Blog

Better to be Safe than sorry - Spicerhaart on the importance of Client Money Protection

Tue, 15 May 2012 09:06:31 +0100

Spicerhaart is a leading member of the Tenancy Deposit Scheme and a founder member of SAFEagent. Paul Sloan, Operations Director of Spicerhaart Residential Lettings, explains why Client Money Protection is important and how the SAFEagent scheme will help.

It is sad fact of life but lettings agents go out of business. I know of at least half a dozen firms in the last 12 months that have closed for differing reasons, often leaving landlords and their tenants unsure of how to recover their money.

It’s why we at Spicerhaart have fully embraced the need for Client Money Protection and why we are adding our voice to National SAFEagent Awareness Week. Without it, people’s money can be at risk should a business fold or a principal abscond with their money (which sadly happens all too frequently.)

Most Public Indemnity Insurance policies cover fraud or dishonesty on the part of an employee of a business, but not the principal, on the basis that you cannot insure against your own dishonesty.

The beauty of Client Money Protection for me is that it can only be obtained through a recognised trade body or accreditation scheme. As a consequence, firms like ourselves are required by the body through whom they are covered, to comply with certain audit requirements such as an annual accountants report covering the proper operation of their client account. We are also required to confirm that adequate funds are held to cover monies due to clients. When applying to join a Client Money Protection scheme it is likely that the firm will be required to obtain written confirmation from their bank that their client accounts are ring fenced and cannot be used to cover any monies owed to the bank by the business in the event of insolvency.

Looking for the SAFEagent mark for me is the easiest visual proof that consumers are protected against total loss. Spicerhaart Residential Lettings are proud to be one of the founder members of SAFEagent because their ethos of doing what is best for the client exactly matches our own approach to business.

Events such as National SAFEagent Awareness Week help to increase public awareness of the importance of choosing a lettings agency that is a SAFEagent. This recognisable signpost clearly denotes that the agent will be covered by a Client Money Protection scheme and as such, whether you are a landlord or a tenant, your money will be safe and secure at all times.

With the housing market in general finding it tough and social housing provision increasingly stretched thanks to contracting government budgets, there has never been more of a focus on the private rental sector and with it letting agents. SAFEagent and Client Money Protection ensure that in the event that something does go wrong, whatever the reason, no one loses out.

Look out for the SAFEagent when you are considering letting or renting a property. Better to be safe than sorry as my mum still reminds me!

Paul Sloan, Operations Director, Spicerhaart Residential Lettings

Why we support SAFEagent Awareness Week - TDS chief

Mon, 14 May 2012 08:14:55 +0100

Last month saw the collapse of Canterbury based Lettings Agent Joseph Newman. The agent went into voluntary liquidation with the liquidator saying that up to £350,000 is owed to landlords and tenants from the client account. Some of this will be rent money but a lot of it is likely to be rental deposits. Tenants appear to have been told that the deposits were protected by the custodial scheme DPS but it appears that many of the deposits may in fact never have been paid over to DPS.

Now of course you could argue that tenants should have checked that their deposits were protected but for many tenants, particularly the students to whom Joseph Newman was letting may not be fully aware of the intricacies of deposit protection. The tragedy of course is that this agent has gone bust, taking the client account down with it, leaving landlords and tenants out of pocket. If the tenant deposits were not protected then the deposit protection legislation will not be able to repay the deposit to the tenant.

This is why TDS supports the regulation of the private rented sector and in particular that Lettings Agent ought to be regulated and provide client money protection insurance. In the event that such a regulated firm goes bust for whatever reason then landlords and tenants will have access to the client money insurance protection supplied by the firm’s regulated body (e.g. ARLA, NAEA, NALS, RICS or the Law Society). In addition if deposits are protected with one of the three approved schemes then tenants should be able to recover their lost deposits via the schemes.

ARLA has some very powerful advertising that makes it clear why you should use a bonded lettings agent and it is really important that landlords and tenants are made aware of the risks of using unregulated agents without CMP. In Canterbury the local lettings agents, landlord groups, tenants groups and the local National Union of Students should be joining together to stress the need for agents to have client money protection. And if consumers then choose to use an unregulated agent they need to be doubly sure that the deposit is protected with one of the three schemes and be aware that their client money might be at risk.

That’s why TDS supports ARLA, NAEA, RICS and NALS in promoting the benefits of regulation for lettings agents with client money protection insurance and why we support SAFEAgent awareness week.

