Agent went bust without protecting client deposit!

The liability to protect the deposit ultimately remains with you, despite the use of an agent. The agent's behaviour is shocking as they should at the very least used a clients' account so that your money was held separately.

If you've had the tenants for several years, do you need a deposit?

I think you need to repay the tenant, as you suggest, even though this is at your expense. If you then get the tenant to pay it back t you, that's a decision for you to make. Not sure I'd bother myself.

I had the same problem a few years ago, crook of an agent who done the same thing the first time I had used an agent and the last, decided to pay the deposit back to the tenants and got them to provide bank statements and a signed acceptance to the deposit being returned to them to give me a paper trail in case of issues. I don't ask for deposits anymore I just add it to the rent, less hassle!

You are still responsible, but are you certain the deposit was not protected. Many agents use an insurance backed scheme so they can keep the deposit money to fund their cash flow.

It might be worth checking with TDS & DPS etc to see if the deposit was protected in this way

Did the agent not have a protected client money account?

Reply to the comment left by Mike231 at 20/02/2024 - 09:51
Like Mike 321 I don’t bother with a deposit it’s another admin thing to worry about. Just state on the rental agreement that the tenant signs, that no deposit was taken as protection just in case a tenant later claims that they paid one.
While deposits can be claimed against arrears if a case goes to court, in other cases the schemes give the tenants a right of redress over any claim a landlord makes. You can get caught up in what constitutes damage and what constitutes fair wear and tear and the landlord has to supply all the proof. Any tenant could object to just aggravate a landlord and delay the process. Let’s face it a month’s rent won’t pay for much in the way of repairs, especially nowadays.

Reply to the comment left by Tim Peters at 20/02/2024 - 10:17
Under no circumstances should an agent use a deposit to help with their cash flow. It should be in the client account, if not lodged with a deposit scheme.

Bryan,
You don't say how long since the tenancy started. The deposit has to be protected within 30 days not 14. The agent should have been a member of a redress scheme. This information should be on the paper work you have from the or easy to find out from either of the two schemes. The schemes require and would of ensured the firm had client money protection. They should provide you with details to apply under.

If your tenancy is six month get the tenants to sign a new AST and serve all paperwork on them ensure you have proof of doing so.
Also some time the AST lists what scheme will be used to protect the deposit. You could also ask the tenants to see the paperwork the agents gave them to check what has and jas not been provided.

It is worth you signing up to a landlord's associate for guidance and assistance throughout the tenancy.

Best of luck

Agent should have been in a Redress scheme. If you know which one, see if they can do a thing for you - they might have details of the agents professional indemnity insurance, for example.

A reminder to all landlords. You are always responsible for any mistakes or omissions by your agent. You need to monitor and supervise what they have done constantly. Never fall for the "you can relax as and let us manage it" line. .
Always check what they have done and know your legal duties and ensure they have fulfilled them.
Depending on the contract with them you may have redress.. but this is not much help if they go bust or fail to pay their redress as scheme.