‘This petty deposit dispute shows why landlords need to be licensed’

I have just read the latest property tribunal decision which has ordered a landlord to return a £320 holding deposit paid by an applicant for a rented property.

The case, which is the usual mix of ‘he said, she said’ arguments and contested claims, ill-tempered Whatsapp messages and some narrow-minded pettiness given the small amount of money involved, led to the tenant winning.

Without going into the minutia, the judge said that the tenant involved must have the holding deposit returned due to her guarantor, a friend, being unwilling to guarantee the tenancy because of the draft ASTs terms and conditions and, she said, therefore the tenancy was not able to go ahead.

The key to the case was that regardless of the details, both sides were unable to agree to proceed with the tenancy and therefore the holding deposit should have been returned.

Open-ended risk

One thing worth mentioning is that the guarantor pulled out (after the deposit was paid) because the landlord had subsequently made it clear that the guarantor’s risk was open-ended rather than restricted to the tenancy’s duration, which few people would consider reasonable.

Such a one-sided approach, and the later refusal to return the deposit because the applicant and her guarantor had ‘time wasted’ suggests that too many landlords do not understand this law.

In many ways, that’s not surprising. While agents were bombarded with offers of help and training during 2019/20 when the legislation went live by trade bodies such Propertymark, many landlords remain ignorant of its rules. This is despite representative bodies such as the NRLA offering courses on the Act for landlords.

The problem here is that many landlords, as in this case, use cheap DIY lettings platforms to find tenants and do some of or all the onboarding paperwork, and hope for the best.

Struggle

But these platforms, which can be used to take holding deposits, struggle when complicated disputes arise because their call centre staff often don’t fully understand the minutia of legislation like the Tenant Fees Act.

The landlord, and the lettings platform they used in this case, said the tenant had ‘mispresented’ herself by agreeing to provide a guarantor who later pulled out and therefore the landlord was entitled to keep the deposit.

But this is not what the Act says. The only reason landlords or agents can keep a holding deposit is when a tenant provides ‘false or misleading information’ which usually means lying on reference forms about their employment, previous tenancies or financial position.

The tenant here had provided a guarantor in good faith, the Property Tribunal said, but they had not been informed from the outset that they were signing up to a guarantor agreement that was open-ended.

I will not make myself popular saying this, but this case is a good example of why landlords who self manage or use DIY lettings platforms need to be licenced in England in the same way they are in Scotland and Wales. They need to understand how the law works before they attempt to hand out street justice to tenants, as was the case here.

Got on to any of the sector’s chat forums and you’ll see landlords asking questions they should already know the answer to. This has to change.

Nigel Lewis is Head of Content at The Neg.

Read more about recent Tenant Fees Act decisions.