Your letting agent has gone bust: what happens to your rent and your tenant's deposit

In England, a letting agent that holds rent or other client money must belong to an approved client money protection scheme, but that is separate from tenancy deposit protection. Scotland and Wales have their own client-money rules; Northern Ireland has no legal requirement for letting agents to belong to a client money protection scheme.

What happens to your rent and deposits if your letting agent goes bust?

If your letting agent goes bust in England, rent or other client money they were holding should be claimed through the agent’s client money protection scheme, while a tenant’s deposit depends on whether it was in a custodial deposit scheme or an insurance-backed scheme. The English CMP duty is aimed at the event of a firm becoming insolvent: GOV.UK says, “These schemes make sure landlords and tenants are compensated if you cannot repay their money, for example if you go into administration.” The legal definition is broad enough to cover money held for someone else: a “client money protection scheme” is one that compensates the person for whom the agent held money if it is not repaid. Do not assume every CMP scheme pays the same limits: Propertymark publishes a £50,000-per-claim and £15 million-per-year cap, but UKALA says its current CMP pays all the money owed. In Scotland, letting agents handling client money need CMP insurance or equivalent protection; in Wales, CMP is a Rent Smart Wales licence condition.

Does client money protection cover rent the agent collected but never paid over?

Client money protection can cover rent the agent collected but never paid over in England, because rent held after the agent’s fees have been deducted is client money and approved schemes must respond when a member fails to account for it. The enforcement guidance defines this rent as “Money paid by the tenant and owed to the landlord for the permission to reside in the property for an agreed period which is held by the property agent after their fees have been deducted.” The approval rules then require a scheme, where the agent fails to account for client money to the person entitled to it, to make good that liability as soon as reasonably practicable, subject to approved scheme limits. The practical result is that rent sitting in the client account waiting to be forwarded is not just treated like an ordinary trade invoice without first checking CMP; uncollected rent that the tenant never paid to the agent is different. Scotland and Wales require CMP-style protection, while Northern Ireland does not impose a legal CMP membership duty.

Is your tenant's deposit still protected if the agent goes into administration?

Your tenant’s deposit is still protected if it is already in a custodial tenancy deposit scheme, but an insurance-backed deposit can become unprotected if the agent held the cash and its scheme membership is cancelled. In England and Wales, custodial protection means the money sits with the scheme administrator: the legislation says the amounts are kept by the scheme administrator until they fall to be paid to the landlord or tenant. That is very different from an insurance-backed deposit, where the agent or landlord may still hold the money and the scheme insures against failure to comply with directions. MyDeposits says insolvent or uncontactable agents can have membership cancelled and that “all deposits will automatically be unprotected in three months time from the date of cancellation.” Deposit money already held under an authorised tenancy deposit scheme is not CMP client money, so CMP is not the ordinary route for a deposit-return dispute; Propertymark says its CMP scheme “does not cover disputes about the return of tenancy deposits or disputes about deductions to those deposits.” Scotland uses an approved-scheme custody model; Wales requires occupation-contract deposits to be dealt with under an authorised deposit scheme.

How do you claim against a letting agent's client money protection scheme?

To claim against a letting agent’s client money protection scheme in England, identify the agent’s CMP provider and follow that scheme’s claims process; an approved scheme must accept claims for at least 12 months after the event giving rise to the claim. The statute does not prescribe one universal claim form; it requires approved-scheme rules to include “the process for making claims for compensation under the scheme.” It also requires the scheme administrator to accept claims “for at least twelve months after the date on which the circumstances giving rise to a claim occurred.” Propertymark tells landlords to report the missing money to the police and claim within 12 months, while Client Money Protect says a police crime number is needed before a claim can be made. Propertymark’s £50,000 individual limit and £15 million annual limit are scheme rules, not a universal statutory cap; UKALA says it pays all money owed. Scotland and Wales use their own regulatory frameworks; Northern Ireland has no compulsory CMP scheme.

How do you claim money back from a company in liquidation?

To claim money back from a letting agency company in liquidation, submit a proof of debt to the liquidator or other office-holder, but expect little or no recovery if the money is not covered by CMP or held outside the company’s assets. The insolvency rules say, “A creditor wishing to recover a debt must submit a proof to the office-holder unless—”. Once a winding-up order has been made, you normally cannot start or continue proceedings against the company without court permission: “no action or proceeding shall be proceeded with or commenced against the company or its property, except by leave of the court”. The harsh commercial point is that unsecured creditors often recover nothing; the Insolvency Service’s CVL research found that “In 266 cases (10%) there was a distribution and in 2,299 cases (90%) the creditor did not receive anything.” In Northern Ireland, the equivalent route is to ask the Official Receiver or insolvency practitioner for a proof of debt form.

Is rent in the client account ring-fenced from the agency's own creditors?