Steve Harriott, CEO

Monkey Business in the Garden

Mon, 30 Apr 2012 16:42:27 +0100

Do your tenants ever give you problems with gorillas in the garden? Probably not. Disputes involving gardens appear in a little over 10% of disputes - and even fewer involve gorillas! Nonetheless they do occur, as in this recent adjudication…

“The check-out report makes little reference to the garden, except to note the presence of a stuffed gorilla and to note that the garden was overgrown at check-in.

As the garden was overgrown at the start of the tenancy, but did not contain a stuffed gorilla, I award £10.00 for the removal of the gorilla.”

As was the case in this dispute, awards made to landlords with respect to gardens are usually for the removal of rubbish, and rubbish in the garden should be easy to record (especially if it takes the form of a stuffed gorilla). However, claims by landlords for lack of maintenance are often not supported by sufficient evidence to make an award and they are given little consideration in the inventory and check in and check out reports. Beauty is in the eye of the beholder and a simple description of a garden in “good” or “well kept” condition, as we often see, is hard to objectively qualify and compare if it’s disputed.

Adjudicators approach the condition of a garden in much the same way as the condition inside – the tenant should return the property to the landlord in the same condition as at the start, allowing for fair wear and tear or, in the case of gardens, seasonality. This is why photos of a garden will be extremely valuable. Not only can they verify your written description, but the changes which gardens undergo through the seasons means liability for a change in its condition can be harder to assess. Dated visual evidence of the garden at the start and at the finish allows an adjudicator to make an accurate assessment as to whether the tenant has neglected their responsibilities and should be liable for the costs of returning the garden to its former condition.

The condition of gardens in the rental properties we see tend not to be of high quality, but there are always exceptions and this may well change as the number of ‘amateur’ landlords letting out their own homes continues to rise. In another dispute, a tenant intending to fulfil his responsibility of maintaining the garden cut back some plants and destroyed a plant of sentimental value to the landlord. However, the landlord had not told the agent or the tenant that this plant required special attention so it was not reasonable to expect the tenant to maintain the garden whilst giving special treatment to one plant without being actually told.

If you have particular requirements for your garden it is essential that you agree them in writing at the start of the tenancy. You may be an avid gardener, but don’t assume that your tenants will be.

Localism has arrived and there's 30 days to act

Fri, 06 Apr 2012 09:00:00 +0100

It's here! Section 184 of the Localism Act has now come into force as of 6th April 2012.

Plenty of information is available on the new regulations (see the links at the bottom of this page) and the new 30 day absolute deadline for deposit protection is straight forward, especially if you are accustomed to abiding by the existing 14 day limit. However, some landlords and agents have contacted TDS with concerns about how the new law applies to their existing tenancies.

D-Day is 6th May...

The new penalties for failing to meet obligations relating to deposit protection are stated not to apply if the tenancy was in effect on or after 6th April 2012, and the landlord has, before the end of the period of 30 days beginning with that date —

complied with the initial requirements of an authorised scheme in relation to the deposit,

AND

given to the tenant and any relevant person the information prescribed for the purposes of section 213(5) of the Housing Act 2004.

This gives deposit holders a period of 30 days grace to comply with the deposit protection requirements, where they haven't already done so, for a deposit received before 6th April 2012, and where the tenancy is running on or after that date. So if you haven’t already complied with the requirements, you should ensure that you do so within 30 days - before the 6th May.

What needs to be protected?

Debates over the Localism Act urging agents and landlords to register all of their deposits have caused some concern about what constitutes a deposit. Remember, the Localism Act does not change the definition of a tenancy deposit:

(s.212 Housing Act 2004) “tenancy deposit”, in relation to a shorthold tenancy, means any money intended to be held (by the landlord or otherwise) as security for—
(a) the performance of any obligations of the tenant, or
(b) the discharge of any liability of his, arising under or in connection with the tenancy.

Other blog articles go in to this subject in more detail (When is a deposit not a deposit? and Tenancy deposits - confusion and clarity) but put simply, if money paid to the landlord for the reasons stated above in the 2004 Act is intended to be repaid to the tenant, it can be considered a tenancy deposit and should be protected.

If you need further advice on this matter, please contact TDS as soon as possible, and certainly in advance of May 6th.

Localism Act guidance and documentation

Localism Act: The Housing Act 2004 and the changes introduced by the Localism Act 2011

Localism Act: Some frequently asked questions on the changes introduced by the Localism Act 2011

Prescribed Information and Clauses - Fifth Edition, April 2012 Changes highlighted

Summary of Rule Changes 2012

the tenancy was in effect on or after 6th April 2012, and
the landlord has, before the end of the period of 30 days beginning with that date—
complied
with the initial requirements of an authorised scheme in relation to the deposit, and
given
to the tenant and any relevant person the information prescribed for the purposes of
section 213(5) of the Housing Act 2004.

