In recent years, it has become apparent that the financial stress put upon letting agents, along with strict compliance regulations, has left some feeling pressured to gather funds underhandedly. There is in fact a growing trend in agents using deposits paid by tenants to bridge any gaps where their typical funding has failed to reach. Even more shockingly, it has been reported that many do not actually repay the illegally borrowed funds.
An investigation by the BBC has revealed that in 2016, over £1m had been taken from tenants’ deposit schemes by letting agents. It is unnerving to think that money thought to be secure is actually being mishandled by those entrusted to keep it safe. Not only that, but it leaves landlords in a vulnerable position, as they lack the protection that they may need to rely upon for their investment.
The Property Reporter, the online news service for the UK property industry, has noted that this appears to be a growing problem, finding that in the first few months of 2018, £750,000 has already been stolen by rogue letting agents.
Richard O’Neill, Lettings Managing Director for estate and lettings agent Romans, has noted the likeness of such actions to those of Walter White, from TV show Breaking Bad: “Whilst watching an episode of Breaking Bad, it suddenly occurred to me, like Walter White, other agents hadn’t started out with bad intentions, they are victims of circumstance.
“All agents (hopefully) start out with good intentions, they want to do the right thing for landlords and tenants alike. However, just like Walter White, when faced with financial pressures and unforeseen circumstances, many begin to look for short cuts.
“One bad decision after another, Walt’s life spiralled out of control and he became the villainous Heisenberg. It’s much the same for the letting agents who at first may just take a small short cut but, as their financial outlook gets bleaker, the decisions they make become more and more drastic.”
The on-going preparations for the Tenant Fees Ban promise a big shift in the private rented sector, which will financially affect all involved. With the Government predicting that the first year of the ban will bring with it major costs to both landlords and letting agents, the pressure is continuing to increase. In particular, it could result in many smaller, independent letting agents finding themselves “Breaking Bad”, which is to say, this change in circumstance may wear agents down, and the temptation prove too much. It seems as though the belief that their actions will go unnoticed is a trap too alluring for some to avoid.
This should not be considered a representation of letting agents as a whole, on any account, however. Richard went on to say: “It is by no means all doom and gloom for the lettings industry, there are many compliant, honest agents who will go above and beyond to do the right thing by the customer.
“Some agents have employed a dedicated compliance team to manage the on-going changes to legislation and ensure client funds are protected.”
A number of changes are expected within the private rented sector, in order to put a stop to the actions of rogue landlords and letting agents. The requirement for lettings agents to have a nationally recognised qualification is on the horizon, along with changes proposed by the Tenant Fees Bill, which are expected to have a massive impact.