Is your rental deposit in safe hands?
By Spencer Gordon, Jan 29 2016 02:16PM
According to a new report from the Cebr, 15% of landlords are sitting on Â£514m of unprotected deposits.
Despite government intervention to make it a legal requirement for landlords to protect renters’ deposits in one of the government backed schemes, new research carried out on behalf of financial comparison website money.co.uk by the Cebr (Centre for Economics and Business Research) reveals that 284,000 landlords have failed to do so. Research estimates that these landlords are sitting on £514 million of deposits that should be protected by an official third party service.
With approximately one in five (4.6 million) households in the UK now privately rented and the average protected deposit at £1,040, the total value of deposits paid by tenants and placed in protection schemes by landlords has now reached a whopping £3.2 billion. Despite the risk of fines for landlords who fail to protect their tenants’ deposits, 15% are still failing to do so running the risk of a £2,400 penalty. Landlords that flout the rules could together be earning up to £8.5 million a year in interest on unprotected money, while leaving themselves and their tenants with no third party protection when their agreement comes to an end.
What is deposit protection?
It is mandatory for all landlords to protect deposits for assured shorthold tenancies via a government backed tenancy deposit scheme. They must also give tenants prescribed information about where their deposit is protected, who they are renting from and how they raise a dispute. Different approved deposit schemes are used in England and Wales to Scotland and Northern Ireland but they all operate in a similar way. The schemes give landlords and tenants access to a free dispute resolution service if things go wrong when the tenant moves out, eliminating the need for court action in many cases.
The government imposed deposit protection schemes to stop landlords unfairly taking money out of deposits for things such as wear and tear or pre-existing damage when tenants move on. With this protection in place, an alternative dispute resolution scheme will step in and assess the case and make sure any money held back by the landlord is a fair deal for both the tenant and the landlord.
Hannah Maundrell, Editor in Chief money.co.uk comments: “Renting is a money minefield and with troubled times ahead for the buy to let market, the problems caused by ‘dodgy landlords’ are only likely to get worse. While many landlords are doing the right thing and protecting deposits in one of the official government backed schemes, a worrying amount of money is falling through the cracks and far too many tenants are being left vulnerable.
Renters must take control and ask landlords which protection scheme their money will be stashed in before signing on the dotted line. Existing tenants must ask for proof their money is protected if their landlord hasn’t given them the correct written documentation.
It’s not right that tenants are left responsible for taking their landlord to court if their deposit hasn’t been protected. The government needs to step in and take decisive action. Introducing a compulsory register listing every landlord that rents out property in England and Wales would be a start. This works for Scotland and Northern Ireland and it seems crazy this hasn’t been brought in across the UK. Add in tenants’ ratings and reviews to this too and you have both the beginnings of a solution that helps renters make an informed choice about who they’re handing over buckets of cash to; and the foundation for policing landlords that are currently going unchecked.
That said, it’s not just renters that stand to benefit from deposits being protected; after all landlords need a safeguard against renters that misbehave too. I can’t understand why any landlord wouldn’t do this; it doesn’t have to cost too much to place money with a tenancy deposit scheme and could save so much hassle later on.”
If you have any questions on tenants deposits, whether you are a landlord or a tenant, then please feel free to contact ourselves at Spencer Gordon Lettings 01704 460160.
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