Can pictures replace the written word?

Mon, 02 Apr 2012 15:22:26 +0100

According to Pat Barber of the Association of Independent Inventory Clerks (AIIC) “a glossy inventory that relies heavily on photographs will be of little use in a dispute.”

You won’t be surprised to hear that digital visual media continues growing in popularity amongst agents and landlords; it makes perfect sense when you can fit a thousand photos on a piece of plastic smaller than your credit card. Although those images might be perfect for glossy advertisements, when it comes to images for inventories, a lot more diligence is required. Adjudicators at the Tenancy Deposit Scheme take a similar view to Pat Barber - visual records can be very valuable in supporting written evidence, but they can rarely replace the written word.

Put yourself in the position of an adjudicator. You’ve never seen or visited the property before, and you only have the evidence presented to you to assess. When that evidence comprises mainly photos, what are you looking for? What do they show? How do you know when or where they were taken? An adjudicator won’t just make assumptions. If the photos and videos are not accompanied by written evidence the chances are those questions can’t be reliably answered and an adjudicator cannot confidently make any award to the agent or landlord.

But photos and video evidence can be of great help. Only a small number of tenancies end in dispute (less than 2% in the case of tenancies registered with TDS) and if you have records which the tenant can’t argue against you may avoid the need for TDS adjudication entirely. To get the most out of what visual records have to offer, they need to be strong in their quality and reliability.

To ensure photos are reliable and verifiable evidence it is ideal if the tenant is present at the check in and check out when they are being taken, and that they sign and date the photos and report alongside the person compiling it. Even if they aren’t present, they should still be given the photos and documents to sign and date – you don’t want a dispute to be just one word against another, so this way you can confidently show that both parties are in agreement on the condition of the property at the start. Photos and videos are particularly useful for properties with a garden, as it can help distinguish nature taking its course from tenants taking liberties.

If you do submit visual evidence in a dispute, the adjudicator needs to know exactly what they are looking at, so the photos should be well labelled; e.g. “large brown coffee stain next to the coffee table in the lounge”; and they should be either embedded in the relevant section of the report or fully referenced in an appendix.

It's likely that you won’t have taken a specific photo of something which the tenant subsequently damages and this is where videos can be particularly useful, as they can encompass the entire property much more easily.

Of course, every dispute is judged on its own merits, and photos and videos will be more useful in some cases than in others. But these photos show one of the rare and undesirable occasions when a photo really is worth a thousand words…

The TDS provides a large amount of guidance on all aspects of deposit protection and disputes. See Use of photographs, videos and DVDs,

A Guide to Damages, Deposits, and Disputes

And Monthly Adjudication Digests and Case Studies

Are you prepared for the Localism Act? Checklist for Members

Wed, 21 Mar 2012 16:45:31 +0000

Are you prepared for the Localism Act? Checklist for Members

The good news for members is that when the Localism Act comes into force on April 6th 2012, you shouldn't notice much change in the administration of protecting your deposits. The timescale for registering deposits and serving Prescribed Information has increased from 14 to 30 days - but the 30 days is an absolute deadline - so be sure not to miss it!

But don't forget! As a result of the Localism Act, Prescribed Information and clauses for your terms of business have been updated, and you will need to make some small revisions to your documentation.

Here is a checklist for TDS members of what you need to do:

For Assured Shorthold Tenancies:

Update your Prescribed Information (Section A) to reflect the extension of the registration deadline from 14 days to 30 days. This applies to new Assured Shorthold Tenancy agreements which begin on or after 6th April 2012.

The advisory leaflet What is the Tenancy Deposit Scheme? (which forms part of the Prescribed Information) has also been updated. Download the new version here, or get it from our website by click this link.

Check that your existing Tenancy Agreements contain the correct clauses (section B), and that your Prescribed Information (section A) comply fully with the requirements of the Localism Act. If you are concerned that they may not comply, you should seek to correct this as soon as possible and no later than 5th May 2012.

For Terms of Business

Update your Terms of Business to include new Clauses (Section C).

