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On the money?

piggy bank imageOne of the many sticks used to bash letting agencies is that ‘rogue’ agents do not obey the law that requires them to advise tenants in the Private Rented Sector (PRS) as to how their deposits are protected. Another is that they do not they safeguard tenants’ deposits, and, worst of all, they unfairly retain those deposits at the end of the tenancy. Shelter says that 20 per cent of tenants don’t even know if their deposit is protected.

With three approved tenancy deposit organisations in England and Wales and further representation in Scotland and Northern Ireland, can this really be the case?

I asked Steve Harriott, Chief Executive, The Dispute Service (TDS), Alexandra Coghlan-forbes, Head of Adjudication at The Deposit Protection Service (The DPS) and Eddie Hooker, CEO, Mydeposits just what the real situation is. Do agents, landlords and tenants really understand Tenant Deposit Protection (TDP) legislation – and is it working?

Are tenancy deposits a real issue?

Steve, TDS

Steve Harriott image

Steve Harriott

Most letting agent members of TDS have a good knowledge of deposit protection law; partly because our membership rules require almost all to hold professional body membership, bringing a level of standards and knowledge.

The majority of our landlord members let only one property. Inevitably, they have a more limited understanding of deposit protection. As part time landlords, learning about the many regulations they must comply with is challenging.

Shelter’s statistics are concerning, but not surprising. Tenants contact us to ask if their deposit is protected with TDS, but all too often only when they are faced with a dispute.

Urging tenants to ask, ‘What is happening to my deposit?’ as soon as they enter into a tenancy agreement is a challenge. On our visits to student housing fairs the first question we are asked by first time renters is not, ‘What is deposit protection?’ but ‘What is a deposit?’

Eddie, Mydeposits

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Eddie Hooker

According to Government figures 86 per cent of landlords and agents no longer consider that deposit disputes are a problem, they understand the requirements. Our research shows that 79 per cent of tenants are aware of deposit protection, closely matching Shelter’s findings. This has risen from 70 per cent in 2013. However, our research (Mydeposits’ deposit awareness panel – Q2 2015 with 1400 respondents) also shows that only 50 per cent of tenants say their landlord or agent provided them with details or proof of the protection (prescribed information), and 43 per cent are aware they have access to free and impartial dispute resolution without the need to involve the courts, if they disagree with deposit deductions.

These findings show that the majority of landlords and agents comply and that tenants are broadly aware of TDP. However, there is still a lack of understanding among tenants and they aren’t always seeing the evidence (or significance) of deposit protection.

Alexandra, The DPS

Alexandra Coglan Forbes image

Alexandra Coglan Forbes

The DPS generally only comes into contact with landlords and agents who have protected tenants’ deposits. However, to ensure full compliance, agents must serve the ‘prescribed information’ as well as protecting the deposit. There is a constant need for landlords, agents and tenants to be aware of developments – such as the implications of the recent Deregulation Act – and to refine their understanding of what is required and how to avoid disputes. Our website is full of useful information for every party and we recently held 22 well attended dispute workshops for agents and landlords. We also provide awareness through our ‘Open House’ communications and regular blogs.

How do you improve awareness?

Alexandra, The DPS
Before any money is repaid, we ask the tenant whether they agree to any deduction the landlord requested. If they do not, we advise how they can dispute the claim and what steps they must take. The DPS runs the only custodial deposit scheme in England and Wales, physically holding deposits, this means that all repayments are also controlled by us.

Government figures show that 86% of landlords and agents no longer regard deposit disputes as an issue.”

We communicate regularly with tenants and landlords, providing information on TDP at the start of their tenancy. Our website is continually updated, our staff is trained to assist landlords, agents and tenants. Our ‘YouTube’ page has videos about the scheme. At the end of the tenancy we use all methods of contact to make sure the tenant is aware of the landlord’s position and what happens next.

Steve, TDS
We took a major step forward last year launching the TDS Charitable Foundation, funding education and information for tenants and landlords. In the past year our funding has varied from nationwide training for student advisors, to small community projects, to an online resource for the 80 per cent of foreign nationals who currently live in the PRS.

Eddie, Mydeposits
Tenancy deposit schemes have undoubtedly helped to raise standards but there is some way to go towards better understanding. Education is the key to improvement and we’re constantly looking at ways to develop knowledge.

