Tuesday March 6, 2007
Guardian Unlimited
BECKY HIRST, an NHS stop-smoking adviser in London, was horrified by how much of her deposit she lost when she and her boyfriend moved out of their rented flat. "We're not just talking about a few hundred pounds either," she says. "My deposit was £1,500."
When Becky and her partner, Dan Proctor, came to the end of a 12-month let in Chiswick, south-west London, they had their flat professionally cleaned, handed the keys back to their letting agent and moved on.
After taking account of various agreed charges she was "expecting £1,300 to hit my account. Instead I got £65." She was gobsmacked. "The landlord said he had taken the rest for new carpets and decoration." They later found out this was untrue: "It was exactly the same - he hadn't touched it."
The letting agent couldn't do anything - they didn't have the landlord's new address and calls and letters went unanswered. The only thing Becky and Dan could do was go to the small claims court, the easy bit of a very laborious process. "That was really impressive," says Becky, "we did it all online."
It took eight months of fighting but eventually the pair got their money back.
Cases like Becky's are not unusual. Shelter, the housing charity, says 1.7 million people live in the private-rental sector under assured shorthold tenancy agreements, the most common sort of rental contract. The average deposit in England is £695 - the equivalent of four to six weeks' rent.
Shelter's figures also reveal that in 2004-05, the last time a survey was carried out, 30% of deposits were returned "in part or not at all". Of that 30%, more than three-quarters felt their landlord had ripped them off and kept money unjustifiably.
There is an estimated £1bn held by landlords for tenants in the UK, and the system is currently wide open to abuse by unscrupulous landlords. "You haven't got a leg to stand on unless you want to go to court," admits a Shelter spokeswoman. "Most people don't feel equipped to do that."
Help is at hand
That, however, is all set to change. On April 6, a system designed to "provide clarity" and protect tenants will come into force.
Under the Tenancy Deposit Protection Scheme (TDPS), landlords will have to sign up with a third party, which will protect the deposit and arbitrate in cases of dispute. Virtually all properties where a deposit is taken after this date will be covered by the regulations. However, it will not apply to those with existing or rolling contracts.
"It's a rebalancing between tenant and the landlord," explains Shelter. "At the moment it's very much in favour of the landlord."
The TDPS requires landlords to sign up to one of three independent government-approved custodial or insurance-based schemes.
In the custodial scheme the landlord pays the tenant's deposit into a central pot where it is protected. At the end of the tenancy the money, plus a small amount of interest, will be paid back from the central pot. Firms operating the custodial scheme will make money on the interest they earn from the deposits they hold.
There are two insurance-based schemes. Under these, the landlord keeps the deposit but pays a small premium to a dedicated insurance company. If there is a dispute, after a relatively short arbitration process the insurer will pay the tenant the deposit and then recover it from the landlord.
In both cases it is up to the landlord to decide the type of scheme to use. They are also obliged to tell tenants within 14 days what scheme they've chosen.
When there is a dispute, rather than heading straight to the courts the schemes will operate an "alternative dispute resolution" (ADR) service, ie an alternative to going to court. This panel will take into account inventories, letters, photographs and other evidence, all of which will be done by post or email.
Disputes will only go to court if either the landlord or tenant refuses to use the ADR. Appealing an ADR decision in court will be a last resort, and a court is unlikely to overturn it.
Landlords who subsequently ignore the finding of the ADR can be fined up to three times the value of the deposit, which is then payable to the tenant.
"Your deposit will be protected and you won't get stung," says Becky, who has since moved into a new flat but is contemplating withholding her last month's rent instead of risking her deposit when she moves again. "The new system will be much better."
Your rights and deposit
Unless you agree otherwise, your deposit is there to cover damage to the property and furniture. It cannot be used to pay for general wear and tear, or things like decorating, new carpets or retiling the bathroom.
Under the present system, if there is a dispute over the return of the deposit the only option is the small claims court. Shelter advises writing your landlord a letter with a deadline for a response. If that is ignored, write again explaining you will take legal action - again give a deadline. After that all you can do is file a claim. It costs a minimum of £30 and can be done online.
You will need "evidence" to support your claim, such as photos, references, letters from your landlord and your inventory. This is a list of what was in the flat and the condition of the property that you and your landlord agreed on before moving in. Shelter says they are essential (although not mandatory), and that estate agents who charge for them are operating "bad practice".
To coincide with the TDPS, Shelter has produced a special red envelope that sets out the landlord's obligations under the new law, and included a receipt to prove the money was paid.
Chief executive, Adam Sampson, says: "Shelter helps thousands of people each year with deposit problems and has campaigned for many years to get tenancy deposit protection introduced.
"This money represents a sizeable chunk of cash for many tenants and losing it unfairly not only leaves thousands of people out of pocket, but can lead to homelessness.
"Tenancy deposit protection schemes provide a vital safety net for both tenants and responsible landlords, making the private rental sector more professional and fairer for everyone."
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