We have updated our Prescribed Information and Clauses document, which sets out the changes you need to make. For your convenience we have highlighted the additions you need to make in yellow - DOWNLOAD HERE

This checklist covers the practical changes you should make in preparation for 6th April 2012. For more detailed information on the changes made by the Localism Act you can download the following TDS guidance documents:

Some frequently asked questions on the changes introduced by the Localism Act 2011

The Housing Act 2004 and the changes introduced by the Localism Act 2011

Tenancy Deposits - Confusion and Clarification

TDS has also published a comprehensive 67 page guide by David Smith of Anthony Gold Solicitors. This is the most in depth guide to tenancy deposit protection and you can download it for free by logging on to your Member's page, clicking Agent's documents and forms, and looking for 'A Guide to the Tenancy Deposit Scheme.'

Alternatively, you can buy a hard copy for £5.99 by completing and returning this order form 'A Guide to the Tenancy Deposit Scheme' Book by David Smith Order Form

A robust inventory can turn the result of a dispute: Video interview with John King

Sat, 17 Mar 2012 17:20:12 +0000

Have you ever doubted the importance of a good inventory? In this interview by Vanessa Warwick, John King (TDS Member Relations Manager) explains why a robust inventory is important for landlords, tenants, and agents alike. Watch the interview below.

TDS will accept anything as evidence, but it’s unlikely to be good enough if it’s not supported by a robust inventory.
Fair wear and tear can be contentious. An inventory with check-in and check-out reports provide evidence of the dilapidation over the tenancy period and whether it can be considered fair or excessive - considering the length of tenancy, type of property, and who is in residence.
The Localism Act will impact upon the professionalism of agents as they must now pay extra attention to having their paperwork in order within the time limits.
TDS is seeing an increase in use of digital inventory software. Some of it is very good, but the outcome will always depend on the quality of the evidence.

Delivering proportionate justice: the case of TDS

Mon, 12 Mar 2012 09:19:51 +0000

Everyone knows that going to court is time-consuming and expensive.

It is easy for the costs involved to far outweigh the value of the sums of money in dispute. For years, politicians, policy-makers and leading judges, in particular Lord Woolf, have been concerned about the problem. They say that justice should be ‘proportionate’. By this they mean that the cost of resolving disputes for relatively small amounts should not be out of proportion to what is at stake. The trouble with statements such as this is: what is proportionate? How do we know when things have got out of control and become disproportionate?

Enter Tenancy Deposit Protection. What TDS and the other TDP schemes offer is a model form of ‘proportionate justice’. Think about it for a moment. In the case of the insurance backed schemes like TDS, landlords/agents pay a small amount of for each tenancy. This fee protects the deposit and guarantees free dispute resolution where parties cannot sort out the trouble for themselves.

Of course, the scheme does not pretend to work in the same way as a court works. There are no opportunities for oral hearings before a judge, for example. But the process of holding oral hearings is what racks up the cost of litigation in court (as well as the court fees, the costs of getting to court, etc.) In the case of the typical tenancy deposit dispute (where the average sum under discussion is typically under £500) these costs would usually result in disproportionate justice.

Because the process is paper-based, and reliant on evidence submitted to TDS, TDS also delivers outcomes much more quickly than the courts. At present, TDS resolves well over 98% of disputes in less than 28 days from receiving the parties’ consent to adjudicate. In overall terms TDS resolves disputes within an average of 40 days from when it first receives the claim. This enables people to put disputes behind them and get on with their lives. (The Government has a website which appears to boast that small claims in the county court are dealt with in, on average, 6 months; see http://open.justice.gov.uk/. Are you impressed?)

I think that if Government and policy-makers are serious about PDR, TDS offers an effective model which with imagination might work in other contexts as well.

What do you think?

Chief Executive of TDS Steve Harriott, has also recently published an article in Inside Housing "Legal Legroom" on the benefits of alternative dispute resolution, which you can read here

The Localism Act - When is a deposit not a deposit?

Fri, 02 Mar 2012 09:35:12 +0000

Readers of Letting Agent Today might have seen the heated response to the recent article Agents warned over illegality in taking tenants' money too early. The subject of what constitutes a deposit and what needs to be protected is a recurring one, and the impending Localism Act seems to have set the hare running once again.

Our view is that agents’ fears of breaking the law by not protecting holding deposits or other advance payments, are unfounded. The Localism Act does not change what a tenancy deposit is with regards to assured shorthold tenancies, and therefore does not change what must be registered with a tenancy deposit protection scheme.

What is a deposit?

Any money taken for security in respect of a tenant’s obligations or liabilities connected with the tenancy is a tenancy deposit and must be protected with an authorised scheme.

A holding deposit is not a tenancy deposit for the purposes of section 212 of the Housing Act 2004, and does not need to be protected with an authorised scheme.

