Warnings that many Scottish letting agents are going to go bust due to the new tenancy deposit law are getting stronger as the autumn deadline approaches, and if the worst happens some industry experts are forecasting a £50 million black hole in tenant deposits leaving private landlords legally accountable.
It has already been reported that a record number of letting agents in Scotland are trying to sell up in advance of the November deadline that will require them to place all tenants’ deposit money in a custodial scheme. The latest warning is the most serious yet, and the dire forecast is that the new law may have the opposite effect to what was intended. The result could be that many letting agents will go out of business, taking with them huge amounts of tenancy deposit money and landlords are being warned that in some cases their landlord insurance will not mean that the deposits are protected.
This will then have a substantial knock-on effect for private landlords, who will be forced to find the money for their tenants from their own savings. In the last week some private landlords have reported that letting agents have simply disappeared while there are some forecasts that in the next twelve months, half of all Scottish letting agents will have gone out of business. Any private landlord with a property in Scotland and where the agent has taken a deposit is urged to act now to clarify exactly where the deposits are being held and to take steps to make sure that it is properly protected.
Peter Grant, managing director of VTUK, said “Many Scottish agents have used tenants’ deposits for their own businesses’ working capital requirements. The clock is now ticking and agents have until November 2nd to find the finance required in order to place deposits into one of the three approved schemes. Given current economic conditions and the restrictions banks are placing on lending, there is a real danger that many agents simply won’t find the money and will go out of business, leaving landlords and tenants significantly out of pocket. It was stated at the debate that Scottish agents could potentially have a collective £30m-£50m hole in their accounts, which really demonstrates the extent of this problem.”