No statute in England holds letting-agent client money on trust; the statutory trust in the Estate Agents Act 1979 applies to estate agency sales work, not letting agency rent, so letting money is protected by the segregated-client-account rule plus CMP membership. The CMP approval regulations require a client money account that “does not contain any sums other than the whole or any part of client money paid into it” except correction money and accrued interest. That rule is segregation, not the same as a statutory trust against all creditors. By contrast, the Estate Agents Act 1979 says money received in estate agency work “is held by him on trust”, which is the sales-work rule that often gets wrongly carried across to lettings. In practice, a properly designated client account and bank set-off letter matter because they stop the account being treated like the agency’s own trading balance; Propertymark says the bank should confirm funds cannot be taken from the client account to pay business or personal debt. Scotland’s Code requires bank confirmation that the bank cannot combine the client account with any other account or use set-off against money in it.

Are the directors personally liable for landlords' money if the agency fails?

Directors of a limited letting agency are not automatically personally liable for landlords’ money just because the company fails, because the CMP duty and ordinary insolvency liability sit on the property agent or the company unless a separate personal route applies. The English CMP rule says, “A property agent who holds client money must be a member of an approved or designated client money protection scheme,” and GOV.UK says the fine for not joining can be up to £30,000. Limited liability also matters: on a winding-up of a company limited by shares, no member has to contribute more than any unpaid amount on their shares. That does not protect a director who has committed wrongdoing; wrongful trading can lead to a court order requiring a director to contribute to the company’s assets, but that is not a simple direct landlord claim. Some private scheme rules go further: Propertymark’s rules can make an associated individual member, including a director, jointly and severally liable to indemnify the scheme after it pays out.

What happens to the deposits you hold if you close your lettings business?

If you close your lettings business in England, custodial deposits should remain with the deposit scheme, but insurance-backed deposits must be transferred, re-protected or returned because the landlord can remain legally liable if the agent’s protection ends. The continuing legal duty is that “Any tenancy deposit paid to a person in connection with a shorthold tenancy must, as from the time when it is received, be dealt with in accordance with an authorised scheme.” Custodial schemes are cleaner because the cash is already with the administrator; closing the agency should not leave the deposit in the agency bank account. Insurance-backed protection is riskier because the cash may still be with the agent or landlord, and the Housing Act schedule says that, when membership ends, deposits on continuing tenancies “cease to be retained under the scheme.” MyDeposits says that where an insolvent, fraudulent or ceased-trading agent’s membership is cancelled, “all deposits will automatically be unprotected in three months time from the date of cancellation,” so those deposits need active transfer, re-protection or repayment before that point. Scotland’s approved-scheme model avoids the agent-holds-cash problem; Wales and Northern Ireland also keep an ongoing authorised-scheme duty.

Last reviewed September 2026.

