The penalty handed down to an agent whose business went under owing its clients over £90,000 has come under attack from the chief executive of the NAEA.
Peter Bolton King said that the £3,000 fine received by Sharon Price, a former NAEA member, in Huntingdon magistrates court this week, was far too soft.
He said: “I am not impressed with the leniency of the court. It has sent out no meaningful messages.”
He also said that the sums that had to be paid to Price’s former clients through the NAEA’s client money protection scheme had been instrumental in this year’s steep hikes in insurance premiums for members.
“So, when it was suggested in mitigation in court that it was somehow all right because the creditors had been repaid, my reaction was – well, we’re a creditor.”
He went on: “This case epitomises the problems we are having all over the place – persuading the police and Crown Prosecution Service to take action in the first place, and when they do, getting the courts to impose appropriate penalties.
“In this case, the courts have shown that they do not help in driving forwards the standards that we as a professional body are looking to achieve, and I will be taking this up with the housing minister.”
In the case, Price, of Price Properties in Huntingdon, pleaded guilty to two charges that Bolton King said made it a civil matter.
It had been expected that Price – whose business was said to have been run in a ‘chaotic and shambolic’ manner and who was said not to have passed rent on to landlords for a year – would have faced trial at crown court.
The case was reported yesterday on EAT’s sister title, Letting Agent Today, as below:
Agent who owed over £90,000 to clients is fined just £3,000
An agent whose business went under owing over £90,000 to landlords, tenants and contractors has been fined £3,000 by magistrates.
She has also been banned from being a director for five years and must pay £2,000 costs.
The penalties have angered her creditors, who had expected the case to go to crown court.
Sharon Price, an NAEA member, of Price Properties in Huntingdon, Cambridgeshire, had not kept client money separately, kept inadequate records and ran her business in a “chaotic and shambolic” way.
On Tuesday, she pleaded guilty to two charges of contravening the Consumer Protection from Unfair Trading Regulations, and Business Protection from Misleading Marketing Regulations, between January 2009 and February 2010.
While more than £90,000 had to be paid back to landlords and tenants of Price Properties via the NAEA insurance scheme after the company went into administration in February 2010, the company’s full liabilities remain unknown.
Prosecutor Mike Magee said Price, 49, had “singularly failed” in her duties to her clients: “Ms Price held herself to be a competent and professional estate agent. It is the prosecution case that she was neither of those.”
Rent was not passed on to landlords and deposits were not ring-fenced in separate accounts, the court heard.
On occasion, payments to landlords were authorised only to be cancelled by Price the following day. Some landlords received no rent throughout the whole of 2009, despite their tenants paying on time and in full.
Tenants who had paid deposits did not have them repaid when their tenancies came to an end.
Despite concerns being raised by a staff member in the summer of 2009, she believed she could trade her way out of the situation and continued to take new clients until January 2010.
Mr Magee said: “Given the absolute absence of financial controls and financial training, the mess the company was in is unsurprising.”
He added: “By her mismanagement, negligence and lack of professionalism, she caused those losses to the landlords and tenants who had placed their trust in her to negotiate their finances.”
Kevin Warboys, mitigating, said Price admitted mismanaging the company finances “disastrously” but had made no personal profit, and that her membership of estate agency bodies had allowed many creditors to reclaim their losses.
He added that Price herself was the business’s largest creditor, owed £83,500, and that her marriage had broken down in the past year.
One of her creditors, contractor Mark Shipley, carried out decorating work for Price Properties just before the company went into administration and was owed £1,800.
He said: “At the point she contracted me in January, she knew full well she was going down the pan.
“I’ve had to write that money off and put it down as a lesson learned. Meanwhile she’s come out of this smelling of roses.”
* The Editor of Letting Agent Today wishes to thank the local paper, The Hunts Post, for its help and professional co-operation with this report, following the refusal of Huntingdon Magistrates Court to give LAT any information as to how Price pleaded, what the charges were or what penalty was imposed. The court cited the Data Protection Act.
