TDS will protect tenants but not landlords of collapsed agent

Thursday 12th July 2012

The Tenancy Deposit Scheme has said categorically that no tenants will lose out as a result of the closure of Spencer Knight. However, it appears that any landlords affected could lose out as they would have to claim against Safeagent, of which the firm was no longer a member.

Safeagent yesterday evening confirmed: “Inclusion under the Safeagent Client Money Protection Scheme ceases when an agent leaves or is terminated from Safeagent. The policy underpinning the Safeagent CMP scheme does not offer unlimited liability.”

It must be stressed that Safeagent has, as yet, had no claims from landlords.

The Wilmslow firm, formerly also a SAFEagent member, was dissolved on June 26, leaving question marks as to the deposit money. The London Gazette had published a striking off notice on March 13.

The deposits were protected by the TDS. Altogether, some 115 tenancy deposits were protected with a value of £206,475.

In response to a series of questions from LAT, Steve Harriott, chief executive of the TDS, released a detailed statement yesterday afternoon.

In it, he says that tenants will be repaid deposit money, but that, in the event of a landlord being made an award for an expense such as cleaning or putting damage right, the landlord is not covered by the TDS and would have to try and seek this money from any relevant body holding Client Money Protection.

In this instance, the body was Safeagent, of which Spencer Knight was no longer a member as from May 10.

According to Safeagent’ own website, it appears that claims can only proceed once the agent concerned has been verified to be a ‘current’ member.

According to Ian Potter, managing director of ARLA, the affair raises questions about Client Money Protection policies held by the different bodies. See also next story.

The Steve Harriott TDS statement reads in full:

Over recent days there has been a great deal of comment on the Spencer Knight case and some queries as to the position regarding the tenancy deposits.
Firstly, the Spencer Knight case should be viewed as an example of the tenancy deposit protection scheme working as it was intended. No tenants will lose out as a result of the closure of the firm as the deposits were protected with TDS.
The facts are these:
•         Spencer Knight was a member of TDS and also a member of Safeagent and SAFEAgent. 
•         Spencer Knight had 115 tenancy deposits protected with TDS with a value of £206,475.
•         On 10 May 2012, Safeagent advised TDS that Spencer Knight’s Safeagent membership had been terminated as of that day. 
•         In line with its Rules, TDS contacted Spencer Knight and advised that as they were no longer members of Safeagent that it intended to terminate their membership of the scheme. They were given the opportunity to make representations to TDS about this proposed termination (in case they were seeking membership of another Approved Body for example) but Spencer Knight’s membership of TDS was suspended at this point to prevent further tenancies being registered. No further tenancies were therefore registered after this point.
•         As it was clear that the firm was not becoming a member of another Approved Body, TDS served notice on Spencer Knight confirming that their TDS membership would be formally terminated. 
•         As required by the legislation, TDS also then sent the required notices to all tenants of live registered tenancies and all landlords for whom TDS had contact details, advising them that the firm’s membership of TDS was being terminated and that deposits registered with TDS remained protected by the scheme until 1 September 2012.

Where a tenancy ends within this notice period a tenant can seek repayment of the deposit from the Scheme. Where this happens TDS seeks information from both tenant(s) and landlord(s) of any deductions required from the deposit and will adjudicate where there is a dispute. Any sum from the deposit awarded to the tenant is paid by TDS and recovered via its insurance policy. Any payment awarded to the landlord is not insured under the legislation; landlords affected in this event would be advised to contact the relevant Approved Body to seek recompense under their Client Money Protection Insurance Cover. 
Going further than the legislation requires, TDS will also allow affected tenants to still make a claim if their tenancy ends after the three-month notice period – provided they tell TDS within the three-month notice period that they may wish to make a claim when their registered tenancy ends. 
As can be seen, no tenants’ deposits are at risk because of the TDS insurance that is in place. However, landlords seeking reimbursement from the deposit for things like cleaning, damage or unpaid rent will need to make a claim either via the Courts against the tenant, present themselves as a creditor of the agent for the loss of the balance of the deposit, or seek to claim from the CMP insurance.
TDS confirms that a number of Spencer Knights’ tenancy deposits were transferred to an existing TDS member, Lime Lettings Ltd, and these have been protected with TDS by them.

A small number of other tenancies have been taken over by Benson Bunch. TDS has been informed that these deposits have been protected with another scheme and confirmation is awaited.

In respect of the Lime Lettings deposits registered with TDS, we expect them to follow the normal TDS rules and to repay any deposits due when their tenancies end in the future. Lime Lettings Ltd is a member of ARLA and is subject to ARLA’s compliance regime and is required to have the deposits in a client account, as has been confirmed by ARLA.
This currently leaves 90 tenancies with a value of £164,938 which are being dealt with by TDS under its insurance scheme.