The RICS has now explained to its members why it has guaranteed the Tenancy Deposit Scheme to the tune of £500,000.
Proof that it had done so finally emerged this week when, following a successful Freedom of Information request, copies of contracts between CLG and the tenancy deposit scheme providers were made public.
The RICS had previously declined to discuss the matter.
Although in redacted form, the RICS guarantee is spelled out, and by cross-referencing parts of the document, it is possible to work out the amount of the guarantee.
It also emerged that:
“The Company (TDS Ltd) is a direct subsidiary of the Guarantor (RICS) and the Guarantor will derive substantial indirect and direct benefits from the Company’s performance under the Agreement (which benefits are hereby acknowledged by the Guarantor).”
Steven Gould, RICS Director of Regulations, yesterday clarified why RICS gave the guarantee, although he did not refer to the status of the TDS as a direct subsidiary of the organisation.
On the RICS website, he said: “It is not RICS’ policy to comment on the detail of contracts, but members have asked for clarification as to why RICS gave a guarantee to CLG on TDS.
“When CLG developed policy on tenancy deposits, initially they wanted all tenancies to be held in custodial schemes which they would approve and then appoint through contract.
“RICS members considered this to be unfair, potentially expensive and representing a failure to work with the existing regulatory landscape. RICS members held deposits that were already protected by existing insurance-backed arrangements for clients’ money.
“CLG agreed, very late in the day, that they might approve an insurance-backed scheme, but only if a third party financial guarantee was in place in case of failure.
“This was because, at the time of approval, TDS was a relatively new business and, under its procurement rules, CLG required an additional guarantee, not to protect the deposits but to ensure a continuing service to the public in the event of business failure.
“RICS was the only body involved in TDS able to do this and it therefore provided a guarantee to obtain CLG’s approval.
“The contract is due for renewal within the next two years when TDS will have getting on for five years of operation.
“Despite unsubstantiated reports, TDS is an established and growing business, and RICS does not propose to continue with the guarantee in future, although that will, of course, be a matter for contract negotiations with CLG.
“We wish to make it clear that the contract is based on a standard CLG procurement contract.
“RICS has received no direct financial benefit.
“As for indirect benefits, these have come not to RICS but to its members and others who belong to the scheme.
“They have been able to keep client money in their own client accounts rather than join a custodial scheme.”
The TDS was initially launched as an ARLA-only scheme on May 1, 2004. On May 20, 2004, the Government announced that it would be including tenancy deposit protection measures in the new Housing Bill.
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Comments
OK – but I don’t agree, the passage concerning ODPM’s initial approach may well be correct – though to my certain knowledge, their original advisers, PKF, were recommending one of each type scheme, in early 2005. RICS were already participating in TDSRA by that time, so their comment that the ODPM decision was ‘last minute’, as a justification to their membership, (which this thread is all about), for providing the guarantee in support of the ‘consortium’ bid, is not accurate. What is far more likely is that, as they (none of them – RICS, ARLA or NAEA) had ever been involved in a government tendering process before, by the time they realised that an unproven company would be expected to provide a guarantee, they were so heavily committed they had no choice – RICS were the only one that could provide it. The big question then is, had they known about the requirement in advance - before the tendering process started, would they have supported the bid – that I very much doubt.
Laurie you make very astute comments but really only one comment in the RICS statement matters and that is this one:- “When CLG developed policy on tenancy deposits, initially they wanted all tenancies to be held in custodial schemes which they would approve and then appoint through contract." Like Pandora's Box CLG then made the mistake of caving in to vested interest lobbying including RICS fir the TDS Scheme and Landlord Associations that led to Mydepoists. The rest is history (otherwise known as the current TDP shambles). Hopefully the Scottish Parliament when it eventually sanctions the Scottish scheme (alarmingly now delayed several months and still no launch date announcement in sight) will be more sensible and having observed the English shambles will just have one scheme - custodial and run by DPS. After all that is all that is needed.
So let me see if I have understood this correctly, RICS members are being expected to accept the following explanations:- a) The legally binding Guarantee signed by RICS in late 2006 for the benefit of ODPM, formally acknowledges it receives substantial benefits, yet it is now claimed that they don’t get anything – so why sign it? b) There is incontrovertible evidence in the public domain, that ODPM had acknowledged and recognised the concept of ‘insured’ TDP schemes as early as May 2004. The procurement documentation for the TDP tendering process, in which RICS +ARLA & NAEA, as a consortium, voluntarily participated, was produced in 2005. Contracts were awarded in late 2006 and schemes didn’t go live until April 2007, yet RICS claim that this was all ‘last minute’ – really? c) RICS claim that TDS Ltd is an ‘established and growing business’, whereas Robert Jordan’s comment at the ARLA conference at the beginning of this month was reported as saying, “... back TDS or watch it go under...” d) Though not mentioned in the statement published yesterday, RICS is referred to in the Guarantee as the Parent of TDS Ltd yet in direct conflict with that comment, the TDS web site (RICS subsidiary) claims it is ‘independent’ – how? er .... yes, I think I understand!