From the high cost of calls to the Department of Work and Pensions helpline, to the six-week delay until back-dated benefit payments are received, media coverage of the government’s rollout of the new system of Universal Credit has – quite reasonably – focussed on the plight of affected recipients.

Universal Credit – in a nutshell

But the new system – which combines six previously separate benefits, including housing benefit – also has a profound effect on landlords.

Universal Credit is the much-vaunted simplification of the benefits system and is designed to provide greater incentive for claimants to continue in employment, rather than rely on welfare payments. With the new Universal Credit payments made directly into individual’s bank accounts, it is argued that recipients are likely to assume greater responsibility for their finances.

Landlords’ reactions

According to a recent survey, however, landlords of buy to let property are worried about the switch from the former system of housing benefit to the new Universal Credit. Indeed, so worried are they that only one in five are prepared to continue to let their property to tenants in receipt of the new benefit, reveals research carried out by the National Landlords Association (NLA).

The fears revolve around a number of issues with the new system:

• the six-week waiting period which any applicant for Universal Credit faces, before receiving any benefit payment, means that any tenant may be two months in arrears before the first payment of rent may be made;
• payment of the benefit in arrears simply increases the waiting period until tenants are able to pay their rent;
• payments in arrears also mean that may tenants are unlikely to have the deposit against damage and breakages that landlords typically require;
• whereas it was relatively easy for tenants to arrange payment of their housing benefit directly to their landlord under the old system, Universal Credit is intended to hand greater financial responsibility back to the tenant, so that arranging payment of the housing element of their Universal Credit to the landlord is a more complicated and time-consuming process; and
• both tenants and landlords have already encountered difficulties in communicating and interacting with the administrators of the Universal Credit system.

The result has been that two out of every three landlords are now reporting that tenants in receipt of the new Universal Credit have fallen behind in their payment of rent, according to the NLA’s survey.

All of these developments and concerns have led the NLA and other landlord groups to join members of parliament and other pressure groups to call on government to review the system of Universal Credit.

Landlords of buy to let property have been under increasing financial pressure in recent years.

Probably the biggest challenge to running a profitable business has been the effective increase in taxation, following the decision to abandon tax relief on mortgage interest repayments paid by landlords.

But other regulations, such as an increase in Stamp Duty, changes to the tax allowance on expenses for wear and tear, and a general tightening up by the Bank of England’s Prudential Regulation Authority on the lending criteria for buy to let mortgages have all weighed heavily on the ability of buy to let landlords to run a profitable business.

Licensing of let property by local councils is also becoming more widespread and adding further administrative burdens on even reputable and responsible landlords.

The additional costs – together with the normal overheads of maintenance, letting agency fees and let property insurance – are likely to have left landlords with little choice but to increase rents.

The most recent spur to such increases may be the announced intention by government opposition leader, Jeremy Corbyn, at the Labour Party conference to reintroduce some form of rent controls in the private sector. Despite conflicting view on whether rent controls are ultimately to the benefit of tenants, and others who support the concept, many landlords may be encouraged to increase rents now, in anticipation of any controls in the future.

Our landlords’ insurance survey

A rise in the number of private sector landlords already looking to increase rents is a trend confirmed by a survey recently commissioned by ourselves here at Cover4LetProperty.

Our press release of the 21^st of August 2017 reveals that almost a third of all buy to let landlords we canvassed are planning to increase rents within the next 12 months or so.

The reasons appear to be all about the environment in which landlords now have to operate rather than anything to do with the tenants themselves. The overwhelming majority of landlords (92.55%) said they were happy with the tenants they had, whilst only 1% said they were unhappy, and 6% responded that they felt “50/50”.

Although they gave no indication of the scale of increases likely to be made, the overwhelming reason given by landlords for the need to increase rents was the additional tax burden imposed by government. Other concerns included uncertainties over Brexit, the burden of increased regulations and “interference from the local council”. The prospect of some form of government rent control, of course, may well prove the final straw.