The Hunts Post report is at: https://tinyurl.com/6dy94hs
Comments
the NAEA ? Are they still around? I didnt think there was room for a pointless quango that freeloads its way around the worlds international conferences....... in the age of Austerity. The Property Ombudsman is the enforcer these days which makes NAEA about as relevant as a duck in a drought.
If the NAEA has suffered significant losses as a result of such practices then they should be a little more thorough in their vetting of members.
There is a Cardiff Based EA who is a member of NAEA who is completely unscrupulous and has been involved in various fraudulant activities (allegedly). If or when this is proven, the NAEA is likely to take an even bigger hit.
Other agents in Cardiff have been detered from joining the NAEA because of S McM's inclusion indicating that the whole thing is probably a bit of a farce.
Your reply Paul is a very good example of exactly what goes wrong. A good book keeper (singular) indicates that there is no separation of duties in your business.
To be fair on yourself and you staff, the person who does the receipts should not be the one who reconciles the bank. The person who pays the landlords, contractors etc should not be the one who signs off the end of month bank rec.
Lots of companies stick in a computer system and use it to generate statements, most never Reconcile. Lots of auditors sign off accounts that they simply do not understand, but are in a shocking mess.
I am waiting to see the outcome of the case that EAT won't let us discuss.
I have the client account balances made up every month without fail and I just do not understand what the problem is. A good book keeper is worth their weight to keep money in the right place.
Client accounts are not subject to regulation though so this is maybe a fault that needs to be looked into. My concience is clear - how about yours?
Hi Anna
Sadly too many people think that because they have a client accounting system that is has been tested and it is correct. Most of the first half of this year has been spent showing some agents that what the computer says is not always correct.
Without disciplined separation of duties most software is no better than an unlocked safe. A lot of business owners I come across do not fully understand Client Cash Accounting that is not surprising when some accountants don't understand it either.
Many agencies that branched into Lettings and Management to keep them afloat during this quiet spell are over reliant on their software and could quite easily find themselves in the same situation as Sharon Price.
No surprises here. Last year I took a few landlords from a local agent who were experiencing bounced cheques, no gas safety certs etc etc.
It took over 2 months to get the tenants' deposits back. The agent had been booted out of the scheme he was using and then had not put them into the DPS.
The agent in question was selling to a larger agent who pulled out because of the mess. We have now been told he has gone bust also owing thousands.
Regarding software, I'd be in an asylum without mine and it keeps accountant costs right down.
How are accountants, auditors and professional bodies supposed to learn how to audit the 40+ client accounting software packages? There are no guidelines or codes of practice for Client accounting systems.
I actually have some sympathy for anyone who innocently gets into trouble with their client account system; very often it takes a forensic investigation of the accounts to get to the bottom of why things aren't as they should be.
Here is a question which beats most a fair few in Client cash accounting. How many weeks are there in a month?
If your immediate answer was 4 then you will be on average £621 short of cash per year for every property you manage. (About £124,000/ year on a 200 property portfolio)
Ah, the old NAEA kicking off eh?
……….and that’s the problem, PBK and his team of magazine and training course salesmen love to wade in after the event for a bit of willy waving but once they get the zip down they just show how little they have to wave.
A toothless, pointless, out of date / touch joke of an outfit with as much influence of the industry as a fart in a trance and now becoming hand wringing commentators on exactly the sort of stuff they should be there to prevent.
Time to cancel the direct debits everyone.
Jonnie
@ James.
The NAEA already ask for accountants reference every year at renewal of Membership. With al;l due respect to the NAEA it is not for them to comment on sentences passed by the highest authority in the Land. If the NAEA wanted to police itself better then fair enough but dont rely on the Legal System which has enough to deal with already.
Surely there is a real case to have somebody going around and checking agents' clients accounts in the current climate?
It is a wonder that not more have gone out of business, how are they funding themselves - possibly by doing this sort of thing in some cases?
In these hard times, the NAEA should be visiting all its agents and auditing their client accounts to ensure that clients are protected
P155 poor policing of adequate regulations. PBK ought to be in the dock with her!