What you call the money is of relatively little importance – it is its purpose which you need to consider. A deposit is only required to be placed in a scheme if it is paid as security for the performance of any obligations of the tenant or the discharge of any liability of his, arising under or in connection with the tenancy.

So, if the tenancy agreement has not been entered into, or there are no contractual obligations on the tenant, the deposit paid is not a deposit for the purposes of the Housing Act 2004.

However…

If a landlord has a holding deposit in respect of a person who subsequently becomes his tenant, the holding deposit must either be returned to the tenant and then repaid as a tenancy deposit, or be retained by the landlord and then protected within 14 days (30 days from 6th April 2012) of entering into the tenancy agreement, and prescribed information issued.

Retention of the money is likely to be the more practical option, and therefore it is advisable for agents to put a clause in their documentation defining what event transforms a holding deposit into a tenancy deposit and commits them to register the deposit and issue the prescribed information.

What is the Localism Act changing?

In summary, the Localism Act is updating the time limits and penalties associated with the registration of tenancy deposits.
The window for registering the deposit and issuing prescribed information is increasing from 14 to 30 days, and in order to close a loophole previously open to agents and landlords, this limit is now absolute - tenants will be able to bring a claim from 31 days after the payment of the deposit and/or after the tenancy has ended. Previous court cases had allowed landlords to escape penalties if the tenancy had ended, or if the deposit had been registered prior to the hearing.

If the landlord has not issued the prescribed information within 30 days, no section 21 notice can be served until s/he has done so (and this can be after the 30 days).

If the landlord has not registered the deposit within 30 days, no section 21 notice can be served until either the deposit has been returned to the tenant or, if court proceedings have been taken against the landlord, proceedings have concluded.
The penalty which a court can award is between one and three times the amount of the deposit and it is worth noting that if the deposit is protected outside of the 30 day limit, the court will take this into consideration when deciding this amount.

A more detailed guide to the changes made by the Localism Act can be found here on the TDS website: The Housing Act 2004 and the changes introduced by the Localism Act 2011”

Taking positive engagement with agents and landlords to 'a wholly new level'

Fri, 17 Feb 2012 11:20:23 +0000

Today the consultation period on proposed housing legislation in Wales comes to a close.

The consultation paper, Meeting the Housing Challenge: Building a consensus for action, was published by the Welsh Government back in December and reported that in March 2010 70% of housing in Wales was owner occupied with 14% in the private rented sector and 16% in social housing. Clearly the private rented sector continues to play an important part of meeting the housing needs of Welsh households.

However, although the government says that the private rented sector is an “increasingly important” part of the housing sector it goes on to express concern about the quality of accommodation and the practise of some landlords:

“We must take our positive engagement with private landlords to a wholly new level, particularly those, often the worst landlords, who are not engaged in current efforts to improve the sector. In addition to committing to landlord registration and training and the regulation of letting/management agencies, we should take further steps to ensure growth and improve quality in the sector”.

So unlike Whitehall, the government in Wales has now expressed its commitment to landlord registration and training and importantly the regulation of letting and management agencies. At this stage it is unclear what the regulation might look like but this is good news for organisations like NFoPP and RICS which have been campaigning for regulation of the sector for many years.

Of course tenancy deposit protection has operated in Wales since 2007 and it will be interesting to see what impact the proposed regulation of lettings agents has in terms of improving the quality of lettings agents in Wales and the services they provide to landlords and tenants. In times of austerity and recession there are continuing financial pressures on lettings agents and it is important for consumers that their rent and deposit money, held by their agent, is properly protected. The client money protection insurance carried by the regulated bodies in the private rented sector is an important safeguard which unregulated agents simply do not offer. And it’s only when things go wrong do consumers realise the extent to which they have been financially exposed if they decide to use an unregulated agent.

Having a working model of a regulated lettings agent sector in Wales will serve as a good comparison with the unregulated sector in England. It is a refreshing aspect of devolution that different policy approaches are being pursued in the countries of the United Kingdom; the devolved administrations are setting an example for central government to seriously consider following.

In Scotland tenancy deposit protection will soon be joining the compulsory landlord registration scheme already in operation. The Northern Ireland Executive is committed to a mandatory landlord registration scheme, and on January 30th the Assembly called for the Department for Social Development to bring forward its legislation for tenancy deposit protection from November in time for the academic year.

According to the Northern Ireland Executive, landlord registration is “a first but essential step in establishing better regulation of the private rented sector”.

Steve Harriott is Chief Executive of The Dispute Service Ltd, which operates the Tenancy Deposit Scheme.