All in all, therefore, it may come as absolutely no surprise that one respondent we asked commented that the role of a landlord had become “more complicated now than when I started”.

Buy to let portfolios

Given the uncertainties in the overall buy to let market, it may also be little surprise that relatively few landlords reported any intention of increasing the size of their buy to let portfolio in the coming year.

A significant 83% said they had no such intention, with only 14% expressing any plans to increase their buy to let property holdings.

Property fraud is one of the fastest growing crimes in the UK, according to press reports.

The principle is alarmingly straight forward and simply described by the property website Just Do Property. It involves the effective theft of your property by criminals who steal your identity and, by impersonating you, go on to mortgage or sell your home.

The way in which it works may be illustrated by two court cases which recently hit the headlines.

Title deeds handed over

The first example was reported by the Independent newspaper on the 28^th of June 2017 and is especially straight forward – although evidence in the prosecution of the particular criminal involved took almost a year to present to the court and gained notoriety as the longest trial in English criminal history.

The criminal in this case posed as a financial adviser and targeted elderly or especially vulnerable home owners, by persuading them to part with the title deeds to their homes in the belief that the large sum of money obtained may be used to help clear their debts or help to support them through their old age.

As more and more elderly people move into care homes, a greater number of houses may be left empty, with the existing mortgage already paid off. This makes the property vulnerable to property fraud, where criminals impersonate the absent owner and arrange a further mortgage on the property. The advance is made, but no mortgage repayments are forthcoming, and the criminals abscond with the proceeds, leaving the hapless owners to attempt to settle the losses.

Fraudster tenants

The second example is a crime committed by tenants who may be equally smooth talking and convincing.

Having taken on a tenancy agreement – under an assumed name, of course – they then use your own name to advertise the property for sale and may once again stand a chance of making off with the proceeds, as described in a report that appeared in the Financial Times on the 12^th of May 2017.

Protecting yourself from property fraud

In the first instance, it is vitally important to entrust your financial affairs only to a trusted and properly authorised financial adviser. Never hand over the title deeds of your property without legal advice or without thoroughly understanding the implications of what you are doing.

Avoiding rogue tenants – including the potential fraudsters amongst them – is always a question of being rigorous in your selection and insisting on verifiable references and credit checks.

Whatever type of property you own – whether it I your own home or one that is let to tenants – a general protection against potentially very costly fraud lies with HM Land Registry.

Always make sure that your property remains correctly registered and that the details are thoroughly up to date – these identify the legal owners, the price that was paid for the property and a plan showing the boundaries of the property.

The Land Registry also offers free fraud protection advice on its website, together with a Property Alert Service which informs you whenever critical activities appear on the registered property you are monitoring. Alerts are sent to you by email – although you may still receive such notifications even if you are not online and do not have an email account.

If you become aware of any such suspicious activity, of course, it is as well to inform the police via the Action Fraud website or telephone number.

If you have teenagers yourself, you probably know that students tend to be in a class of their own – and, as tenants, this typically puts them in a special category as far as the landlord, in terms of his particular obligations and the specialist landlords insurance for students that is needed.

Student landlord insurance cover

It is impossible to generalise, of course, but those in further education are likely to:

• be younger than the average tenant – although there are plenty of mature scholars too;
• work less regular hours than tenants who are in full-time employment;
• probably have a smaller disposable income and maybe managing only on a grant – although there may also be significant numbers of well-heeled international students;
• have a scanty, if any, credit history for you to check – and may be in the early stages of learning how to manage their financial affairs;
• be more inclined to hold impromptu parties and have more visitors than other classes of tenant; and
• raise the risk of a greater number of breakages, theft, damage and general wear and tear in your let property.

That may be why some buy to let insurance policies contain provisions specifically excluding rental to those in further education (and other groups, such as benefits claimants or asylum seekers).

