Tag Archives: Deposit Protection

25Jun 2013

Lettings News: Deposit Case Sends a Message to Landlords

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By Craig Smith

Message

There has been yet another court case due to confusion around tenancy deposits and this one has sent the lettings industry into a spin about what does or doesn’t need to be done.

The case in question is Superstrike Vs Rodrigues where the Landlord had issued a section 21 notice for the tenants to vacate. The tenancy started before the tenant deposit protection came in on 6th April 2007. The issue with this case is that the tenancy actually started before 6th April 2007 and became periodic after that date. Once the tenancy had become periodic, it was deemed to be a new tenancy in the eyes of the law and therefore the deposit should have been registered. In turn, this meant that the Landlord could not rely on their Section 21 notice for the tenants to vacate.

The tenants challenged the notice that was issued as the deposit had not been protected in line with the Housing Act 2004 legislation. As the wording isn’t all that clear, a lot of Landlords could find themselves in a bad position if they have had long term tenants.

Right now, there will probably be a lot of Landlords checking their files to make sure they are within the law and with good reason! By not registering the deposit as it should have been a Landlord can find themselves not only unable to give notice to the tenant (they could but they would lose if it went to court!) but also having to pay back more than 3 times the deposit amount to the tenant.

Back in November 2012, there was a similar case that caused Landlords to make some important changes to their processes. The deposit may need to be protected, we already know that, but once the tenancy has gone to a periodic status it means that a new set of Prescribed Information needs to be issued to the tenants. This information should already have been provided to the tenant at day one and needs to be given again at the first periodic stage.

This is a process that we, as an agent, have already been doing for our Landlords to ensure that they are protected and not at risk from such cases. It is a very rare instance but one that could have major consequences for any Landlord involved. The deposit protection schemes are yet to release anything further on what they advise Landlords to do.

03Jun 2013

Landlord advice: Inventory Company promotes a lack of professionalism in Agents.

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By Steve Roulstone

Inventory

I have just read an article in one of the Industry magazines as part of my Monday ‘what is happening’ hour and frankly could not believe my eyes. It is in a section called Outsourcing in Mays issue of The Negotiator, so falls half way between an advert and an article, but is based upon the words of two gentlemen from the industry, one being an Agent and one being a facility provider for the industry and it is clear that one has an invested interest in selling his services, but I just find it hard to believe that an Agent would place in writing what has been repeated in the article!

 Matter of opinion.

 Let me say from the off here, that what I am stating is my opinion or ‘take’ on the subject, so some of what I comment on I do so agreeing that it is a matter of opinion, but I would never admit in writing that as a Company we could not offer our Landlords such an important part of the service needed in Managing property on their behalf. Because the representative of the Agents involved is openly stating that they are unable to provide professional quality inventories for the Landlords they serve!

 Inventories are us!

 Firstly, the skill set needed to be able to supply top class inventories can be learnt by one man as well as the next, so I cannot agree that Letting Agents cannot carry out the task on their Landlords behalf. All they need to do is learn how! But secondly and again in my opinion more importantly, how can any agent pass on such a vastly important part of the job to somebody else?

 Legal responsibility.

  Far more importantly for me is the legal responsibility we have with our Landlords under the contract all Agents should supply their Landlords. Good inventories are such an important part of the service now that to charge for a job and only do half of it in my opinion cannot be called ‘Full Management’ services.

 Argument against.

The reasons given for encouraging outsourcing inventories, is that Agents are too close to the position and risk Tenants stating the inventory is one sided. Well if what we claim for is correct, then where is the problem? Done correctly, Tenants have as much input as we do in the document and as we are contractually bound to work for the Landlord then that is what we do. They go on to say that there is then an inherent risk that the Agents inventory could fail in any claim because it was raised by the Landlords Agent. Well in our experience, that is just wrong!

 Facts speak louder than words.

The facts are that after three years with our current system, where disputes are dealt with by independent arbitrators, as a Company after ensuring we have Landlord agreement we have won every case that has gone through arbitration. So our experience would suggest exactly the opposite than what is claimed in this article. So the facts support that Agents should know what to do and how. I would also suggest, that a third party inventory, has far more chance of having their claim challenged by a Tenant who can easily prove that they were not involved during the Tenancy and are therefore not aware of matters which could have a far greater bearing on the outcome of any claim.

