Tenants are to be legally protected from “dodgy” letting agents who take rents and then go bust, ministers have announced.
In a major victory for housing campaigners, the Government confirmed that it will amend its own Housing and Planning Act to prevent people from losing thousands of pounds when agents go bust.
The compulsory “Client Money Protection” plan, which was urged by charities such as Shelter and recommended by a Labour and Liberal Democrat review, will now become law for all letting agents in England.
Landlords as well as tenants have urged ministers to act as the scheme will protect both parties when agents, who hold deposits and rents, go bankrupt.
Shelter has found that renters typically hand over £600 in deposits alone and agents often act as a conduit for rents on top.
But when the agents have gone bust in the past, they fail to separate out the deposits – which are already supposed to be legally protected – with rents and tenants have been left seriously out of pocket.
Campaigners have long complained about the lack of protection from “dodgy” letting agents who take people’s money and then disappear without trace.
Labour peer Baroness Hayter revealed the news on Twitter after being informed by the Government of the change.
“We have just heard that ministers will ACCEPT our Client Money Protection for Letting Agents report. Result!”
Housing minister Gavin Barwell also announced: “We’re accepting these recommendations”.
And in the House of Lords on Tuesday, Housing Minister Lord Bourne confirmed the news, adding that “yielding to persuasive argument always seems to be the best and most sensible course to pursue”.
“This will ensure that every agent is offering the same level of protection, giving tenants and landlords the financial protection that they deserve,” he said.
“The Government will consult on how mandatory client money protection should be implemented and enforced.”
The change follows an extensive Parliamentary review of the system led by Baroness Hayter and Lib Dem Lord Palmer.
Barones Hayter told HuffPost UK: “Today’s announcement is a major victory and comes almost a year after a Labour amendment to the Housing and Planning Bill gave Ministers reserve powers to force lettings agents to ring fence rents.
“In response to our report, we will now see safeguards put in place to ensure that any rent paid via lettings agents must be held in a separate bank account. This will protect tenants and landlords should an agent go bust or make off with the money.”
Kate Webb, head of policy at Shelter, told HuffPost UK: “It’s good news that the government has taken action today to make sure landlords and private renters are better protected if a letting agent goes bust, tries to steal from them or commits fraud. We’ve been campaigning hard at Shelter to improve the lives of private renters and this is a positive step forward alongside the proposed ban on letting agent fees.
“This announcement shows the government is serious about giving renters a fairer deal but there is still much more work to be done to make private renting fit for purpose in this country.
“Next on the list needs to be the introduction of five-year tenancies across the board to allow people to feel secure and settled in their rented home.”
The Association of Rental Letting Agents, which has its own ‘Propertymark’ scheme, and the SAFEagent campaign both welcomed the decision.