05/09/2018

Consumer group, Which?, has said that the current tenant deposit system is broken and is forcing tenants to take on debt because of delays in gaining access to their deposit. The group has said that a lot of tenants are being forced to wait weeks before getting their deposit back.

43% of affected tenants are forced to take on debt via credit cards, loans, and by borrowing money from friends and family to meet the shortfall in money. The report highlighted the fact that one in six tenants were being forced to wait more than four weeks.

However, the chief executive of the Tenancy Deposit Scheme, Steve Harriott, has criticised sections of the report, in particular pointing out that the suggested alternatives would not benefit the tenant or the landlord. However, Harriott did agree with some of the points that were made by Which?.

The Tenancy Deposit Scheme

The Tenancy Deposit Scheme (What Is The Tenancy Deposit Scheme?) was first introduced as part of the United Kingdom Housing Act 2004, and as of April 2007, it is necessary for any landlord that takes a deposit to protect it under an authorised tenancy deposit scheme. The move was taken not only to help protect the deposit, but also in a bid to try and speed up the process of returning rent to tenants after a tenancy has finished.

Money held in the scheme can only be released, at the end of a tenancy, and when both parties agree that a portion or all of the deposit should be paid back to the tenant. Where there is disagreement, the case may end up in court, and consumer group Which? has said that the scheme is not fit for purpose, and has suggested a number of changes that should be made to improve matters.

Which?

Consumer group Which? has said that, during a recent survey, they discovered that 43% of renters said that they have had to use a credit card, loan, overdraft, or money borrowed from a friend or family member to cover the cost of moving from one property to another.

They went on to say that this is often due to the fact that tenants have to endure a long wait to receive their deposit back. During the survey, approximately one third of respondents said that they had to pay a new security deposit before the previous deposit was returned to them.

In 55% of cases where the renter did not get their full deposit back, they challenged the decision. 50% of those that did not receive their full deposit said that the landlord deducted money from the deposit for cleaning, while 32% said that they had had money deducted for damage to the property.

81% of those that had deposit money deducted for cleaning said they felt it was an unfair charge. 75% of people that saw reductions for damage to the property also said that they believed the amount deducted was unreasonable.

One in six tenants that did get their deposit back said that it took more than four weeks to arrive.

Which? Proposals

The consumer group suggested a number of ways in which the current system could be improved or repaired. They highlighted the fact that 62% of landlords incorrectly believe that security deposit money can be used to repay outstanding utility bills. Greater education, therefore, is required.

The group also said that they believe the government should review current schemes to ensure that they are working in the best interest of the tenant. This would help ensure that deposits are returned sooner rather than later.

Which? said that the current cash-based system needed to change, and especially to a system where there would be less of a gap, or no gap, between deposits. The group suggested that an insurance style product, or a direct transfer of deposits between properties.

The TDS Response

Steve Harriott, chief executive of the Tenancy Deposit Scheme, responded to the report. He agreed with some of the criticism of the report. He said that the criticism levelled at the group for deposits taking too long to get back to tenants was justified. He said that tenants have the right to request their deposit back at the end of the tenancy, and if they haven’t heard within 10 days of making that request, they can submit a request to the TDS to review the deposit and the proposed repayment.

Harriott also agreed that tenants should not have to struggle to find a deposit while they wait for the return of their previous deposit, but he does not believe that the solutions offered by Which? are the best approach to take. Finally, he agreed with the call for their to be an independent regulator for lettings and management agents, saying that “this is something that we can support in addition to its call for a code of practice which reflects our own code of recommended practice which we launched last year.”

Deposit Passport Scheme

However, while Harriott agreed with some of the points, he didn’t agree with everything. In particular he took aim at the suggested alternatives to the current deposit scheme. He said that the proposed passport system would not work, primarily because of the deductions that are usually taken from the deposit before it is returned.

This means that there would only be a portion of the deposit left to send from one landlord to the next and would still require that the tenant send additional cash to the new landlord.

Challenging Deductions

When it came to the matter of deductions, and the common reasons for those deductions, Mr Harriott said that “cleaning is clearly an emotive subject”. He said that they regularly see exaggerated claims and that if the “landlord can’t evidence that a deduction is valid, then the landlord’s claim will be lost”, highlighting the importance of check-in and check-out surveys; a service that we, at PDF Estates, offer as a vital component of our full property management landlord services.

Property Inventories And Check-Outs

At the start of any new tenancy, it is important that the landlord and tenant conduct a thorough property inventory and inspection. This allows both landlord (or agent) and the tenant to determine the current condition of the property.

The inventory includes details of furnishings and other items within the property, and the inspection determines the level of cleanliness and general state of repair of the building and everything inside. The inventory and inspection should be fully documented, and both parties should take and keep pictures for their own records. When the tenant comes to leave the property, a check-out inspection should be conducted as soon as possible.

This will form the basis for determining whether the landlord wishes to challenge any of the deposit return, and completing the check-out inspection in a timely manner can prevent unwanted delays in deposit returns.

PDF Estates Property Management

PDF Estates Ltd offers a full property management service. We conduct check-in and check-out inspections, take the security deposit, deposit that money in an accredited protection scheme, and help determine whether any of the deposit should be retained and how much of it should be returned to the tenant. We are currently offering 3 months’ free property management services to all of our new landlords, which means that you can try our services for yourself with no risk to your bottom line. Call us on 020 3815 7952 or email info@pdfestates.com.