Property management firms such as ARPM must be much more closely overseen in the future, a well-known industry figures has said.
Robert May, who says he’s been warning for years of likely problems with outsourced property management firms, says everything he warned ‘could happen has come to pass’.
May says he has no desire to comment further on the difficult position faced by those suffering the fall out of ARPM’s demise including agents, landlords and staff.
Instead he says lessons must be learned and changes made to the way they are regulated.
“I would like to think I know what I’m talking about because 60% of the rent paid in the UK every month goes through systems that I have either designed, influenced or been a consultant on,” he says.
May is calling for firms like ARPM to be much more stringently and regularly audited than they are now to prevent another catastrophe taking place.
“At the moment it’s too easy for companies like this to pull the wool over auditors eyes by manipulating spread sheets so that rents and bank account entries tally,” he says.
“Organisations such as RICS, Propertymark and the Law Society should have much greater governance powers over them.”
Firms that undertake ‘client cash accounting’ are not required to stick to the UK’s Generally Agreed Accounting Principles because the money they handle is not turnover or profit, but simply ‘other people’s money’ that is collected, retained and then passed on to the landlord after agreed disbursements have been deducted.
But it’s not entirely free of rules; RICS’ Rule 8 on client cash accounting makes it clear that firms involved in this kind of activity are not allowed to use one landlord’s money to pay another, and money cannot be ‘borrowed’ and then returned at a later date.
“If best practice client cash accounting is followed, it ensures that money cannot be stolen or used improperly,” adds May (pictured).
“And one of the worst things you can do as a property manager is have all the payments for dozens of landlords and hundreds of properties all going into the same pot.
“It’s time this kind of bad practice is prevented.”