The Property Ombudsman wants views from letting agents about setting up client money protection insurance to safeguard rents and deposits.
Unlike estate agents, letting agents are not regulated and do not have to protect client money in separate bank accounts.
In recent months, several high-profile letting agents have gone bust leaving landlords hundreds of thousands of pounds out of pocket and with no hope of getting their money back.
Some letting agents have been jailed and picked up hefty fines for fraud and theft of landlord and tenant cash.
Now, The Property Ombudsman (TPO) wants to add compulsory client money protection to codes of practice for letting agents making cover compulsory for membership of the scheme.
“TPO membership requires residential sales and letting agents to abide by the TPO codes of practice and have professional indemnity insurance. While estate agents holding client money must deposit money in a separate client account, it does not currently require residential letting agents to hold client money protection cover,” said Bill McClintock, chairman of the TPO operating company.
“Given that the code of practice is generally accepted as the primary standards document in the industry, the omission of such an important aspect needs to be addressed.
“This is something the board and Ombudsman Christopher Hamer have been considering for some time and recent incidences of both landlords and tenants suffering financial loss means action on protecting client money is imperative.”
A consultation paper has been distributed to all TPO scheme members setting out client money protection options.
McClintock wants TPO members to disclose their client money protection policy to landlords and tenants at the point of instruction or sale of services.
“TPO and its codes of practice are part of a consumer protection regime with the firm objective of raising standards in the industry,” said McClintock. “While TPO cannot force agents to sign up to the code, firms should see the codes as enhancing the reputation of the industry and for those that are already members of TPO the addition of a clause requiring client money protection will enable them to demonstrate to landlords and tenants that their money is protected.
More than 9,000 letting agents are signed up to the TPO code – around two-thirds of the estimated 13,500 letting firms in the UK.