 Summary.

 Sub contracting major parts of the role of Property Management is not and never should be the way forward and our industry is not alone in being able to challenge the principal. The inventory is such an integral part of being able to offer the services of Property Management to Landlords that I would challenge any Companies ability to call themselves’ Letting Agents if they openly state they are unable to fulfil the role themselves. What else? Rent Collection? Property Visits? The agreement?  Better to be able to say yes, we do that!

02May 2013

Deposit Protection Schemes: Which One to Use?

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By Craig Smith

When the law was changed back in 2007 it meant that any deposit taken for an Assured Shorthold Tenancy needed to be protected. There were 3 schemes set up that could offer this service, each working in a slightly different way but all with the same goal in mind. (There are now 4 but more news on that later!)To ensure that tenants’ deposits are properly protected.

Each of the schemes have their own set of rules and terms & conditions but the law governs that the deposit should be protected within 30 days of receiving it. Each Landlord or agent tends to stick to one of the schemes, knowing that all of the deposits that they take are in one place which makes everything that little bit easier to deal with. Although there is no right or wrong answer, which scheme do you think is best?

MyDeposits

Unfortunately, Castle Estates have never used My Deposits but there are a few of our tenant find Landlords that do use them. This is a ‘pay as you go’ service where any Landlord or agent has to pay a registration fee per deposit registered. The current prices for individual Landlords start from a £36 joining fee and £18-£24 per deposit, depending on the amount of the deposit.

Depending on the amount of deposits registered, this could turn out to be costly for a Landlord but the money can still be held by the Landlord themselves. My Deposits is what is known as an insured scheme where only the details of the deposit are registered.

Should any deposit deductions go to dispute and the adjudication service is used, they aim to resolve any disputes within 15 days which does seem very speedy.

The Dispute Service (TDS)

TDS is another insured scheme and offers a similar service to My Deposits. Castle Estates did use this scheme when the legislation first came in to place and continued to do so for around 3 years. It was only when the agent registration fees were hiked up, by around 400% in some cases, that the decision was made to switch to another.

Although we haven’t used this for 3 years since, they do now say that there is no joining or administration fees for Landlords. This is another insured scheme so the Landlord can keep hold of the money themselves, although if a dispute is raised the amount in dispute then needs to be paid over to them so they can pay it to the relevant party when a decision is made.

The Deposit Protection Service (DPS)

The DPS now offer an insured scheme, working in much a similar way to those above, running alongside their original custodial scheme. The custodial is basically what it says it is, any deposit monies registered are held physically by the DPS rather than sitting in the Landlords account. Currently, they are the only organisation who offer the custodial service.

This can put a lot of minds at rest, both for Landlords and tenants. There was one agency in our local area a few years ago who ceased trading for one reason or another and we had a number of their Landlords approach us who didn’t know where the deposit was. Some of the deposits were registered in an insured scheme and there is some protection offered but within a certain timescale. Some tenants didn’t realise what had happened until too late and ended up losing out.

As the DPS can hold the money themselves, should a Landlord (or tenant for that matter!) disappear without trace, the money is still held securely.

Your Choice!

So there we have it. There is no right or wrong answer as to which scheme a Landlord should use and everyone will have their own personal choice. The point is, each scheme has the same goal in mind; to protect the deposit that is held in line with the Housing Act 2004 legislation.

05Apr 2013

Rental News: More Disputes as Finances Get Tighter

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By Craig Smith

The Chancellor of the Exchequer made his budget announcement a fortnight ago and the general consensus is that it has affected the poor for the worse. Perhaps the biggest news at the moment is how the reduction in certain benefits is affecting households around the country with many losing out and finding it even harder to make ends meet.

It isn’t just being able to afford the mortgage or rent that is an issue, the cuts can have had a knock on effect on general living costs and with ever increasing fuel & heating bills, some households can feel their finances running out of control.

