Propertymark says letting agents should be aware of the financial implications of failing to deregister tenant deposits after revealing it is the most common cause of accounting discrepancies among its membership.
A recent routine check of members’ client accounts found 26% of those scrutinised had discrepancies relating to deposits that had been returned to tenants, but not deregistered. The biggest was £800,000 which would have meant the agency paying almost £5,000 in unnecessary protection fees.
The Tenancy Deposit Scheme (TDS) says around 20% of all the registrations it invoices agents for every year end up being for already returned deposits.
David Oliver, Compliance Manager at Propertymark, said:
“It has been a legal requirement for tenant deposits to be registered with a government-approved scheme since 2007, so it is baffling that there are some agents for whom deregistering them is still not ingrained in the process of ending a tenancy.
“Letting agents have almost 200 pieces of legislation to contend with, not to mention a conveyor belt of day-to-day issues with the properties on their books. Deregistering a deposit is not a legal requirement so perhaps it is not surprising it can slip down the to-do list or off it altogether.
“Agencies are invoiced annually by their protection scheme based on the number of registrations and with larger agencies holding deposits totalling tens of thousands of pounds, the potential financial implications are clear.
“Propertymark’s compliance team carry out regular sample checks in addition to the accounting rules and regulations that members are expected to follow.
“We advise all members to instil deregistering deposits into the process of concluding a tenancy, not only as good housekeeping but also to avoid unnecessary costs if the discrepancies are not picked up before they pay their annual protection fees.”
You can find Propertymark’s guide to deposit protection here.
Surely an organisation such as Propertymark would insist their members conduct regular reconciliations on all accounts that Client or Tenant monies are held. At Hauzoo all our Lettings accounts are reconciled daily; this even includes both insurance and custodial deposit schemes. This isn’t just about making sure a business is not paying too much, but that they are making sure every transaction is correctly entered and recorded.
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Nice product placement… however it shows that you dont understand the difference between insured and custodial deposits (much the same as the author of the article who doesnt make the distinction clear).
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As the article sets out, this isn’t about the reconciliation of funds but the ‘closing off’ of the deposit registration certificate. This isn’t an issue with Custodial Schemes, as they issue the refunds, close the certificate- and also don’t charge for the service (other than retaining the interest earned).
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What exactly do they mean by ‘de-registering a deposit’? I’m with DPS so maybe its a scheme thing, but I instruct DPS to release the deposit, they get the agreements from the Tenant and release the money? What else is there to do?
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The issue described is only an issue with ‘insured’ deposit schemes, not custodial ones.
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That really wasn’t clear in the article, was it? I’ve always assumed that for the custodial deposits, they get ‘paid’ by keeping the interest from the accounts that the money is kept in, so when it started talking about fees I wondered what I’d missed!
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So basically the TDS continue to charge even though the Deposit has been returned. Surely they should automatically de-register it at the point it is returned to the tenant. Glad I’m with the DPS.
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None of the schemes (all of which operate both ‘custodial’ & ‘insured’ schemes) manages the return of insured monies or the registration conclusion.
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This is an “insured deposit” problem.
If you wish to use an insured scheme so that you can retain the interest, this is the risk you take. You do not have this issue with a “custodial scheme“.
The lack of clarity on this article is hilariously alarming.
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Wow, what a terribly unclear article submitted by an organisation that want to be chosen as a provider of training for when agents are required to have letters after their name to continue trading!
Pretty certain I won’t be signing up to any of their courses if this is the standard!
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This is a real & understandable issue- especially for agents with either substantial portfolios and/or huge peak seasons (such as agencies specialising in student lets). We understood this issue, and it was highlighted by TDS, when we were building The Depositary in collaboration with them. That’s why our TDS Insured API automatically and instantly closes off deposit registration certificates once we receive confirmation all funds have been reconciled. A task is removed and a cost saved- simples. This is how tech should work- seamless interaction saving agents time and money. [Sentence removed. PROPERTY INDUSTRY EYE TERMS & CONDITIONS #6. Users may not use comments to promote a service or business.]
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I can’t speak for others but our deposits are renewed each year during a tenancy and if we dont renew the protection we don’t pay and they automatically drop off the deposit system. We use mainly insured deposit protection and each year are required to do a reconciliation for Client Money Protect so we address all the discrepancies. How is that other agents do not have to follow these regulations ?
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