It is also why we make it one of our specialities here at Cover4LetProperty to arrange landlord insurance which covers all categories of tenant – including those in further education – so that your buy to let business has every opportunity of tapping into this potentially buoyant and rewarding sector of the market while giving you peace of mind that your investment is adequately insured.

Student lets – the market

The student let market is growing, with both UK national and international students signing up for university attributed to a 17% increase in the number of student lets.

So, an attractive market exists, but only if you are fully aware of the additional obligations you may have as the landlord of accommodation let to those in further education – obligations with which it is necessary to comply as a matter of law and in order to maintain the validity of your landlords insurance for students.

Student lets – your obligations

As the landlord of any let property, the principal obligations set out in a variety of laws, relates to the safety of the accommodation and keeping it free from any health hazards. For example:

• you must arrange an annual inspection, by a qualified Gas Safe engineer, of any gas installation, its flues and appliances;
• a copy of the safety certificate that is issued must be given to new tenants when they move in or to existing tenants within 28 days of you receiving the certificate;
• the electrical installation – its cables, sockets and fittings – together with any of the appliances you provide, must also be kept in safe working order and, although the law does not specify an inspection schedule, the prudent landlord is likely to carry one out at least once every five years or when there is a change of tenancy;
• as a landlord you must comply with all national and local fire regulations and fit a smoke alarm on every floor of the property and a carbon monoxide detector in any room where there is a coal or wood-burning fire;
• you must be able to prove that any tenant and members of their household have an immigration status giving them the right to rent the property and stay in the UK;
• any deposit you accept from tenants as a condition of an assured shorthold tenancy (the most common type), must be held by an independent third party, approved under the government’s Deposit Protection scheme;
• Houses in Multiple Occupation (HMOs) – where three or more tenants live in the property as more than one household, sharing facilities such as bathroom and toilet or kitchen – are especially popular with students, but impose further obligations and health and safety checks on the part of the landlord;
• the property must not be overcrowded, for example, and there must be sufficient facilities for the number of tenants sharing the accommodation;
• many HMOs and all large HMOs (those with at least five tenants forming more than one separate household, but all sharing kitchen or bathrooms) must be licensed for use by your local authority;
• the licence is granted on condition not only that the property offers a suitable standard of accommodation, but also that the landlord is a “fit and proper” person.

In order to make the most of the financial rewards that may be enjoyed from letting to the large student population in the UK, therefore, you must ensure that you meet a range of obligations as their landlord – and make sure your landlords insurance covers students too. (Which it does with our policies!)

Why not get a landlord insurance quote today?

Contrary to many expectations, landlords and prospective landlords seem to be increasingly attracted to investment in the buy to let property market.

According to a Property Investor Survey on the 7th of June 2017, the proportion of landlords looking to increase their property holdings has increased by 48% since November 2016 and is up by a surprising 41% over the previous 12 months.

The survey also revealed some notable changes in the mortgage preferences expressed by buy to let investors:

• there has been a distinct switch from three- to five-year fixed rate mortgages amongst investors;
• 42% of those surveyed expressed their preference for five-year fixed rate mortgages, compared to just 33% in November of 2016 and double the percentage twelve months ago;
• three-year fixed rate mortgages appear to be less popular (only 5% of respondents) than 10-year fixed rate mortgages.

The statistics on buy to let mortgage preferences appear to reflect landlords’ adapting to new affordability rules which were introduced by the Bank of England’s Prudential Regulation Authority (PRA), which came into effect in January 2017.

The challenges to which landlords are responding

The Property Investor Survey suggests that investors in buy to let property are adapting to the challenges created by a raft of government and regulatory bodies in the past few years – not to mention the ongoing, background uncertainty of the results of Brexit negotiations, which formally opened on the 19^th of June 2017.