Everyday Living

Managing more than 300 properties can have its ups and downs but it does give us a broad spectrum of scenarios to deal with. The properties that we deal with can vary greatly in size and condition, although none that are too bad we hope! There have been instances where even the tenants who seem almost perfect can fall foul to the ‘credit crunch’ and end up in a very quick downward spiral. All it takes is for one person to lose their job, for example, and have no money coming in to provide for their family.

We don’t just see this from tenants, we have had situations where Landlords have had to sell or even had their rental property repossessed as they hadn’t kept up with mortgage repayments.

Tenancy Disputes

The most common example of a dispute arising is when a tenant has left a property which is judged to be in need of works. We have written posts previously on how best to avoid disputes with tenants’ deposits and also the poor condition that some properties have been left in. We seem to live in a blame game culture at the moment where the slightest little niggle or problem results in compensation of some sort to an injured party. This has also found its way into the lettings world where issues that often arise are disputed as being someone else’s fault.

Quite commonly when a tenant leaves a property, and more so now when a problem comes up during a tenancy, it can turn into a game of tennis with neither the Landlord or tenant wanting to take responsibility. Something as simple as a broken door handle can be made into a big issue. The Landlord might think that the tenant has leant on it too hard and needs to pay for the repair themselves, whereas the tenant might think it is a cheap fitting and not made to last!

Of course, there are genuine reasons for wanting to hold back some of a tenants deposit. Maybe the property hasn’t been left as clean as when it was at the start of the tenancy or the garden hasn’t been looked after. (The time of year is a common argument with gardens which should always be taken into account but it is no excuse for extra weeds or damaged items!)

Rise in Deposit Disputes

If no agreement can be reached at the end of a tenancy then the costs can be taken through dispute. They can also be taken through the courts but this is less common as it costs a lot more this way!

Over the past year or so in particular, we have seen a steady rise in the number of people looking to dispute their deposit costs. For larger expenses this is understandable but some can be for smaller amounts, which does sometimes feel a bit like penny pinching!

The Future

It looks as though there is more financial uncertainty to come and we cant see a light at the end of the tunnel just yet. The points mentioned above are becoming common practice so the lettings road ahead could be bumpy!

25Jan 2013

Prescribed Information Still Important When It Comes To Deposits!

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By Craig Smith

In another recent case a Landlord has been found to have not complied with legislation when protecting their tenant’s deposit. It can be a bit of a minefield if you are new to the industry but the rules are becoming clearer and clearer.

Not Just Deposit Protection

Where a deposit is covered by the legislation it isn’t enough to just protect the deposit. The Prescribed Information (PI) must be provided to the tenant at the start of the tenancy, usually within 30 days of the deposit being paid. The PI contains the information the tenant needs to know about where the deposit is going to be held and who has access to it. This recent case also proves that the tenants must be provided with the terms and conditions of the relevant deposit scheme.

What Information to Give?

You may have read my post about the DPS before so you’ll know that it is that scheme that our office uses. We must always give our tenants a set of the DPS terms & conditions which is a lengthy document but is worth its weight in gold should a case arise. The legislation states that it is the responsibility of the Landlord to ensure the information is given to the tenant and it is not up to the tenant to go looking for it. The terms and conditions are an important part of the PI as the case has proven. In this instance, the Landlord had registered the deposit in line with the legislation but hadn’t given the correct PI to the tenants.

There are also a lot more handy documents available through the DPS giving both tenants and Landlords advice on how to use the scheme. Don’t forget that each scheme differs slightly in the way their information is presented and they may not have an official set of terms and conditions, so to speak. 5 minutes checking you have the right stuff is better than 5 years recouping unnecessary costs!

Final Advice

Some of the information that needs to be provided may seem trivial but it is very easy to get hold of. Certainly with the DPS, the documents are free to download and can be found with a few clicks on their website.

The majority of tenants seem to ask what they need to do at the end of the tenancy anyway as the documents seem to get overlooked. You only need to read the details of the case mentioned here to see how really important they are!

