Those managing agents who have collected deposits from Tenants on behalf of Landlords and subsequently gone out of business (or go out of business in the future) may leave behind financial problems for Landlords.

Where a managing agent has collected a deposit from a tenant and registered it with the insurance backed deposit protection scheme (the Tenant Deposit Service) this may leave liabilities to the Landlord if the managing agent fails before the end of the tenancy. This is a very real problem with the amount of managing agents that are currently going out of business.

The insurance will cover the tenant only and not the Landlord. This means that at the end of the tenancy, the tenant can pursue the Landlord to repay the deposit or make a claim under the insurance scheme. If a claim is made under the scheme the insurer may pursue the Landlord to recover any monies they have paid out to the tenant. To avoid being pursued many Landlords are opting to repay the tenant the deposit immediately at the end of the tenancy. In either event, LANDLORDS ARE LIABLE because the managing agent is the employee of the Landlord and the Landlords duties and liabilities to the Tenant remain unaltered even if they were delegated to a managing agent (who ultimately failed).

The end result for the Landlord is that they have to use their own funds to repay deposits which were held by there managing agents that have ceased trading.

Hot Tip: Landlords may wish to check that their managing agents are registered with professional bodies which are bonded. This will help Landlords if the managing agent ceases trading. Check out the new licensing system for managing agents at arla.co.uk

Source: ms-law.co.uk

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