I have been meaning to comment on the post on the Pain Smith blog recently on tenancy deposits and ‘let only’ agents. However Francis Davey on the Nearly Legal blog has beaten me to it.
As I said in my comment on the Nearly Legal blog, my view has always been that an agent is responsible for ensuring that the deposit is dealt with properly if the deposit is paid to him (irrespective of whether he is acting on a let only basis or a management basis). The fact that the deposit was passed on to the landlord is no defence.
I would advise all agents to either protect the deposit themselves or only pass it over to the Landlord if they are really certain that it will be protected. Or of course they could ask the tenant to pay the deposit direct to the landlord.
It will be interesting to see what conclusion the court come to. Keep us informed David!