30Nov 2012

Tenancy Deposit News: DPS Announces New Insured Deposit Scheme

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By Craig Smith

The Deposit Protection Service has recently announced its new plans to setup a new insured deposit scheme alongside its already well established custodial scheme in 2013.

Custodial Vs Insured

The difference between the custodial scheme and the insured is what happens to the actual deposit money. Custodial is exactly what it says on the tin, the deposit money has to be given to the DPS for them to hold securely whereas with the insured scheme, it is simply registered rather than being paid over.

Why Use Custodial?

Prior to 2010 we used to register tenancy deposits with The Dispute Service (TDS) and had to pay a yearly fee in order to confirm our registration. The renewal prices were hiked up so high that many Landlords and Agents were forced to move elsewhere, hence our move to the DPS. (There are too many abbreviations in tenancy deposit protection, or TDP for short!)

By using the DPS, we found that Tenants know that their money is safe and there is no risk of it being used for anything without their say so. Nor can it just happen to be used ‘by accident’ by a forgetful Landlord! One other agent local to us closed down recently which left a number of Landlords and Tenants reportedly losing out on money as the deposits were held in an insured scheme. No such chance if the money is held elsewhere!

Downfalls with Insured Schemes

Now I don’t know exactly how the insured scheme will work with the DPS but it looks as though a Landlord or Agent will not need to pay a registration fee but will need to pay a fee per deposit registered. This seems fair enough but still begs the question, why bother when there is a free alternative?

There seems to me there is no point in holding a deposit in your own account. The amount of money to be earned from interest is barely pennies with interest rates lower than low and the custodial option even offers a free dispute service to boot! Not to mention the extra hassle of having to pay back the money yourself whereas a repayment with the DPS custodial scheme can be done & dusted with the click of a few buttons.

The Future for Deposits

Back in April 2012 the law changed with regards to the registration of tenancy deposits. Any deposit taken for an Assured Shorthold Tenancy needs to be protected and the future surely looks set for further tightening of the protection process.

I can honestly say that I think deciding to use the DPS is perhaps the best decision any Landlord can make. It is free, easy and everybody knows exactly where their money is!

15Mar 2012

The Localism Act: Changes on the Horizon for Assured Shorthold Tenancies

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By Craig Smith

Oh no! Not another post about deposits! Around 12 months ago we posted the importance of dealing with deposits correctly. In December of last year we wrote about a court ruling regarding a deposit for an Assured Shorthold Tenancy that had not been protected by the Landlord. Since then a number of changes have been announced that change the way in which deposits should be dealt with and these changes come in to force on 6th April 2012.

Prescribed Information for AST’s

Under the ‘old rules’, Landlords would have 14 days in which to serve the Prescribed Information to the tenant. This is the document that gives the tenant certain information about where the deposit is held and what happens to it. With the changes that are due to come in to force in April, Landlords will now have 30 days to protect the deposit and issue the Prescribed Information.

But this doesn’t mean relaxed rules for Landlords as if the deposit has not been protected within those 30 days, the tenant can take the Landlord to court to claim this back. Neither can the Landlord wriggle out of any penalties by protecting the deposit at that time as this will now not be accepted as sufficient protection for the deposit. The fines for non protection of the deposit used to be a mandatory 3x the amount of the deposit, plus the original deposit to be paid back to the tenant. Now it can be any amount between that of the original deposit and a maximum of 3x the deposit amount.

Existing Tenancies to be Protected

The new rules also require deposits for any existing AST’s to be registered within 30 days from 6th April 2012. This is regardless of whether the tenancy began before or after the date that Tenancy Deposit Protection came into force (6th April 2007) but of course any AST’s that started, or renewed, from that date should already be registered!

The reason for this is that the new legislation states that any new tenancy should be registered and the wording in the Housing Act 1988 means that any tenancy that goes to a periodic status is classed as a new tenancy. 

Tenancies Not Under the Housing Act 1988

The legislation is still yet to reach other types of tenancy agreement, such as Company Let or Assured Tenancies. Of course, this may change in the future but we’ll cross that bridge if we come to it! Non-AST tenancy deposits may still be registered if all parties are in agreement but it is always best to check before registering. 