Sources

• Housing and Planning Act 2016 s.133 — “client money protection scheme” means a scheme which enables a person on whose behalf a property agent holds money to be compensated if all or part of that money is not repaid in circumstances in which the scheme applies; Source
• GOV.UK, Client money protection scheme for property agents — “These schemes make sure landlords and tenants are compensated if you cannot repay their money, for example if you go into administration.” Source
• The Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc.) Regulations 2019, regulation 3 — “A property agent who holds client money must be a member of an approved or designated client money protection scheme.” Source
• Scottish Government, Letting Agent Code of Practice — “You must hold a client money protection insurance policy unless you can demonstrate equivalent or greater protection through another body or membership organisation.” Source
• Rent Smart Wales, Agent Licence Conditions: Business Safeguards — “This is a form of insurance that protects a client (usually the landlord and the tenant) if the company holding the money was to either go bust or misappropriate the money.” Source
• GOV.UK, Client money protection scheme for property agents — “Northern Ireland - you do not have to join a client money protection scheme” Source
• Propertymark, CMP applications — “However, if unexpectedly the worst happens, Propertymark will reimburse tenants and landlords up to a maximum award of £50,000 per individual claim, with a total scheme limit of £15 million per year for all claims submitted against one of our CMP scheme members.” Source
• UKALA, Client Money Protection — “Previously, the amount you could claim was capped, but now, whether you’re owed £5000 or £50,000, under UKALA’s CMP, you’ll be able to claim ALL your money back.” Source
• The Client Money Protection Schemes for Property Agents (Approval and Designation of Schemes) Regulations 2018, regulation 5 — “(iii)require the scheme administrator, in the event that a scheme member (M) fails to account for client money to the person (P) entitled to it, to make good M's liability to P as soon as reasonably practicable, subject to paragraph (1A);” Source
• GOV.UK, Mandatory client money protection: enforcement guidance for local authorities — “Money paid by the tenant and owed to the landlord for the permission to reside in the property for an agreed period which is held by the property agent after their fees have been deducted.” Source
• Housing Act 2004 Schedule 10 paragraph 1 — “(c) those amounts are kept by the scheme administrator in that account until such time as, in accordance with the scheme, they fall to be paid (wholly or in part) to the landlords or tenants under the tenancies.” Source
• Housing Act 2004 Schedule 10 paragraph 1 — “(e) insurance is maintained by the scheme administrator in respect of failures by landlords to comply with such directions.” Source
• Propertymark, CMP applications — “Please note that the Propertymark CMP scheme does not cover disputes about the return of tenancy deposits or disputes about deductions to those deposits.” Source
• Housing (Scotland) Act 2006 (Schemes for Tenancy Deposits) Regulations 2011, regulation 3 — “The landlord must ensure that any tenancy deposit paid in connection with a relevant tenancy is held by an approved scheme from the date it is first paid to a tenancy deposit scheme under paragraph (1)(a) until it is repaid in accordance with these Regulations following the end of the tenancy.” Source
• Renting Homes (Wales) Act 2016 s.45 — “If the contract-holder under an occupation contract pays a deposit (or another person pays a deposit on his or her behalf), the deposit must be dealt with in accordance with an authorised deposit scheme.” Source
• The Client Money Protection Schemes for Property Agents (Approval and Designation of Schemes) Regulations 2018, regulation 5 — “(i)the process for making claims for compensation under the scheme; and” Source
• The Client Money Protection Schemes for Property Agents (Approval and Designation of Schemes) Regulations 2018, regulation 5 — “(iv)require the scheme administrator to accept claims for compensation under the scheme for at least twelve months after the date on which the circumstances giving rise to a claim occurred;” Source
• Client Money Protect, Claim — “You will need to report the incident to your local police and obtain a crime number before you can make a claim.” Source
• Propertymark, Client Money Protection for landlords — “Firstly, report the missing money to the police then make a claim to the agent’s CMP provider within 12 months.” Source
• Insolvency Rules 2016 Part 14 Chapter 2 — “A creditor wishing to recover a debt must submit a proof to the office-holder unless—” Source
• Insolvency Act 1986 s.130 — “When a winding-up order has been made or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company or its property, except by leave of the court and subject to such terms as the court may impose.” Source
• Insolvency Service, CVL research report — “In 266 cases (10%) there was a distribution and in 2,299 cases (90%) the creditor did not receive anything.” Source
• Northern Ireland Department for the Economy, Creditors of insolvent companies — “To make a claim you should ask the OR/IP for a proof of debt form and complete and return it to the OR/IP.” Source
• The Client Money Protection Schemes for Property Agents (Approval and Designation of Schemes) Regulations 2018, regulation 5 — “(a) does not contain any sums other than the whole or any part of client money paid into it, or such sums of money as may be necessary to replace any sum which by error has been withdrawn from the account, together with accrued interest on such amounts; and” Source
• Estate Agents Act 1979 s.13 — “(a)is held by him on trust for the person who is entitled to call for it to be paid over to him or to be paid on his direction or to have it otherwise credited to him, or” Source
• Propertymark, Benefits of having a client account — “The bank needs to provide a written confirmation that funds cannot be taken or move funds from the designated client account to pay a business or personal debt.” Source
• Scottish Government, Letting Agent Code of Practice — “(b) that the bank or building society is not entitled to combine the account with any other account or exercise any right to set-off or counterclaim against money in that account for any sum owed to the bank or building society on any other of your accounts it holds.” Source
• GOV.UK, Client money protection scheme for property agents — “You may be fined up to £30,000 if you do not join a client money protection scheme.” Source
• Insolvency Act 1986 s.74 — “(d)in the case of a company limited by shares, no contribution is required from any member exceeding the amount (if any) unpaid on the shares in respect of which he is liable as a present or past member;” Source
• Insolvency Act 1986 s.214 — “Subject to subsection (3) below, if in the course of the winding up of a company it appears that subsection (2) of this section applies in relation to a person who is or has been a director of the company, the court, on the application of the liquidator, may declare that that person is to be liable to make such contribution (if any) to the company’s assets as the court thinks proper.” Source
• Propertymark Conduct and Membership Rules — “Where a payment is made by the CMP scheme to compensate any third party for the default howsoever arising of a sole trader, partnership, limited liability partnership or limited company (“the Business”) or of any CASP (as defined in clause 1.3) to whom the custody of client money has been entrusted by the Business then any individual member of Propertymark who is associated with the Business as either a sole trader, principal, director, employee, shadow director, member, consultant, partner, or shareholder shall be jointly and severally liable to indemnify Propertymark or its insurers in respect of any such payment.” Source
• Housing Act 2004 s.213 — “Any tenancy deposit paid to a person in connection with a shorthold tenancy must, as from the time when it is received, be dealt with in accordance with an authorised scheme.” Source
• Housing Act 2004 Schedule 10 — “(a)any tenancy deposits previously retained by the landlord under the scheme (in relation to tenancies which had not ended before the termination) cease to be retained under the scheme; but” Source
• MyDeposits, Guide for landlords using a letting agent — “Unfortunately if the agent becomes insolvent, acts fraudulently or ceases trading you, the landlord are liable by law for the return of the deposit to the tenant, which is why we strongly recommend you use a reputable agent and ensure they use a segregated bank account.” Source