The problems started in 2009 when one tenant, Marcin Kierdelwicz, claimed City Living had deprived him of £1,700 (the deposit and one month's rent for a flat he rented through the firm). He handed over the cash to Mr Marcus upon viewing the property to secure it. But on moving day the landlord said he had no contract with City Living, and that the money hadn't been passed on. "We were stuck, and I have a wife and child, so I had no choice but to pay the money again to the landlord," says Mr Kierdelwicz. City Living later refused to return his cash. Mr Marcus tells the IC he suspected the landlord and tenant of "trying to deprive me of my fee".
After complaints to the police and Trading Standards failed to get anywhere, Mr Kierdelwicz was so enraged, he started an internet blog detailing his bad experience.
He claims the blog attracted a number of other complaints from aggrieved landlords and tenants.
Mr Marcus tells the IC he tried and failed to get the blog removed, claiming that 90 per cent of the complaints were "made up by that Polish chap" – a claim Mr Kierdelwicz denies. "I reported him to the police for harassment, and he was told in no uncertain terms to stop," Mr Marcus says. What's more, he claims City Living Hackney went bust because of all the negative publicity from the blog.
Those who lost out include buy-to-let landlord Tony Cassidy. He was trying to rent out a one-bedroom flat in Highbury Square (the former Arsenal stadium). "We were desperate to get a tenant in so we could pay the mortgage," he says. After advertising the property at £1,250 a month in December 2008, he had a call from Mr Marcus saying he had found a tenant. "He took the tenant's deposit of £1,250 and six months' rent up front," says Mr Cassidy.
Mr Marcus said he would register the deposit and take the first three months' rent as his fee, but in month four, no money was paid to the landlords. "We were given a list of excuses," says Mr Cassidy. "In the end, we issued a statutory demand for the £7,500 rent and the £2,000 deposit, but by then his company had collapsed. Financially, this nearly killed us."
Hackney Trading Standards confirms it investigated complaints against City Living in April 2009. "Following the investigation, we served the letting agent with a notice under the Fraud Act 2006 demanding that [Mr Martin] produce financial evidence to prove that sufficient funds were in place to support the business, and to return outstanding deposits," says a spokeswoman. "The agent failed to produce this evidence, but the business immediately left Hackney."
Mr Marcus says: "The business owed £20,000 when it collapsed but only a handful of people lost money. I have done nothing illegal. I didn't have the intention of ripping people off. There was a domino effect from the blog. At the time, I hadn't known we were supposed to have a separate client account. We used one account for everything."
He claims that tenant deposits were registered with the government-approved scheme MyDeposits.co.uk, but the lack of a client account meant the losses were not insured.
Undeterred, Mr Marcus has set up a new lettings agency business, Lets Rent, in Finchley, north London. The IC has been contacted by another landlord who is chasing him for a £2,000 deposit – and £5,000 damages after tenants vetted by Lets Rent set up a cannabis factory in his Haringey property.
"Mr Marcus said he had someone who wanted to move in straight away. He said that the tenant would pay his commission," says landlord James Parsons. "It sounded too good to be true, but he had copies of the tenant's passport and references. Three months later in April 2010, I had a call from the police. They said I had 20 minutes to get round there with a key, or they would knock the door down. The tenants had turned my property into a cannabis farm."
Mr Parsons has since spent £20,000 repairing the property. "Parts of the ceilings had been knocked through so cables to power infra-red lights could get through," he says. "I was lucky the whole place didn't catch fire. The curtains had been stapled to the walls, and most of the doors had been taken off their hinges."
Police found 640 cannabis plants in the property when they raided it.
Mr Parsons asked Lets Rent to release the £2,000 rental deposit, which he had been told was placed in a deposit scheme. After some negotiation, Mr Marcus wrote out a cheque for £2,000 – which bounced.
"It is totally true that I stopped the cheque," says Mr Marcus, explaining; "We are not responsible for the damage. That's what our lawyers told us to do and I'm not going to budge. My colleague put the tenants in. It was all a bit of a rush." The colleague has since left the business.
Mr Parsons has attempted, unsuccessfully, to serve a court summons on Mr Marcus at Lets Rent' s registered address in Stanmore (care of a firm of accountants). He says he will continue to chase Mr Marcus for the debt.
Mr Marcus adds: "My business is solvent. We only have one disgruntled client out of 150-plus Lets Rent has dealt with. We have a ringfenced client account. I'm not saying we are perfect but we try our best to be professional. We're not regulated, because it's a waste of money. People think it offers protection but it doesn't at all. They're a dog with no teeth."
