Tenancy Deposit Scheme Update
Note - the Landlord Law Blog has now moved to www.landlordlawblog.co.uk.
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I have now visited and done interviews with all three of the companies running the new Tenancy Deposit Protection schemes, due to come into force on 6 April, so am in a position to say a bit more about them.
The company running the Custodial scheme is Computershare Limited, a large multinational firm. They have set up a company called The Deposit Protection Service Ltd to run the scheme, which has a web-site here. Their scheme is free but involves the landlord handing over the deposit for them to hold, and their costs come out of the interest on deposits held. They have been running a similar scheme in Victoria, Australia for the past eight years, where they tell me, their custodial scheme is the only one. Apparently landlords moaned a lot when it was set up, but now take it for granted. They feel fairly sure that the same thing will happen here. I think that their web-site is pretty good and I suspect that they will run an excellent service.
There are two companies running Insurance based schemes. These are where the landlords get to keep the deposit but have to pay the scheme administrators for the privilege. They are both different, one is aimed largely at landlords and the other at agents.
The landlords scheme is run by Tenancy Deposit Solutions Limited which is sponsored by the National Landlords Association with Hamilton Fraser, and has a web-site here. Theirs is a pay as you go scheme. Landlords will have to pay a joining fee of £58.75 and then £30 per deposit. National Landlord Association members pay slightly less at £47 and £26. There is an annual renewal fee of £14.70. There are slightly different fees for agents, accredited agents paying less than non accredited agents. Note that it costs £83 to join the NLA, with a few variants.
The final scheme is run by the Dispute Service Ltd, whose web-site is here, and is aimed mainly at agents. The only fees announced at the time of writing this are for agents. These run from £521 for agents who are members of ARLA, RICS etc to £1,609.00 for unaffiliated agents, with a few variants inbetween. However once this fee (which is an annual fee) is paid, the agent can register as many deposits as he wants. So the more deposits are registered, the cheaper overall this scheme will be.
It will be interesting to see how the insurance based schemes go. I know that there is a huge amount of interest in the Dispute Service’s scheme, plus they already have an existing client base as they formerly ran a voluntary scheme for letting agents, and these firms will be passported through into the new scheme.
The National Landlords Association has, they tell me, over 12,000 members and I suspect that many of these will be using the NLA scheme. However other landlords associations appear to be boycotting it, and going for the Dispute Service scheme. I am not sure whether this is because they consider the Dispute Service will run a superior service or whether it is because they do not like the NLA. However it is likely that the NLA will do quite well out of this and will probably pick up a lot of new members, to the fury no doubt of the other landlords associations!
However I suspect that for the smaller landlord, the cheap and easy custodial scheme will be the most attractive, as it will not involve any cost. For if the property has good tenants and no recourse is needed to the deposit, then there is no need for the landlord to incur the additional expenses involved in having the deposit money in his bank account rather than the scheme administrators bank account.
Certainly the custodial scheme will be the most attractive one for tenants, as they will know where their deposit is. The NLA told me that if the landlord fails to pay the deposit over to them in the event of a dispute, the tenant will have to get a county court judgment (as opposed to going to arbitration) before they will pay anything over to them, which I suspect will not please tenants. I also suspect that this comment may not accord with the regulations, but we shall see.
However if you are a landlord, you should, fairly soon, read the information on the various scheme administrators web-sites, and register with them to receive more information. And then make your choice.
14 comments:
Hi - I work for Computershare in Melbourne and I am involved with the Rental Bonds department there. It works very well provided landlords and agents complete their tenancy forms correctly and all parties use the same signatures they originally registered with. The custodian scheme should work the same way and I can happily say in theory it is trouble free. Good luck with the new changes.
Many thanks for your comments Sarah, that is very helpful to know. I will warn landlords not to change their signature!
I paid for a deposit on the 5th April but I am not signing the contract until next week. Am I protected under the new deposit law? (I have a receipt for the deposit which is dated the 5th April)
My understanding is that it is the date the deposit is paid to the landlord rather than the date the contract is signed. So if it was paid before 6 April 2007, then the tenancy deposit scheme will not apply. A pity you did not wait another day ...
Hi - I recently moved into new rented accommodation (private landlord) and after much difficulty with things not working, ie. the kitchen tap, a friend asked if my landlord had entered into the Tenancy Deposit Scheme - which he hasn't. When I asked him about about it he simply asked if I wanted to move out. I don't particularly, but I am concerned about the security of my deposit money. Any advice would be gratefully appreciated, Thanks, Amanda
There is not space here to give advice in detail, but basically your landlord cannot evict you under the normal s21 procedure as this is not available if the deposit is not protected.
You will find a lot of information in the Tenants Problem Solver section of my web-site.
Dear Tessa,
Do I understand correctly - mydeposits.co.uk advertises itself as a protection service where landlord can go and use the deposit money during the tenancy, if he likes?