The following are just some of the new market pressures faced by landlords:

Mortgage restrictions

• the Bank of England’s Prudential Regulation Authority (PRA), introduced new rules on lending in January of this year;
• increasing and tightening up the criteria under which lenders may make mortgages available to would-be investors has made it theoretically more difficult for existing landlords to increase the size of their property portfolios and for new buy to let investors to enter the market;
• the changes are designed to make a stricter assessment of affordability of any mortgage in terms of the ratio of profit on rental property income and expenditure on mortgage repayments;

Mortgage interest tax relief

• traditionally, buy to let landlords have enjoyed a tax-free allowance on expenditure on mortgage interest repayments;
• starting with effect from April of this year and for the next four years, that allowance is steadily being phased out and, in future, all owners of buy to let property become liable for tax on the whole of their profits, minus the flat-rate tax allowance of 20%;
• hardest hit are likely to be those landlords already in the highest tax ratings of 40% or 45% – since they are going to pay significantly more in tax – but even those landlords currently on lower ratings are likely to be pushed into higher tax brackets, and so, are also going to have to bear a heavier tax burden;
• on the 21^st of November 2016, the Telegraph newspaper described the effects of the changes which are being made and also included a simple buy to let calculator, with which you may compute the way the new tax regime is likely to reduce your profits as a landlord;

Stamp Duty

• since April 2016, anyone buying a second property – in addition to their main home – that is valued at more than £40,000, has to pay an additional Stamp Duty surcharge of 3%;
• clearly, this affects practically every buy to let investor, who is hit by the increased tax when purchasing a property;
• just how much needs to be paid in Stamp Duty of course depends on the purchase price of the property, but the Consumers’ Association’s Which? magazine has published a Stamp Duty calculator as a ready reckoner;

Wear and Tear Allowance

• in the same month of April 2016, landlords also saw an amendment to the way in which tax allowances may be claimed on repairs and maintenance to let property – the so-called wear and tear allowance, which was formerly granted as an automatic matter of course;
• now, landlords may only claim up to 10% tax allowances on money actually spent on maintenance, repairs or the renewal or replacement of furnishings and fittings – but it is important to remember that there is still no tax allowance on money spent improving your let property.

Clearly there have been many changes for landlords to take on board and new challenges to confront when attempting to run a profitable buy to let business. Surveys such as the one referenced above, however, suggest a decided resilience in this sector of the property market, with investors adapting to change and still being drawn to buy to let businesses.

It might be something you never thought you’d have to worry about as a landlord, but there is growing evidence that some tenants are using private rented accommodation for the cultivation of cannabis.

Time was, when criminals choose relatively large industrial and commercial buildings in which to develop cannabis farms, explains a booklet published by CrimeStoppers. Increasingly, though, criminals are turning to privately rented homes – where more than a million cannabis plants have been seized by law enforcement officers in recent years.

One of the latest seizures – reported by Landlord Today on the 15^th of March 2017 – was in Motherwell in Scotland, where a tenant faces jail for cultivation of 93 cannabis plants found to be growing in his small flat. It was only when the presence of a cannabis farm on his property became apparent that the landlord reported the matter to the police?

What to do

If you were the landlord in a similar situation, what would you do? Might you be tempted to turn a blind eye? To do so is likely to prove a huge mistake. If you become aware that your let property is being used as a cannabis farm and knowingly allow the cultivation of the illegal drug to continue, you are committing a crime and may face up to 14 years in prison and/or an unlimited penalty in fines.

It might be in your more immediate interests because of the wider consequences for your buy to let business.

Turning such a residential property into a cannabis farm typically involves significant structural alterations – which, of course, are completely unauthorised by your local planning department. As the subject of unauthorised structural alterations, your insurer may decline any claim you submit for the extensive and costly repairs likely to be incurred after the event.

Structural alterations are not the only form of serious damage likely to be caused by such illegal activity. A cannabis farm typically requires a continuous and extensive supply of both electricity and water. Little care – for structural damage or safety – is going to be taken by criminals routing further electrical cables and water pipes through your property.

The cost of repairs to the damage done in this way might easily run into tens of thousands of pounds.

