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Investigation: How are the tenancy deposit schemes performing?

Nigel Lewis talks to letting agents about their experience using tenancy deposit schemes and looks at a recently launched alternative.

Nigel Lewis

tenancy deposit schemesLetting agents with fairly long memories may recall that, when the current compulsory government-approved custodial deposit scheme was launched, deposits were one of the most controversial aspects of the lettings industry.

Many agents and landlords held their tenants’ deposits in their own bank accounts and arbitration over withheld or lost deposits was patchy. News coverage of ‘stolen deposits’ was also pretty negative, action was needed, so the current system was set up.

The system is now up and running, offering agents and landlords a choice of three schemes, so is it all going smoothly? We asked several senior letting agents working at the coalface what they think of their deposit protection schemes.

TDS – Portico
Michael Kennedy tenancy deposit schemes

Michael Kennedy

Michael Kennedy is Property Management Director at London agency Portico which has 18 branches across the capital. He says TDS is an effective barrier that prevents both landlords taking advantage of tenants, and tenants making frivolous claims.

“We’re pretty happy using TDS and my view is that the deposit protection system the industry now has is a strong and positive thing,” he says.

“It’s certainly better than what we had before when tenants only had the option of going through the courts to resolve an issue.”

Michael says he uses TDS because it started out as an insurance-based scheme and Portico wanted to control the money, which he says makes administrating and handling deposits much easier.

“We have a good working relationship with TDS and a clear process. We’re quite a large user so we get an account manager and the admin is simple,” he says. “We know what we need to provide to them when a dispute is raised.”

We’re happy using TDS, the system that we now have is a strong and positive thing. It’s certainly better than what we had, when tenants had to go through the courts to resolve a dispute.

But looking to the future, Michael says he’d like to see more automation of the property, landlord and tenant registration process, because “how we do it now is pretty manual,” he says.

TDS – Connells

Chris Day, who is Head of Lettings at Connells, has a great deal of experience dealing with TDS because he sits on its user forum and regularly chips in with suggestions.

“When TDS first began they were just doing what they were doing, but over the last three or four years they have become much more proactive in providing guidance and training, particularly for our property manager so they can understand how an adjudicator approaches things and how to put a case together,” he says.

“If you put hundreds of photographs in as evidence and don’t have a well-structured argument then the adjudicator can’t see the wood for trees. Less is more.”

Among the improvements Chris has been involved in is working with templates for his staff to use and moving to an online- only evidence submission system.

“It’s also about educating both landlords and tenants to understand what they can, and cannot put through when they are in dispute.”

My Deposits – LiFE Residential
Marti Kollar tenancy deposit schemes

Marti Kollar

Marti Kollar heads up the operations at new-build lettings specialist LiFE Residential which has twelve branches across London as well as three overseas in Singapore, Honk Kong and Cape Town. It employs 170 staff.

Marti’s been with the company for five years and as well as handling recruitment and dealing with complaints, she runs the firm’s lettings administration and property management teams.

LiFE Residential uses the insurance version of the My Deposits scheme and Marti says that although she likes how they offer advice and the quality and independence of their arbitration service, she wishes their technology could ‘talk’ to their lettings software, which is doesn’t at the moment.

“My Deposits has introduced a few changes over the past couple of years but I wouldn’t necessarily call their service user friendly,” says Marti.

“I’d love to see a lot more automation in the deposit protection process – for example – it would be great if My Deposits could offer an API that could be plugged into our lettings management software.

“The process would be a lot quicker, smoother and more user friendly if the two systems could just talk to one another.”

There is a particular reason why Marti wants a more streamlined experience too.

“You have to be careful these days with tenants because they are very aware of how deposits work and if they find out you haven’t completed the process to the letter, then they’ll use that as leverage further down the line when it comes to an eviction, for example.

“But when you’re processing hundreds of tenancies at the busier times of the year, it’s not difficult to make small mistakes – everyone’s human, after all.”

Marti says managing the deposits process is still too manual – such as registering landlords, their properties, and tenants and, she says, is still too time consuming.

“I know there can’t be a special API [application programme interface] for every software system, but I would expect them to offer it for those using the biggest providers.”

DPS – Living in London
Rita Sweeney, Living in London, tenancy deposit schemes

Rita Sweeney

Rita Sweeney heads the property management team at sales and letting agent Living in London, which has offices at Canada Water and Marine Wharf in London’s Docklands.

She has a busy daily schedule and looks after a four-person property management team dealing with renewals, property maintenance and move-ins. She also looks after the inbound part of the business including tenant offers, re-marketing and portal listings.

Rita is certainly a busy woman, as she is also the company’s office manager for Canada Water.

“The main challenge day-to-day is finding common ground with tenants when a problem needs to be resolved, a challenge which is magnified by the high rents in London and many tenants’ nervousness about rent increases,” she says.

The challenge is finding common ground with tenants, they tend to agree with the inventory clerk’s report but when the money is deducted from their deposit, they change their minds.

“This is particularly true when dealing with deposits at the end of a tenancy. I find that tenants tend to agree with everything the inventory clerk notes within the check-out report but, when money needs to be deducted, change their minds.

“I’m sure I’d be the same if I was in that position, but it has to be done if the inventory clerk has flagged up something that is the tenant’s liability, rather than reasonable wear and tear, but if it’s not so clear cut, then you need an impartial judge.”

Rita says Living in London has used the deposits service DPS since 2011 because, she feels, it offers the most balanced adjudication service of the three providers.

“The clear majority of our tenants’ deposits are lodged with the DPS custodial system, although a few of our legacy tenancies are with one of the other providers.”


North-East based letting agent Ajay Jagota says he wants to give deposit protection insurance policies a go – so he has launched a website called Dlighted.co.uk.

Why now? The small group of ‘deposit scheme alternatives’ like his, believe the UK’s increasingly high rents could persuade many tenants to embrace insurance-only alternatives because it removes the need for a deposit.

Ajay says he believes a spate of recent cases where letting agents have gone out of business or disappeared owing deposits to tenants and landlords will strengthen his hand.

He argues that the weakness in the custodial deposit schemes is that their ‘insurance’ versions, which enable agents to keep deposits, lead some unscrupulous agents to use deposit funds to prop up their businesses cashflow.

Instead, Ajay says that his service prevents agents ‘disappearing’ with deposits and makes renting more affordable for many tenants, particularly in the UK’s city centres where six-week deposits can add up to several thousand pounds.

Insurance-only products like his remove the need for a deposit entirely and therefore circumvent the law.

“An overwhelming number of landlords in the UK continue to choose to take a deposit from their tenants; for security, a level of protection for their property investment and to encourage tenants to abide by the terms of the Tenancy Agreement,” says a joint statement by all three of the approved tenancy deposit schemes to The Negotiator.

“[Our] tenancy deposit schemes are in place to ensure that the landlords who take deposits can protect them in line with their legal obligations.

“Of course, there are alternative options for landlords and agents to choose from. We would advise landlords to complete their own due diligence on the merits of deposit protection and investigate the level of protection and dispute recourse on offer from alternatives.

“The schemes are tightly monitored by the government and we have contractual obligations to follow relating to timescales, Key Performance Indicators and complaints.”

January 27, 2017

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