When deposit disputes have been to court, pragmatism is the order of the day - a response to Painsmith

Tue, 07 Feb 2012 10:21:08 +0000

Painsmith Solicitors recently published an article highlighting the difficult process of releasing a deposit from the custodial scheme following a court hearing (which you can view here). The courts have wider powers of investigation and take precedence over tenancy deposit protection schemes. As a result, TDS are not able to deal with cases where a claim has already been heard by a court or if court proceedings are on-going.

However we can, in some cases, arrange for a deposit to be paid in accordance with a court order.

The Housing Act 2004, Schedule 10, paragraph 6(4)(a), requires TDS to make payment in accordance with a court order if:

the court order is specific i.e. it clearly sets out what the judgement was for e.g. rent arrears or damages to the property and directs TDS to make payment from the deposit. If a court order merely states that an award is made without being specific, the parties will need to obtain a direction from the court specifying the outcome of the proceedings and directing how the deposit is to be distributed; and
any court order granted is final i.e. either the time limit for appeal has expired without an appeal being filed or, if an appeal was made, the appeal has been disposed of; and
no payments have been made either in full or in part that will affect the amount TDS pay and to whom.

Where a dispute arises at the end of a tenancy, it is for the deposit holder to submit the disputed amount of the deposit to TDS whether the parties intend to go to court or not. For the reasons stated in PainSmith’s blog, instances where the court directs TDS to make payment are infrequent because the courts often take the view that deposit disputes should be dealt with by the schemes and refer the cases back to the schemes for resolution.

For cases where the dispute continues through the court, TDS issue guidance documents to all parties when we become aware of intended court action. This ensures that the parties are aware at the outset of our requirements for the release of the deposit. They can request the judge to include a direction to TDS about the deposit at the time of the judgement, thus avoiding the additional expense of having to return to court for a further TDS deposit direction to be granted or to obtain a Third Party Debt order. Our experience has been that this guidance has resulted in an increase in court orders being granted with a specific direction to TDS to release the deposit.

Having said this, TDS adopt a more pragmatic approach than DPS.

We will still consider releasing a deposit in accordance with a court order that does not contain a specific direction to pay out the deposit. The proviso for this is that the deposit clause in the tenancy agreement permits the deposit to be used for the purposes of the judgement in the court order and that the remaining criteria set out above (2 and 3) are also satisfied. In other words, if the order tells us what the award is for, and the tenancy agreement allows the deposit to be used for that award, we may release the deposit as long as the order is final and no payments have been made under a payment schedule.

TDS can also consider offsetting any balance of the deposit following our adjudication against a court order that contains no specific direction to TDS to pay out, provided the same requirements above are met.

As Painsmith rightly state, part of the intention of tenancy deposit protection schemes was to divert deposit disputes away from the costly and time consuming court process; an effort to assuage the ordeals that it creates for both tenants and landlords. Our more pragmatic approach to disputes involving court hearings is a demonstration that TDS remains conscious of why we were created in the first place.

Giving landlords a greater choice

Tue, 31 Jan 2012 10:14:49 +0000

The Tenancy Deposit Scheme has always been open to landlords, but it has widely been regarded as being the Scheme of choice for regulated letting agents. Now, in association with the Residential Landlords Association, TDS is able to deliver a competitive offering to landlords.

For the increasing number of people taking out buy to let mortgages and stepping into the role of landlord for the first time, the benefit of insured deposit protection cannot be overstated. Without the bureaucracy and inflexibility of the custodial Scheme, the landlord holds the deposit and TDS only becomes involved should a dispute arise at the end of the tenancy. There is no delay waiting for the deposit to be paid out – the landlord simply pays the deposit out as agreed, meaning the tenant receive their money back quicker and the landlord can settle contractor bills where necessary. TDS is the voice of authority in deposit protection, and the resources and expertise available to landlords will be invaluable, particularly for the growing contingent of 'reluctant landlords' which ARLA recently highlighted.

But most importantly for landlords, the cost of protecting a deposit through DepositGuard is cheaper and easier than the other insurance-based scheme. At a time where costs are rising, landlords can save themselves time and money with the new TDS scheme. RLA landlords will benefit from a low cost pay-as-you-go deposit protection scheme, with no registration fees or additional charges for access to adjudication services. Marketed by the RLA as DepositGuard, this is good news for landlords. Registering to use the service takes a matter of seconds, and can all be done online - as can protecting the deposit, making payment, and making any changes to the tenancy. The Tenancy Deposit Protection Certificate is emailed to the landlord once the payment has been confirmed and sets out exactly what must be done to comply with the Housing Act 2004. All information is provided including Prescribed Information for landlords to serve on their tenants as well as compulsory clauses for inclusion in their tenancy agreements.