Bills racked up through the abundant use of electricity and water are most unlikely to have been paid by your rogue tenants, of course – leaving you to foot the bill.

In addition, the use and storage of volatile and flammable chemicals used in the cultivation of the crop inevitably increase the risk of fire.

Clearly, all of this has serious implications for your landlord’s insurance cover. For that reason, we have prepared an extensive guide to landlords and cannabis farms, which you might care to read in more detail.

Finally, you might be warned that the discover of your let property being used as an illegal cannabis farm is likely to be only the start of your problems. Any face to face contact with criminal tenants – even once the police have become involved – is going to be both unpleasant and potentially dangerous.

You are still left with the further worry, hassle, and expense of securing their eviction from your premises. Only once they have been evicted and you have completed what are likely to be extensive repairs to the property, are you once again in a position to generate any income from rents.

Does the acronym “MEES” or the expanded “Minimum Energy Efficient Standards” mean anything to you?

If they’ve both drawn a blank, then you may have cause for concern.

MEES

If you’re in the dark about the above, you’re far from alone.

Some recent surveys have indicated some pretty worrying statistics:

• around two-thirds of landlords are hazy about what this is and how it will affect their business;

• about 25% know nothing at all about MEES.

A full breakdown of the worrying statistics is given in the reference link above and what’s really of concern is that MEES isn’t just another piece of red tape or a minor administrative task. If you get it wrong it could easily stop your business in its tracks.

So, it will pay to get to grips with this – and fast.

What is MEES?

Over many years now successive governments have launched major initiatives, backed up by legislation, all aimed at reducing the country’s energy consumption.

They have been driven partly by environmental concerns but also by the hard fact that our civilization’s ever-growing energy demands look unlikely to be met in the future. Given declining fossil fuel levels and the uncertainty over the practicality of nuclear and alternative Green energies, it looks possible that we’ll have a very real gap between demand and supply capabilities in the future.

So while a scientific breakthrough in energy generation might be hoped for, in the meantime, the only viable route looks to be trying to consume less energy.

MEES is one such initiative.

It’s aimed specifically at landlords and let properties. In a nutshell, it will make it illegal to let a property after 1^st April 2018 unless it meets certain minimum energy efficiency criteria. That’s the now broadly familiar letter designation that’s allocated after a survey on an Energy Performance Certificate or EPC.

If your property is graded in the F or G bands, then from April 2018 you won’t be able to let it unless you’re granted a special exemption. A failure to comply with the regulation could result in a penalty of up to 20% of the rateable value of the property after three months.

Implications

At Cover4LetProperty, we’re expert in things such as landlord insurance rather than building technology and its associated costs.

Even so, it’s clear that these changes in regulations might have a serious impact on some landlords. Certain of them may feel they’re trapped between the need to keep letting their property and the difficulty of finding the money required to upgrade their property to a higher energy efficiency rating.

Some energy saving measures can typically be implemented quickly and at modest cost. Examples such as draught excluders come to mind. However, other required work can be more expensive, such as fitting double glazing.

Fortunately, there is at least some assistance which might be available in the shape of the Energy Company Obligation (ECO) scheme. This is where the energy supply companies assist by installing insulation and other related assistance either free of charge or at reduced rates.

Conclusion

Whatever the impact of MEES will be on your business, ignoring it wouldn’t be advisable.

It will affect very large numbers of landlord properties and those changes will need to be understood and above all managed, if potential fines are to be avoided or your business effectively stopped.

Finding some time to get to grips with MEES and what it will mean to you, might be advisable – and perhaps sooner rather than later.

Whether you are a committed, “professional” landlord with specific objectives for a buy to let business, or a so-called “accidental” landlord who happens to find themselves with a property to let, your activities are regulated by legislation – an increasingly extensive raft of legislation at that.

Naturally, you want to stay on the right side of the law – some of the penalties may be quite severe – and flagrant breaches might jeopardise the validity of your landlord’s insurance.

