When the outsourcer fails: what 2021 should have taught the lettings market

In September 2021, ARPM — then the best-known white-label lettings outsourcer in Britain, running the back office for agencies across the country — ceased trading and took advice on liquidation. The trade press coverage from that week is still online, and it is worth reading in full; Property Industry Eye reported one industry figure calling it “a potential Armageddon for the lettings industry”. Agencies discovered in a morning that their tenancy records, their processes and in some cases their client relationships were inside a company that had stopped.

We are an outsourcer, so we have an obvious interest in this story being read as a one-off. It was not a one-off. It was the failure mode of a structure, and any agency putting work into any supplier, this firm included, should price it. The useful response is not to avoid outsourcing; it is to structure the engagement so that a supplier failure is an inconvenience rather than an emergency.

The five questions that decide which one you get

• Client money. Whose bank account does rent touch, and whose scheme protects it? If the answer is the supplier’s, a supplier failure is your clients’ money at risk. It should never be the supplier’s.
• The systems of record. Are your tenancies administered inside your own software, on accounts you control and can revoke — or inside the supplier’s platform, exported to you on request?
• The people. If the supplier vanished on a Friday, do you know the names of the humans doing your work, and does anything in the arrangement let continuity survive the corporate failure?
• Exit, written down. Notice periods both ways, the state your data comes back in, and who does the work during the handover month.
• Concentration. What share of your operation sits with one supplier, and what is the tested answer for its first fortnight of absence?

Notice that price appears nowhere on that list. The agencies hurt in 2021 were not hurt by overpaying.

Our own answers, since we raised the subject

Rent and client money never touch this firm; they stay in your accounts under your regulated arrangements. The work is done inside your systems, on credentials you issue and can revoke in an afternoon, so the record of every tenancy is in your software on the day anything happens to us. The people are named to you and work for your firm only. And the engagement letter contains its own exit: notice, handover, and what we owe you on the way out, drafted before anybody has fallen out with anybody.

Put the five questions to every provider on your shortlist and keep the written answers with the contract. A good supplier will answer them quickly, because the answers were designed in. A supplier who bristles at the questions has answered them too.

Ejas Deane is a partner of the firm. He answers enquiries himself.