If these landlords had followed the advice of our experts below, they may not have ended up so out of pocket.
| DON'T GET CAUGHT BY A ROGUE AGENT |
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| Property experts tell IC readers what questions to ask in order to avoid being let down by a letting agent: |
Are they part of a redress scheme? "Before instructing, ask the letting agent if he is a member of the redress scheme. If he isn't – just walk out the door," advises London Evening Standard property correspondent and consumer campaigner Mira Bar Hillel. "Redress schemes are the best regulation. On the sales side, compulsory membership of such schemes has cleaned up estate agency hugely. Compulsory redress for lettings agents would weed out the villains, as well as protecting both tenants and landlords – and I can't for the life of me understand why successive governments have failed to take this simple step. The actual compensation awarded may be relatively low, but it's a big headache for agents who have to deal with consumer complaints and therefore an effective deterrent for those tempted to scam people." What will you be charged for? "Some agents publish a low commission rate, but charge high set-up fees, and may charge extortionate rates for safety certificates or other services to make up for it," warns Kate Faulkner, founder of DesignsonProperty.co.uk. "Agents who own their own maintenance companies may charge above the going rate to get things fixed. But the real killer is renewal fees – how much will you have to pay if your tenant decides to stay for a further year?" What tenancy deposit scheme do they use? "By law, tenancy deposits have to go into a government-approved scheme," says Malcolm Harrison, spokesman for the Tenancy Deposit Scheme (TDS). "TDS and MyDeposits.co.uk are both insured schemes – they do not take the deposit, but insure it for a small premium in the event of any dispute," he says. "This means landlords or lettings agents can retain the deposit money in a client account. If there is a dispute at the end of the tenancy, the scheme will take the money and decide who is due what. Alternatively, The Deposit Service is a custodial scheme, which holds tenant deposits in full." But be warned – always ask for proof that the deposit is registered with a scheme, and properly safeguarded. Do they have client money protection? "Landlords often assume agents are covered, when they're not," says Isobel Thomson of Nals. "Some agents will tell you this is covered through their professional indemnity insurance. This covers the agent in the event of misappropriation by an employee; it does not cover the landlord in the case of misappropriation by the firm." Keep your eye on the ball "We've had people complain about not receiving rent from a lettings agent for two years," says Ms Thomson. "What is the matter with landlords? Take control of your business, be prudent and check your bank accounts." |
The letting agent's story
Samantha Collett, founder, Gorgeous Homes, Stoke-on-Trent
"I've been running my letting agency business, Gorgeous Homes, in Stoke-on-Trent for three years, and I've noticed lots of changes in the lettings market recently. A new firm set up in our area earlier this year, and did leaflet drops offering low fees of 8 per cent, the first three months' free and no set-up fees. They took a few of our regular landlords. I wasn't sure how they were going to make money; it was such a cheap service. As time passed, properties weren't being let, as they weren't being advertised. When they were let, the tenants were not very good, and often didn't pay the rent. Then they went bust, and disappeared with rents and deposit money! Did anyone stop to think how they could do it so cheap? The average property up here lets for £400-£500 a month, so 8 per cent of that is nothing. And I can tell you, the costs of running a lettings business stack up. We're a small agency, but advertising costs us £700 a month. Then you've got the overheads of your shop, and staff. Now there are lettings agents setting up online, running their business from their bedroom, so they can do it even cheaper. We've seen adverts promising: "We will find you a tenant for £50." But what sort of tenant will you get for £50? What damage might they do to your property? I've had landlords come back to me after bad experiences with these types of firms. The costs of going to court, getting the tenants out, losing six months in rent – it's a false economy. People think they can open a letting agency business and make money overnight. But your business is built on reputation, and customer service comes at a price."
A landlord turns detective
An Investors Chronicle reader tells how she got her money back from a rogue agent.
"I am fairly new to the property rental game, as I'm renting out a house I own instead of selling it. The agent I used had an office in Twickenham, and seemed very professional. He did all the credit checks and issued me with a confirmation slip that the tenant's deposit would go into a protection scheme. Then I got a letter, saying the firm was moving to Kingston and changing its name. However, it did not contain the new phone number. My e-mails went unanswered. I was concerned about where the deposit had ended up. Eventually, I visited the office in Kingston myself. The letting agent had been there, but he worked for a totally different company – nothing to do with letting properties. I was given another company name to contact. I was told he didn't work there. I then used the WebCheck service on the Companies House website to order information on the firm. The company had been through many incarnations and changes of name, directors and offices, although the company number remained the same throughout, and was still active. I wrote demanding the missing deposit of £1,600, but they didn't respond, so I started a Small Claims procedure. On the point of requesting judgement I had a call from one of the man's relations. Amazingly, they repaid the money. Luckily, I've got great tenants, but by law I was liable for replacing the missing deposit, and they could have sued me for three times the value of the deposit that went missing (£4,800) as it hadn't been properly placed in a protection scheme. I did report this incident to the Citizens Advice Bureau; they said go to the police if you feel strongly about it, but don't get your hopes up."
