Monday, April 17, 2006

Musings on the tenancy deposit scheme

I have heard a rumour that the proposed tenancy deposit scheme (being brought in pursuant to the Housing Act 2004) may not be introduced in October 2006 as has been widely anticipated, but may be delayed until next year, probably next April. This may not be true of course, but many landlords will feel very relieved if there is a delay, beset as they are with the new HMO and other new regulations which came into force recently.

I do hope though that when the new scheme does come into force it will be light on paperwork. I can remember when the pilot scheme was being run by the Independent Housing Ombudsman, how all landlords I spoke to were horrifed by the massive (in their opinion) amount of paperwork involved - and remember that many landlords judge a tenancy agreement not by its contents but but by how short it is! In fact I suspect that the paperwork was a major contributing factor to the low takeup of the pilot scheme.

I was speaking to one of my landlord clients only the other day and she was saying how concerned they are about the new scheme and whether it will be worth their while to take a damage deposit at all, when they were going to have to deal with (she told me) so much extra administration. I suspect that many landlords will either assume that the scheme operators will be anti landlord or be put off by the paperwork, and will stop taking a deposit at all and just increase the rent overall to compensate them for losses which would normally be covered by a damage deposit.

It will be unfortunate if this happens, as an increased rent is not refundable to the tenant at the end of the term in the same way that a deposit is, so good and bad tenants are punished alike. And although technically a tenant can challenge the rent in the first six weeks by referring it to the Rent Assessment Panel, in practice very few tenants do this. It is possible therefore that a scheme brought in to benefit tenants may just result in higher rents. I hope not but we shall see.

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