Here is an overview of the current legislation required as at May 2017. Please note that legislation is liable to change and so the following should be used as a guide only as to what is required.

Repairs and the general condition of the property

You have a general duty to maintain the let property in a structurally sound condition, without the need for major repair. This includes the absence of damp, which may cause a health hazard. You must also ensure that water storage systems pose no threat of the – potentially fatal – Legionella bacteria, which may cause Legionnaire’s Disease.

The property must have adequate lighting, ventilation and heat, together with a water supply, drainage, toilet, wash basin and shower or bath.

If repairs are necessary to keep these in good condition or if anything in the let accommodation is hazardous to health, you are required to arrange for them to be made. If you don’t, your tenants may complain and the local authority might issue an improvement notice requiring the repairs to be made under the Housing Health and Safety Rating System (HHSRS).

Safety

Unsurprisingly, there is a large body of legislation designed to ensure that your tenants live in accommodation free from threats to their safety from gas installations, electricity supplies or fire:

Gas

• you are required by law to have any gas supply and installation inspected and checked every year;
• the gas safety check is to ensure the absence of potentially lethal escapes of carbon monoxide, and during the course of this inspection, you might also want to have the gas supply pipework checked, suggests Stay Gas Safe;
• the inspection must be carried out by a registered Gas Safe engineer and a copy of the certificate he issues must be given to your tenants;
• penalties under the relevant legislation are severe – imprisonment or a fine of up to £20,000, or if the offence is heard by the Crown Court, imprisonment or an unlimited fine;

Electricity

• the law does not require and annual inspection, but you still have a duty to ensure that the electrical installation and any appliances you supply are safe;
• it may be in your own interests, therefore, to have the installation and appliances checked by a qualified electrician periodically – and at least every 5 years;

Fire

• you must comply with all national and local fire regulations – including smoke alarms on every floor of the building and the installation of carbon monoxide detectors in any room with where there is a fuel-burning appliance;
• unrestricted access to fire escape routes must be available at all times.

“How to Rent” guide

The guide is published by the Department for Communities and Local Government, and you are required to give each a tenant a copy of it – emailing it, if you both agree.

Deposit Protection Scheme

If you demand a deposit from your tenants at the beginning of any assured shorthold tenancy (the most common form of tenancy agreement), the fund must be placed for safe keeping with an approved scheme and your tenants informed accordingly.

This is designed to help protect the tenants’ rights to recover any return of deposit due at the end of the tenancy and may help to resolve any dispute you have with a tenant about amounts that need to be deducted (to cover damage and breakages, for example).

If you fail to place the deposit in approved scheme, the tenant may apply to the courts for an order to return the sum involved or to place it immediately in an approved protection scheme.

The courts may also order that you repay your tenant up to three times the amount they originally gave you as a deposit.

“Right to Rent”

To help the authorities police the immigration laws, you also have a duty to confirm that any tenant, or member of his or her household, has the right to stay in the country and therefore a right to rent your property.

This involves checking the documents that confer a right of residence, making a copy of those documents and keep the copies for as long as they are your tenants and one year thereafter.

Once again, the penalties for failing to make these checks or for letting the property to someone who has no such rights, are quite severe and may result in a prison sentence or an unlimited fine.

Income tax

Finally – and as with any other business profits – you have a liability for paying income tax.

As a result of the introduction of the so-called “section 24”, that came into effect in April 2017, there are major changes to the tax allowances available to landlords – principally the phased removal of income tax relief on mortgage interest payments.

Knowing what attracts your tenants and understanding what they want from their rented accommodation, is an important part of being a landlord.

The knowledge gives you vital market information, allowing you to optimise the rent you charge, the priority you attach to given aspects of the tenancy, and allows you to target particular tenant groups.

Above all, perhaps, knowing what attracts your tenants may help you deliver what is wanted in a way that allows you to select the most reliable, responsible, and longer-term tenants.