10Dec 2011

Tenancy Advice: Prescribed Information & Tenancy Deposit Ruling

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By Craig Smith

If you’ve looked back through some of our recent posts, you might think that all we do is bang on about is deposits, deposits and deposits. Well, maybe not but here’s some more important information that you might find useful.

A recent court ruling has changed the way in which information should be provided to tenants paying a deposit that would be protected under the Housing Act 2004. Since 6th April 2007 any deposit taken for an Assured Shorthold Tenancy must be protected by one of the 3 deposit schemes (see my earlier post on deposit protection) but now additional information needs to be provided to tenants.

Prescribed Information

It is already stated in the legislation that tenants must be provided with certain Prescribed Information for the deposit. This information includes where the deposit will be held and the Landlords & Tenants rights to the deposit at the end of the tenancy. If this information has not been given correctly, or not provided at all, Landlords could be forced to pay 3x the deposit amount, plus the deposit back to the tenants.

This is the same for deposits that have not been registered in the timeline set out by the scheme rules, currently 14 days. Landlords cannot ‘get around’ the legislation by suddenly registering a deposit later in the tenancy if the tenancy turns sour. However, new rules are looking set to be published some time in 2012 which will extend the time to register a deposit to 30 days but we’ll wait and see when this happens!

Recent Court Case

The recent case which looks set to have changed the way in which information is given to tenants is the case of Suurpere V Nice. The full details of the case can be found using that link but the very basics of the case are: a deposit that was taken in January 2009 was not registered until July 2009. So, quite clearly not within the 14 day rule! Despite the fact that the tenant had left the property in rent arrears and goods still at the property that would need to be removed at the Landlrod expense, the Landlord was ordered to pay the deposit back to the tenant in full plus 3x the deposit amount.

Now reading this right now, this might seem unfair on the Landlord and to a certain point, I have to agree. But, the rules of deposit protection are very clear and Landlords cannot use the excuse of having a bad tenant to get out of any fines imposed by a court.

Rogue Landlords

A little bit of advice now to tenants. When you are looking to rent a property how much attention do you pay to the Landlord or Agent? Sometimes stickers on an office window might just get in the way of the property your trying to look at through the glass but do you know what they mean? It’s a tough world out there at the moment so make sure that the deposit you have paid is looked after! 

24Feb 2011

Deposit Protection Issues: Best Practice

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By Craig Smith

Since 6th April 2007, any deposit taken for a property that is being let with an Assured Shorthold Tenancy Agreement in England or Wales must be registered with one of the three approved deposit schemes. This can sound like another hoop for Landlords to jump through but the results of not properly registering a deposit can be costly.

Does it make any difference?

In a word… yes! It is not just a case that the money has to be protected but by registering the deposit with an approved scheme, the money can be held in a secure account and is protected for both parties. Each scheme also have their own dispute resolution service which can be used as an alternative to court action if the Landlord and Tenant disagree about any costs at the end of a tenancy. The adjudication service will take into account any evidence from Landlords and Tenants, which is where a good inventory and check out report come in to play!

Tenant Find properties, who deals with the deposit?

Tenancies where an agent only finds a tenant for the property but does not manage it can sometimes be a grey area depending on who registers the deposit. Castle Estates can still register a deposit on the Landlords behalf although would not be able to get involved in any claims at the end of the tenancy. Please feel free to contact us for further information.

So what if it isn’t registered?

If a Landlord fails to properly register a deposit they can be forced to pay back the full deposit, plus 3 times the amount of the deposit to the tenant. And on top of this, a Landlord would not be able to issue a Section 21 notice requiring possession of the property. Not only would it costs 3 times the amount of the deposit, it would also take a lot longer to gain possession of the property.

When should the deposit be registered?

Any monies taken as a deposit should be registered within 14 days of the Landlord receiving it. This is regardless of whether the tenancy has already started or is to start at a later date, although if the monies are paid but the tenant backs out of the deal, don’t forget that the money should be paid back to the tenant!

Where do we go from here?

Always make sure that your deposit is protected, if it falls under the legislation. A good agent will always look after your investment as if it were there own. If in doubt, please do contact us for further advice.