Landlords signed up to DepositGuard keep the deposit themselves in a UK bank account for the duration of the tenancy agreement. The charge paid ensures that the deposit is protected for the fixed term tenancy agreement created, plus any statutory periodic tenancy which continues at the end of the fixed term.

And, at the end of the tenancy, both parties also have access to the alternative dispute resolution service within three months of the lawful end of the tenancy, at no extra cost.

By considering the insurance based tenancy deposit protection and taking a fresh look at what TDS can offer them landlords can save themselves time and money when they need it most.

To find out more about DepositGuard, visit http://www.tds.gb.com/landlord-membership-fees.html or telephone 0845 226 7837.

The year ahead for PRS and deposit protection

Thu, 19 Jan 2012 16:45:38 +0000

Just a few weeks in to 2012 and several studies and surveys have been published predicting some new trends and attitudes in the private rented sector. Although TDS may not feel the impact in the short term, there are things which everyone in the PRS should be mindful of.

According to ARLA’s latest survey, there has been an increase in the number of properties coming onto the rental market with “reluctant landlords” – those who have reluctantly put their properties onto the rental market because they have been unable to sell them for an acceptable price. The Chartered Institute for Housing also recently released figures, which predict that the new caps on local housing allowance will make 800,000 rental properties unaffordable to people receiving housing benefit, meaning a movement of low income families to “benefit ghettos”, and an increase in rent (and subsequently mortgage) arrears.

It is interesting to note that there is a negative correlation between the geography of the CIH and ARLA findings – areas with a higher number of properties predicted to become unavailable to LHA tenants (e.g. inner London) have a lower number of ‘reluctant landlords’. Does this mean that LHA tenants will begin moving towards areas harder hit by falling prices and hence to “reluctant landlords”? Is it a problem? A recent survey by spareroom.co.uk revealed that 87% of landlords who accept LHA tenants had had problems with late rent and 11% said they had payments stop altogether. With 59% saying they stipulate no LHA tenants, the wariness of existing landlords is clear.

Two points are relevant here. Based on these figures there is a strong possibility that rent arrears disputes will increase, which currently appear in 16% of cases. TDS highlighted the issue of rent arrears back in November 2011, when we published a summary analysis of a dispute in which an LHA tenant claimed she was unaware of outstanding payments, because the local authority should have been paying the landlord (see the November adjudication digest).

Secondly, a rise in reluctant landlords may mean a rise in inexperienced landlords. We are constantly promoting to agents, landlords and tenants, the importance of strict processes for detailed record keeping and we need to make sure that all landlords are prepared. The above case demonstrated this – the landlord had not kept rental statements and only had emails as a record; however the tenant didn’t provide any evidence that the local authority that was responsible. Because the tenant agreed that money was indeed owed, the deposit was awarded to the landlord.

Both parties were ill prepared for a dispute. If the tenant’s claim was true, some evidence may have sent the adjudication in her favour. If the landlord had been in a dispute with a tenant who denied that they owed money, his poor record keeping would have made it difficult to prove otherwise.

The growing number of inexperienced and reluctant landlords need to be clear on what their rights and responsibilities are and how to be prepared, not just for rent arrears, but for the multitude of problems which can cause disputes with their tenants.

Chris Kendall

Tenancy Deposit protection to cover the United Kingdom

Thu, 08 Dec 2011 15:58:47 +0000

It is likely that in 2013 tenancy deposit protection legislation will be in place to cover the whole of the UK. In 2007 tenancy deposit schemes were introduced in England and Wales and now successfully cover over £2m tenancies in the private rented sector.

In Scotland similar legalisation has now been enacted and it is likely that the first tenancy deposit protection schemes will go live in Scotland in the spring of 2012. Interestingly in Scotland the government has decided to introduce a custodial scheme only and TDS is a key partner in the SafeDeposits Scotland proposal.

In May of this year the Housing (Amendment) Act (Northern Ireland) 2011 was passed and section 2 paves the way for regulations to be brought in to introduce tenancy deposit schemes in Northern Ireland. TDS understands that draft regulations will be presented in 2012 with a view to the provisions being enacted in 2013. In a notable departure from the legislation in England, Wales and Scotland the penalties for non compliance are much harder with a fine of up to £20,000 being stipulated.

Alongside the introduction of tenancy deposit protection in Northern Ireland comes landlord registration, which already exists in Scotland. Regulations will be drawn up by November 2012 on landlord registration for consideration by the Northern Ireland Assembly.

