Member Article

Close rip-off renting loophole, property expert urges

“The only way to end deposit abuse is to end deposits“, lettings expert warns.

A North East property expert has urged the authorities to close a loophole which could allow rogue landlords and crooked letting agents make off with their tenant’s deposits.

Ajay Jagota of sales an lettings firm KIS, believes a loophole in the government –backed deposit protection scheme vindicates his company’s decision to abolish deposits altogether.

Landlords and letting agents are legally required to must place deposits in a government approved deposit protection schemes within 30 days of receiving them.

There are two types of scheme - custodial schemes, where the money is held by a third party, and insurance schemes, where the landlord or letting agent keeps hold of the money for the duration of the tenancy.

If a landlord with an insurance deposit goes out of business, leaves the scheme during a tenancy, or is even expelled from it for breaking the rules, their tenant’s deposits could become entirely unprotected.

The call comes as Housing Minister Kris Hopkins MP revealed that one protection scheme, which only provides a custodial service, has received £30m of taxpayers’ money in the last ten years.

KIS, who recently expanded into residential sales, manage properties for 700 landlords from branches in Sunderland, South Shields and North Shields and were named Letting Agent of the Year at the national Landlord and Letting Awards 2013.

The company were the first letting agents to abolish deposits, replacing them with a one-of-a-kind landlord insurance policy and asking tenants to nominate a home-owning friend or family member to guarantee their rent.

An exclusive deal with a major insurance broker and insurance provider has now removed the need for the guarantor and offers tenants and landlords guaranteed rent, help with legal fees, 30% lower than average move-in fees, and round-the-clock emergency home repairs, administered by a third party.

Ajay said: “A deposit protection scheme exists to protect deposits. If they don’t, they literally have no reason to exist.

“The ridiculous thing is landlords or agents who break the rules and get kicked out of these schemes are surely the ones you want to protect renters from the most. But it seems like this is when some deposit protection schemes are at their most powerless.

“In one case, a London agent who was kicked out of a protection scheme vanished owing tenants £60,000, only to reappear in Scunthorpe running another lettings business.

“Its reasons like this why KIS did away with deposits altogether - barely covering landlords expenses in the event of serious damage to their property or serious rent arrears, and limiting the numbers of people who can afford to rent their property and placing a huge and entirely unnecessary financial burden on renters.

“The only way to end deposit abuse is to end deposits, but at the very least this apparent loophole needs to close and close immediately.”

This was posted in Bdaily's Members' News section by Ajay Jagota .