Andrew Arden QC and Justin Bates consider the growing problem of tenancy deposit fraud and suggest that there should be mandatory licensing for private sector landlords and letting agents. Introduction The relative vulnerability of private sector tenants is a topic we’ve written about before (e.g. retaliatory eviction, abuses of students), but recently a new practice has been affecting parts of the market. The most common elements involve a property being advertised for rent (usually, but not exclusively, via the internet). A prospective tenant then contacts the putative letting agent/landlord. A viewing may or may not take place. A tenancy agreement is signed and – importantly – a deposit paid, invariably in cash. When the tenant arrives on the agreed move-in date, he discovers that he has been the victim of a fraud because: (a) there is already a tenant in occupation under a lawful tenancy agreement; and/or (b) the agent/landlord had no authority to deal with the property; and, in either event, (c) it is impossible to get the deposit back as the fraudulent agent/landlord has vanished. (see this article in the Islington Gazette, for an example of this fraud in action). The problem is so prevalent that the Metropolitan Police have a dedicated website on the issue (here). One property was used for such a fraud at least 60 times. The National Fraud Authority are similarly concerned and have issued practical advice on how to avoid falling for such a scam. What can be done? The existing law provides little protection. The deposits are “paid in connection” with an assured shorthold tenancy and therefore within the scope of Pt.6, Ch.4, Housing Act 2004 (tenancy deposit protection). A fraudster who intends to run off with the deposit is obviously not going to comply with those provisions and the right to bring proceedings for the return of the deposit is rendered useless if the fraudster cannot be found.   There is a possibility of bringing criminal proceedings for fraud or similar offences (see here for a brief report in Letting Agent Today of an ongoing case against a letting agent; the charges are denied), but experience suggests that such prosecutions are likely to be rare and, in any event, will not necessarily lead to the return of the deposit. Reform This sort of fraud is a concomitant of deregulation of the private sector. Housing is as essential as, say, water, gas and electricity and more so than telecommunications, yet each of these have regulations and a dedicated regulator. In our view, the existence of this fraud makes a compelling case for the introduction of mandatory licensing for landlords and letting agents. A register of landlords and agents freely available and searchable would allow a prospective tenant to establish relatively easily whether the person he was dealing with is lawfully entitled to let the property or, at least, a person with an established presence in the area of activity. The Welsh Government is already moving in that direction. The consultation paper, Proposals for a Better Private Rented Sector in Wales, proposed a scheme requiring all landlords to be accredited with the local authority for the area where the property is located. Those who fail to register with the scheme could face criminal prosecution and, if convicted, a fine of up to £20,000. The court would also be empowered to disqualify the landlord from letting property for up to five years. Letting agents would also be required to register with a similar scheme. Failure to do so would be punishable on conviction by a fine of up to £50,000 and disqualification from acting as an agent for up to five years. In England, proposals are less developed. The House of Commons’ Select Committee on Communities and Local Government has recently opened an enquiry into the private rented sector and has asked for submissions on the regulation of landlords and letting agents. The Greater London Authority has also launched a review of the private rented sector in London and, as part of that review, is considering the role of landlord licensing. It is anticipated that the Welsh Government, the Select Committee and the GLA will all issue reports in the first part of 2013.