Is that wise?
I would like to comment on the use of monies collected through tenancy deposit schemes. My opinion on this subject is that there will only be one organisation dipping into the funds of these schemes and that is the government. In other words how many government officials sat around a table and thought this one up a very cunning way of raising billions of pounds in which ninety percent of this money will never need to be removed as lets face it all the tennants in the uk are not going to move out of rented accomodation at the same time so the government will be able to use this money as they see fit ie lets have another millenium dome built that was a winner wasn't it. And as for paying three times the amount of the deposit to the tennants if we do not put the money in to these schemes why don't they have the same rules for the landlords so we receive three times the housing benefit when we are not paid within three weeks. If you or I had thought this one up it would not be called the (Tenancy Deposit Scheme) It would be called the (Tenancy Deposit Scam)
The government cannot get at money held by the Deposit Protection Service (the only one of the three schemes where the landlord pays the deposit money over). Certainly they could not use it to build a new millennium dome! The Deposit Protection Service is regulated by the Financial Services Regulator who would not allow this sort of thing.
As regards the ‘fine’ landlords may be ordered to pay tenants by the Courts, so far as I am aware very few of these orders have been made. It is not automatic, the tenant has to apply for it by bringing a claim in the County Court, and feedback shows that if the landlord has protected his deposit late, the order will not normally be made. It was not intended as a scheme to make tenants rich, it was intended as a threat to ensure landlords complied with the law.
My current contact with the Deposit Protection Service (DPS) suggests that this so-called Tenant Protection Service doesn't meet the needs of the tenant or the landlord. It only serves the needs of the agency itself.
Recently my tenant moved out. I applied on line to the DPS for the repayment of the deposit. It was agreed by the tenant that I should keep £500.00 for outstanding rent and that the other £ 500.00 should be returned to her. This was communicated to the DPS and her current address was provided for all communication.
After 10 days with no response from the DPS, I contacted the ex tenant to see if she has received any communication from the DPS. She confirmed that NO communication has been received. I sent an email to the DPS requesting clarification. I received an automated reply referring me to the FAQ with a promise of a personal response within 4 days. A week went by with no reply and I sent another email. I received another automated reply similar to the first one. After another week of no personal response I wrote to the DPS. To date I have not had the courtesy of a reply. What I have received is a response to my email which reads as follow:
'Dear Mr Soobhany
Deposit Protection Service (DPS)
Thank you for your recent enquiry regarding the DPS.
I can confirm the current status of this deposit is 'Awaiting Tenant Response', A response has been requested but not yet received. As you have not had a reply to your claim within 14 days you can initiate a Single Claim. The Single Claim Process is a method of repayment for use if:
i. the agent/landlord has no current address for the tenant
ii. the tenant fails to respond to the agent/landlord’s written notice requiring that the agent/landlord be paid some or all of the deposit within 14 calendar days of the end of the tenancy.
The irony of it all is that the tenant has never been contacted. How can the DPS suggests such a course of action is beyond belief. It would appear that the DPS sole interest to drag this matter on while they continue to benefit from the accrued interest from the deposit. I was under the impression that this piece of legislation was to protect the interest of the tenant. What a scam!
I checked the DPS 'terms & condition' to find out where to take my complaint if I was dissatisfied with their service. Of course, I should write to the DPS itself elaborating my complaint. How convenient that they police themselves. What a scam! and the government is complicit to this.
Can you suggest what I could do next?
SMS SOOBHANY
Don't they have a telephone helpline where you can ring up and ask for help? It is possible that the request to the tenant to respond has been lost in the post. You could ask them to send it again.
If you still get no joy, writing a letter headed 'letter of complaint' is often a good idea as these large organisations have strict rules to follow regarding official complaints.
What happens when the tenant removes your bathroom suit, takes your kitchen out, wrecks the place and does a runner after not paying the rent for 6 months and not turning up to court?
Will the DPS pay your legal costs, rebuild costs, lost rent and your mortgage fines because you can't make payment?
Or has the government not thought of this one yet? - it doesn't pay them any interest.
Do you need the tenant's permission to keep the deposit? LOL
I wonder when the government will pull its finger out and protect landlords from scum tenants. If they will give the banks £500 billion for their mistakes, won't they give landlords the same for theirs?
This system stinks. It is another 'Big Brother' scheme set up by this excuse of a government.
Still waiting for the deposit to be refunded.The DPS is not showing any sense of urgency.Why should they? They are getting the interest while the tenant and I are kept waiting. Telephoning them is a waste of time as you are kept waiting for ages for an 'agent' to be free. It is of course an 0870 number which means you put even more money in their pocket.
Never again will I go down that route.
Can people reading this posting please also see the post here which answers some of the cricisms made about the DPS service.
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