"There are cases of agencies, even large and well-established [lettings agency] businesses, running into difficulties because they had no client money protection, with both landlords’ and tenants’ money being lost."
Now it is true that lettings agents are not legally required to have 'client money protection'. A lettings agent can collect the rent from the tenant and use the money as the normal cash flow of the business. They do not have to keep it in a seperate 'client account' on behalf of the landlord. This is what 'client money protection' means.
However once the tenant has paid their rent to the landlord's agent - aka their lettings agent - then as far as the law is concerned they have paid it to the landlord. The tenants' money cannot be 'lost' because a dodgy lettings agent has spent it on fast women and cocaine before it got to the landlord as labour suggest.
Ah, but what about deposits? They belong to the tenant don't they? Well, under the Housing Act 2004 (see Chapter 4 and Schedule 10) it is the landlord that is responsible for protecting the tenant's deposit. If his agent - aka the lettings agent - spends it on fast women and cocaine, the landlord is still liable to the tenant for the deposit, including where the tenant remains in place (say the lettings agent has gone bust) re-protecting the deposit in a deposit protection scheme out of his own pocket.
A tenants money cannot be 'lost' because a dodgy lettings agent has no 'client money protection' only the landlord's money can be 'lost' this way. So don't be fooled by labour's proposals for more new landlord protection legislation. Just look at the vested interests labour quote as wanting this reform on pages 8 and 9 for a start:
* The British Property Federation
* The Association of Residential Letting Agents
* The Residential Landlords Association
* National Landlords Association
* Countrywide Estate Agents
We'll look more at how these vested interests stand to benefit from labours landlord protection regulation later on. Labour haven't changed, don't let them fool you again!