Our main route is our website, with a vast library of guides, videos and practical examples of all things to do with TDP, including how to manage and deal with disputes. We are active on social media and invest heavily in market awareness initiatives such as the London Rental Standard.

What are the main causes of disputes?

Eddie, Mydeposits
Eight years of evidence collated by TDP schemes shows that disputes over the return of deposits occur in less than 2 per cent of all cases, even fewer require formal intervention by the scheme. Compared to statistics before this law, which stated that 1 in 5 tenants experienced problems, it’s evident that TDP has had an extremely positive effect in deposit management.

When a dispute is presented, more often than not it relates to cleaning, gardening or damage.

Alexandra, The DPS
Cleaning is always contentious. Damage claims are often over redecoration, but landlords are sometimes frustrated when we do not award the price of a full redecoration. Adjudicators consider the impact of fair wear and tear, and apply industry guidelines over the expected lifespan of décor. Similar provisions apply to contents, such as damaged appliances, particularly if they were in use by a previous tenant.

Steve, TDS
Reasons for dispute in 2015: Cleaning: 58%; Damage: 52%; Redecoration: 32%; Gardening: 17%; Rent arrears: 16%.

Average value of disputes: Arrears: £1,164; Damage: £475; Redecoration: £449; Cleaning: £220 and Gardening: £195.

How long does dispute resolution take?

Steve, TDS
From the submission of evidence by both parties it takes TDS on average 14 days to adjudicate and publish the report.

Alexandra, The DPS
The DPS has recently reduced dispute resolution times. We are now able to accept evidence from landlord and tenant concurrently within a fortnight. Both parties seek a quick resolution, but must have enough time to compile and send their evidence. Adjudicators then have 28 days to make a decision. Although a resolution is sometimes reached in a matter of days, adjudicators must be thorough, so it can take longer.

Eddie, Mydeposits
The government requires disputes to be handled within 70 days from notification. On average it takes Mydeposits 59 days to deal with a dispute.

HOW CAN AGENTS AVOID DISPUTES?

Steve, TDS
money box house imageAgents must be absolutely clear on what deposits can be used for. By making only valued deductions, justified with evidence, agents can reduce the need for dispute resolution.

A well written tenancy agreement is vital, making clear both parties’ obligations and stating under what circumstances the deposit can be used; especially important in special circumstances, such as keeping pets.

The importance of a good quality check in and check out report, signed by the tenant, cannot be overstated. These key reports, if well conducted, should justify reasonable deductions.

Tenants must not be charged for ‘fair wear and tear’, defined as “the reasonable use of the premises by the tenant and the ordinary operation of natural forces.”

Betterment: The deposit can only be used to restore the landlord to the position they would have been in had the tenant met their obligations. When making deductions for damage and decoration, remember that furnishings and décor will at some point need to be replaced. So, charging full replacement or redecoration value will usually put the landlord in a better off position and so it isn’t a reasonable amount to withhold.

Eddie, Mydeposits

  1. Highlight key points in the tenancy agreement. Define potentially ambiguous terms, set out the tenant’s responsibilities, explain deductions.
  2. Encourage tenants to read the tenancy agreement and inventory thoroughly before signing them.
  3. Mid-term inspections and pre check-out visits can highlight any issues giving tenants time to remedy any potential issues that might lead to a deduction.
  4. Keep a record of emails, letters, invoices and estimates to use in the event of a dispute.
  5. Fully explain your reasons for any deposit deductions; refer to your evidence and the tenancy agreement.
  6. Fair wear and tear deductions must be reasonable and proportionate to costs.

Alexandra, The DPS
Letting agents and landlords should communicate with tenants throughout their time in the property, not just at check in and check out. When a tenant gives notice, landlords and agents should remind them of the process. It’s particularly important that tenants are invited to the checkout and given sufficient notice, so that issues can be discussed and agreed.

Communication between the landlord and the letting agent is also vital. Landlords must understand the process and be given reasonable expectations over whether claims are likely to be successful, especially regarding fair wear and tear.

Documentation is vital. If a deposit is disputed, agents need evidence to prove their claim. Keeping records up to date throughout the tenancy is vital, including repairs made at the tenant’s request. Interim inspections should also be documented. Agents should give tenants a chance to remedy problems before they become too large. During disputes, landlords and agents should provide copies of correspondence with the tenant to show that a clear message and expectation had been set.

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