotected.......

i think i may have to start looking into legal advice. :-(

[tim123]

just got an update from management company today:

"I have established that XXX agency placed your deposit in the ‘My Deposit Scheme’ not the ‘Deposit Protection Scheme’, as we had been told, and as the letter attached explains the signs are not promising.

I have been trying to touch base with xxx’s Liquidator, asking them to transfer £1,500 (your deposit sum) to our firm, which we will hold throughout your term and release accordingly once your term ends.

However, they have not responded to my numerous letters, emails and voice messages. I will keep chasing them and hope to report back to you with progress soon."

So it looks as though the management company feels as though I am unprotected.......

i think i may have to start looking into legal advice. :-(

You don't need legal advice (beyond what you're getting here).

Just write back to them telling them this lack of protection falls upon the Landlord and not you.

Personally, I think these "insurance based schemes" are a crock of **** and should be dis-invented. They don't see to offer any advantages and have lots of disadvantages.

tim

[HPCbeliever]

Just to add to that. You could point out that the landlord will be possibly liable to the 3x the deposit penalty.

[LettingsLady]

You don't need legal advice (beyond what you're getting here).

Just write back to them telling them this lack of protection falls upon the Landlord and not you.

Personally, I think these "insurance based schemes" are a crock of **** and should be dis-invented. They don't see to offer any advantages and have lots of disadvantages.

tim

I would think that in this instance a tenant should firstly apply to the scheme where the deposit is supposedly held. Ask them to confirm in writing that it is not their responsibility (what's the point of the protection?) and then write to the letting agent and ask if they have client money protection insurance. If a tenant then needs to pursue the landlord at least he has shown that he has made an effort. Although I've not yet seen a test case I think the judge will make the LL pay up and then as others have said the LL will attempt to sue the LA. A complete nightmare for all concerned!!!!

Just to add to that. You could point out that the landlord will be possibly liable to the 3x the deposit penalty.

I don't think that will apply in the latest case mentioned as the deposit was actually registered in the scheme.

Our good old Government didn't quite think this through did they? What a crock.

No wonder the TDS is dumping non accredited agents like hot potatoes.

I feel sorry for all tenants and landlords concerned and think the LA's involved should be tried for theft. I register all bonds with TDS on day one and then place said bonds in a separate client money bank account. A chartered accountant has to confirm to ARLA that the account is used for no other purpose. But in addition to this I have to have client money protection insurance that protects the money in any event. The tenant can't lose.

[PeterSDE]

Dear everyone

I am still pursuing this matter. Here is what I think is the case, after considerable investigation:

1. MyDeposits indeed does NOT protect the landlord in the event that the agent goes insolvent. If that happens, the agent runs off with the deposit, MyDeposits says: too bad, landlord. You are liable, you pay up

2. The information about this on the MyDeposits website is, to put it politely, less than clear. In fact, the MyDeposits website gives a very strong impression that the landlord IS protected if the agent goes insolvent.

3. However: myDeposits DOES have a brochure ''Information for landlords using an agent to protect deposits' which does make it very clear that landlords are responsible. This brochure is NOT available on the website. It is ONLY sent to landlords AFTER the agent has defaulted.

4. One may ask: why does not myDeposits put a clear warning on their site to landlords using agents? why do they not put this brochure on the site? One could be cynical: they are doing this because they know that if landlords realize this, they will pull their (valueless) insurance out of myDeposits and make some other arrangement. My, that would be cynical.

5. Just to make matters more interesting. MyDeposits is part owned by the National Landlords Association. Is it not a bit surprising to have a Landlords association part-owning a deposit scheme which so acts against landlords' interests?

Neither MyDeposits for the NLA have answered any of my letters on this matter. Further action beckons.

I would be VERY interested in hearing from other landlords who have similarly suffered from myDeposits.

Peter

[tim123]

Dear everyone

I am still pursuing this matter. Here is what I think is the case, after considerable investigation:

1. MyDeposits indeed does NOT protect the landlord in the event that the agent goes insolvent. If that happens, the agent runs off with the deposit, MyDeposits says: too bad, landlord. You are liable, you pay up

2. The information about this on the MyDeposits website is, to put it politely, less than clear. In fact, the MyDeposits website gives a very strong impression that the landlord IS protected if the agent goes insolvent.

3. However: myDeposits DOES have a brochure ''Information for landlords using an agent to protect deposits' which does make it very clear that landlords are responsible. This brochure is NOT available on the website. It is ONLY sent to landlords AFTER the agent has defaulted.

4. One may ask: why does not myDeposits put a clear warning on their site to landlords using agents? why do they not put this brochure on the site? One could be cynical: they are doing this because they know that if landlords realize this, they will pull their (valueless) insurance out of myDeposits and make some other arrangement. My, that would be cynical.

5. Just to make matters more interesting. MyDeposits is part owned by the National Landlords Association. Is it not a bit surprising to have a Landlords association part-owning a deposit scheme which so acts against landlords' interests?

Neither MyDeposits for the NLA have answered any of my letters on this matter. Further action beckons.

I would be VERY interested in hearing from other landlords who have similarly suffered from myDeposits.

Peter

I take all that on board, but question

"Why would a landlord allow an agent to look after the deposit for them?" Surely the point of an insurance scheme is that the landlord then gets the use of the money, otherwise why bother?

tim

[porca misèria]

1. MyDeposits indeed does NOT protect the landlord in the event that the agent goes insolvent. If that happens, the agent runs off with the deposit, MyDeposits says: too bad, landlord. You are liable, you pay up

If they reimburse you when an agent buggers off with the money, they're wide open to fraud. At the low level, landlord appoints $dodgy-relative; at the higher level someone sets up an agency that pays kickbacks (in a perfectly legal form, e.g. "free" inventory) before going bust with a whole bunch of deposits.

[PeterSDE]

If they reimburse you when an agent buggers off with the money, they're wide open to fraud. At the low level, landlord appoints $dodgy-relative; at the higher level someone sets up an agency that pays kickbacks (in a perfectly legal form, e.g. "free" inventory) before going bust with a whole bunch of deposits.

I think the issue here is the deliberately misleading information on the mydeposits website. The site gives the strong impression that the landlord is protected, even if the agent goes bust: which of course encourages the ll to leave the money with the agent, thinking the scheme protects him. Mydeposits have an extremely clear brochure which states very specifically that the LL is NOT protected if the agent goes bust. Guess what! this brochure is NOT on the website. Guess what! Mydeposits only send this to the LL AFTER the agent has gone bust.

[Hed]

On 7/1/2009 at 3:54 AM, PeterSDE said:

I think the issue here is the deliberately misleading information on the mydeposits website. The site gives the strong impression that the landlord is protected, even if the agent goes bust: which of course encourages the ll to leave the money with the agent, thinking the scheme protects him. Mydeposits have an extremely clear brochure which states very specifically that the LL is NOT protected if the agent goes bust. Guess what! this brochure is NOT on the website. Guess what! Mydeposits only send this to the LL AFTER the agent has gone bust.

Hi Peter,

If you are still active, would you mind giving me an update on how this resolved? I am in this position now only just starting the process with mydeposits. I hope things worked out in your favour. Thanks