Landlords

Is your rental deposit safe in the hands of a protection scheme?

Warren Lewis -
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28th January 2016
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According to a new report from the Cebr, 15% of landlords are sitting on £514m of unprotected deposits.

Despite government intervention to make it a legal requirement for landlords to protect renters’ deposits in one of the government backed schemes, new research carried out on behalf of financial comparison website money.co.uk by the Cebr (Centre for Economics and Business Research) reveals that 284,000 landlords have failed to do so. Research estimates that these landlords are sitting on £514 million of deposits that should be protected by an official third party service.

With approximately one in five (4.6 million) households in the UK now privately rented and the average protected deposit at £1,040, the total value of deposits paid by tenants and placed in protection schemes by landlords has now reached a whopping £3.2 billion. Despite the risk of fines for landlords who fail to protect their tenants’ deposits, 15% are still failing to do so running the risk of a £2,400 penalty. Landlords that flout the rules could together be earning up to £8.5 million a year in interest on unprotected money, while leaving themselves and their tenants with no third party protection when their agreement comes to an end.

What is deposit protection?

It is mandatory for all landlords to protect deposits for assured shorthold tenancies via a government backed tenancy deposit scheme within 30 days of receipt. They must also give tenants prescribed information about where their deposit is protected, who they are renting from and how they raise a dispute. Different approved deposit schemes are used in England and Wales to Scotland and Northern Ireland but they all operate in a similar way. The schemes give landlords and tenants access to a free dispute resolution service if things go wrong when the tenant moves out, eliminating the need for court action in many cases.

The government imposed deposit protection schemes to stop landlords unfairly taking money out of deposits for things such as wear and tear or pre-existing damage when tenants move on. With this protection in place, an alternative dispute resolution scheme will step in and assess the case and make sure any money held back by the landlord is a fair deal for both the tenant and the landlord.

However, compliance with these rules are not being monitored effectively and the onus to report and take action against the landlord lies with the tenant. For tenants who cannot get their landlord to place their deposit with one of the schemes, money.co.uk’s ‘taking your landlord to court’ guide should help.

Hannah Maundrell, Editor in Chief money.co.uk comments: “Renting is a money minefield and with troubled times ahead for the buy to let market, the problems caused by ‘dodgy landlords’ are only likely to get worse. While many landlords are doing the right thing and protecting deposits in one of the official government backed schemes, a worrying amount of money is falling through the cracks and far too many tenants are being left vulnerable.

Renters must take control and ask landlords which protection scheme their money will be stashed in before signing on the dotted line. Existing tenants must ask for proof their money is protected if their landlord hasn’t given them the correct written documentation.

It’s not right that tenants are left responsible for taking their landlord to court if their deposit hasn’t been protected. The government needs to step in and take decisive action. Introducing a compulsory register listing every landlord that rents out property in England and Wales would be a start. This works for Scotland and Northern Ireland and it seems crazy this hasn’t been brought in across the UK. Add in tenants’ ratings and reviews to this too and you have both the beginnings of a solution that helps renters make an informed choice about who they’re handing over buckets of cash to; and the foundation for policing landlords that are currently going unchecked.

That said, it’s not just renters that stand to benefit from deposits being protected; after all landlords need a safeguard against renters that misbehave too. I can’t understand why any landlord wouldn’t do this; it doesn’t have to cost anything to place money with a tenancy deposit scheme and could save so much hassle later on.”

What should you do if your rental deposit isn’t protected?

• Renters, you can take legal action if your landlord fails to protect your deposit and give you the required information within 30 days of receiving all or part of your deposit. If you live in Northern Ireland they only have 28 days.

• Your deposit is considered ‘received’ from the moment the landlord takes any part of the payment, not when the funds have cleared or full deposit has been submitted. The rules don’t apply to holding deposits until the tenancy is agreed and they become an official rental deposit.

• If the deposit is not protected, you must apply to a county court under part eight of the Civil Procedure Rules to force the issue or to resolve a deposit dispute but only if you live in England and Wales; you need to go via the Sheriff Court in Scotland and Environmental Health in Northern Ireland. You may incur legal costs as a result but these may be claimed back if you are successful. This guide has more information.

• Legally, your landlord must give you information about the scheme as well as protecting the deposit. This is not the same as just giving you the official receipt received from the scheme administrator. It is a detailed statement regarding the deposit and must be accompanied by an explanatory leaflet which each scheme issues for the tenant.

• Tenants can check if their deposit has been protected by visiting the relevant deposit scheme website or using the Shelter’s website to check all three schemes in England and Wales. You will need to provide your postcode, tenancy start date and deposit amount.

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