#ExpertView: Why Tenancy Deposit Protection needs to stay
TDS Chief Executive Steve Harriott sets out the case for maintaining the existing model of tenancy deposit protection.
In the last week we have seen Which? publish a report that shines a spotlight on the issue of deposits.
The Which? report had a number of criticisms of the way in which the current deposit protection system works. Some of these are valid and echo our concerns. For example its research found that for one in six tenants it took longer than four weeks to get their deposits back.
In our work in the TDS Academy we are keen to stress the need to resolve deposit deductions quickly; indeed once 10 days have elapsed from the time that tenants first ask for their money back they can raise the issue with the Tenancy Deposit scheme.
We also share the concern of Which? about the problems that some tenants face (especially in London) of having to find another deposit for their next property whilst still waiting for their current deposit to be repaid.
Which? and others continually promote the solution of the so called “passporting” of deposits; allowing tenants existing deposits to be paid directly to a new landlord.
Our work suggests that this idea is a non-starter without some form of tenant guarantee. For example we have analysed the last c20,000 agreed deposit repayments we have made for TDS Custodial and in 42% of cases the tenant agreed some form of payment to the landlord (an average of £275). In a deposit passporting world this would mean that the new landlord would not be getting what they expected in 42% of cases. If you were a landlord would you take this risk?
We also agree that there is room in some parts of the market for insurance-style options in deposit protection and this is why we are working with Zero Deposit. But we are stressing to Government the need to ensure that these new providers are properly regulated by the FCA.
Which? has also suggested the creation of an independent regulator for lettings and management agents. 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.
It is the Which report’s criticisms of the existing deposit protection schemes which do need to be challenged.
Which? says that the most common reason for deposit deductions in their survey was for cleaning and it claimed that many of those who faced deductions for this were unhappy.
Cleaning is clearly an emotive subject as no-one likes to be told they have left their property dirty but day in and day put we see clear evidence in check out reports are properties being left in a less clean condition by the outgoing tenants. But we also see exaggerated claims by some landlords.
Simply put: if the case goes to ADR and the landlord can’t evidence that a deduction is valid, then the landlord’s claim will be lost. We have invited Which? to our offices to see how we deal with cleaning claims so that in future they can base their recommendations on the basis of what really happens in practice.
Which? asserts that half of tenants who didn’t get their money back in full challenged the decision. This statistic was used to make the point that the deposit protection schemes are not working effectively. The facts however do not support this claim as people can and do complain about decisions; all of which are investigated.
Our statistics show that the tenancy deposit scheme is offering a really simple way for the tenants and landlords to agree who should get what. I believe that Which?’s conclusion that it is a system in need of fundamental reform is based on questionable evidence.
The Which? report also claimed that there was a lack of clarity about what deposit money can be used for. In our actual experience, in almost all cases we see, the tenancy agreement does set out for what the deposit can be used and if there is a dispute and the tenancy agreement does not allow a specific deduction, the schemes will reject it.
99% of all deposits we protect don’t end up in dispute. Where there is a dispute, we have a robust, impartial process to ensure that the right money goes to the correct party. Our adjudicators start from the premise that the deposit belongs to the tenant and it is up to the landlord to prove that a deduction can and should be made.
Go back to pre-2007 where deposit protection did not exist and tenants regularly got ripped off by landlords and agents and this was what led to deposit protection being introduced. In 2018 almost all deposit are now properly protected, tenancy agreements specify what deductions can be taken by the deposit, inventories have become almost universal and of higher quality, deposit schemes have developed on-line solutions to enable tenants and landlords to negotiate the return and free ADR exists to resolve any disputes.
The fact is that TDP is a success and is something we should all be proud of.
About the author:
Steve Harriott MA(Oxon), PGCE, MSc, FCIH is the Chief Executive of The Dispute Service Ltd. He has been Chief Executive since September 2010.
He has worked as chief executive of three housing associations as well as chairing a housing association and a regeneration charity.
He is currently a Director at SafeDeposits Scotland, a Director of TDS Northern Ireland and a Director of the TDS Charitable Foundation.
He chairs the Waterways Ombudsman Committee, is Vice Chair of Chatham Maritime Trust and is the Chair of Gravesend Churches Housing Association.
Tenancy Deposit Scheme (TDS) is a government approved scheme for the protection of tenancy deposits; TDS offers both Insured and Custodial protection and also provides fair adjudication for disputes that arise over the tenancy deposits that we protect.
We provide invaluable training in tenancy deposit protection and disputes for agents and landlords through the TDS Academy as well as joining with MOL to provide the Technical Award in Residential Tenancy Deposits.
TDS Insured Scheme: where a TDS member can hold the tenancy deposits as stakeholder during the term of the tenancy.
TDS Custodial Scheme: where TDS hold the deposit for the duration of the tenancy.
TDS Academy: TDS provides property professionals with invaluable training in tenancy deposit protection and tenancy deposit disputes.
TDS can only comment on the process for our scheme, other deposit protection schemes may have a different process/require different steps. Content is correct at the time of writing.
These views are those of the author alone and do not necessarily reflect the view of TDS, its officers and employees.