Survey results

Finding out what tenants want is essentially a question of asking them. It’s a question of such basic importance that, here at Cover4LetProperty, we do more than arrange landlords insurance, but regularly commission surveys on precisely this subject – our most recent results were published on the 15^th of February 2017.

Tenants preferences and expectations change over time – swinging backwards and forwards between key indicators in the relatively short interval of six months between the surveys we conduct. Our most recent findings suggest that:

• rent levels, location, access to and ease of parking, and having a garden appear to be the principal attractions – in that order – for prospective tenants when choosing a property to rent;

• a very significant, but perhaps unsurprising, proportion of 86% of those surveyed said that the cost of the rent was a primary consideration – an increase of some 7% over the previous six months;

• the same proportion (86%) said that the location of the rental opportunity was a major indicator – up by 15% over the past six months;

• access to a garden and easy parking attracted the same 44% of respondents – a figure that represents a decline of 6% as far as a garden is concerned but an increase of 9% on the ease of parking, compared to six months ago;

• fewer tenants (32%) considered an easy relationship with the landlord to be important (down 3% on the previous survey), but more of them (38%) attached importance to the overall state of decoration (up 8% over the past six months); and

• permission to keep a pet in the rented accommodation appears to be significantly less important, with only 20% of tenants now looking to landlords for such approval (down 18% on the previous survey results).

We recognise that no one survey is able to determine the definitive list of tenants’ expectations of rental property – which is why we carry out our surveys so frequently. It is also why we take note of findings from other sources – one of which is the news service Property Wire.

In a press release dated the 13^th of February 2017, for instance, Property Wire claimed that one of the principal concerns of tenants is the resolution of frustrations in dealing with the landlord over maintenance and repair issues – the frustrations appear to take on greater significance among younger tenants, added the news service.

In a separate press release, dated the 22^nd of December 2016, however, Property Wire identified many of the issues highlighted in our own survey, and mentioned the importance to tenants of value for money in the rent that they pay, the location of the property, the overall condition of its décor and the provision of enough storage space.

There are changes on the way for the CMP (Client Money Protection) scheme.

These will be beneficial to the industry at large and it’s important that landlords and letting agents understand them.

The background

Prior to 2007, disputes could arise when tenants were unable to obtain refunds of sums they’d paid to letting agents as a deposit. Unauthorised deductions for non-specific reasons were also a cause for complaint.

Some landlords also report similar troubles at the other end of the chain when, for example, letting agents ceased business whilst holding sometimes significant amounts of the landlord’s money.

After 2007 it became, subject to the date and type of tenancy agreement, a requirement for landlords and letting agents to place all tenant deposits into a government-backed scheme. In theory this should have resolved the problems but it wasn’t totally successful due to a number of loopholes.

The basic problem with the old scheme was that it wasn’t mandatory for the sums concerned to be separately ring-fenced and governed by an official third party.

So, letting agents could still effectively retain the monies in their own account under an insured funds option but then fail to continue paying the cover fees to one of the government-approved third party schemes. There was also no automatic notification system in place for the landlord or tenant to tell them that their funds were no longer insured.

In some cases, the first a landlord or tenant would know of a problem was when they applied to the letting agents for the return of monies.

This situation has resulted in losses for landlords and tenants, negative publicity for the industry in the media and numbers of legal actions. Many landlords have been calling for urgent change.

The new scheme

The good news is that this is changing and that’s something that will be welcomed by tenants and landlords alike.

At the end of March, the government announced that it will be made compulsory for all tenant’s and landlord’s deposit funds to be held in a CMP account. So, even if a letting agent’s business fails, the tenant’s and landlord’s deposit funds will be protected and held safely.

To add teeth to the measures, letting agents found to be using clients’ funds without using CMP services will be liable to a fine of up to £5,000 and potentially face the closure of their business.

A welcome step

All responsible landlords will recognise the benefits of this approach and the greater financial security it provides them with. Similar advantages for tenants will also be appreciated.

For landlords, an added benefit here will be the increased professional reputation of our industry.