TDS will keep readers abreast of developments in Northern Ireland as more details emerge.

Steve Harriott, CEO

The Localism Act: Long awaited clarity in deposit protection law

Thu, 01 Dec 2011 09:26:27 +0000

The Localism Bill became the Localism Act on 15 November 2011. In all the exciting stuff about the transfer of powers from central to local government, there is one section – 184 – which is of direct interest to all of us involved in the operation of the Tenancy Deposit schemes.

Perhaps not surprisingly, following the introduction of the schemes in 2007, a number of issues were taken to the courts which ended in decisions that ran against what the schemes were trying to achieve. Section 184 of the Localism Act amends the tenancy deposit provisions in the Housing Act 2004 to fix those problems.

They are all pretty nitty-gritty issues but it is important that members are aware of the changes.

Time limits. The first change relates to the time limits within which a landlord must meet the requirements of the legislation. The requirements are: (a) to protect the deposit and (b) to give prescribed information – e.g. about what scheme the landlord is using – to the tenant. The original time limit was 14 days. The Act states that the time limit is extended to 30 days. Agents must be clear about this importance of ensuring landlords meet these deadlines.

Penalties. Second, the Act makes it clear that failure to meet these deadlines will trigger penalties. (A court ruling under the original provisions had ruled that so long as the deposit requirements were met by the time any case came to court, there would be no penalty.) This is an important change which agents need to keep in mind and tell their landlord clients about. The Act introduces two changes:

The amount of the penalty. Under the original scheme, a landlord who failed to meet the deadlines could be required by a court to pay a cash sum to the tenant of three times the amount of the deposit. It was the rigidity of this rule that encouraged the courts to take a very strict interpretation of the original legal provisions. Now the courts will have a discretion to make an award of between one and three times the amount of the deposit. Thus a landlord in flagrant breach of the rules will suffer more than one who has made a simple mistake.
Possession proceedings. The original Act provided that where a landlord was in breach of the time limits, the use of section 21 notices – which gives an automatic right to the landlord to regain possession through the courts – would not be available. The Localism Act makes clear that, even if the time limit rules were not met, then so long as the original mistake is rectified, the use of section 21 notices will be possible. Thus the landlord will no longer be exposed to the double jeopardy of having both to pay money to the tenant and have much greater difficulty getting a possession order from the court.

Although the Localism Act is now on the statute books, it is not yet in force. We will obviously let you know when these changes come into force. But you need to think whether your procedures – in particular the info you give your landlord clients – needs amendment to reflect these changes.

Prof. Martin Partington CBE; Chairman, TDS

The Tenancy Deposit Scheme has published a guidance document on the Localism Act 2011 and what it means for members. Click here to download

You can read the full text of the Localism Act 2011 on the website of the UK Parliament - click here

Deposits - What the Private Landlords Survey Tells Us

Wed, 23 Nov 2011 10:23:37 +0000

I have just been reading in detail the Private Landlords Survey (2010) published by the Department of Communities and Local Government. This is a survey of landlords and lettings agents who own and/or manage privately rented properties in England. Its aim is to provide a snap-shot of the composition and experience of landlords and how they (together with any agent) acquire, let, manage and maintain privately rented accommodation. It follows similar surveys carried out in 2001, 2003 and 2006. The sample size was 1,051 landlords and agents, each of whom had a face to face interview.

As Chief Executive of the Tenancy Deposit Scheme I was keen to see what the survey tells us about the approach to deposits taken by landlords and agents.

Taking deposits remains very popular

The survey reports that most landlords continue to take deposits - with 91% of landlords/agents requiring a deposit from their tenants. This shows that taking deposits is still seen as a necessary action to safeguard the landlord’s interest and that other alternatives, such as insurance policies or not taking a deposit at all, are not really growing in popularity.

Inventories: still room for improvement?

A key issue in the adjudications that we undertake is that landlords are unable to justify the deductions that they wish to make from the deposits. We have said, constantly, that having an inventory and check in and check out reports are really important to provide the evidence for any deposit deduction. In the absence of these it is always going to be difficult for landlords to prove their claim to an adjudicator.

With that in mind, it was really surprising that, whilst 85% of agents provided a detailed inventory, individual landlords supplied an inventory in only 58% of tenancies. While we do not say, in spite of continual pressure from professional inventory companies, that the inventory has to be professionally prepared, we do say that the inventory must be comprehensive and a clear record of the property’s condition and backed up by a check in and check out report. The absence of these will severely jeopardise the landlord’s prospects of making a successful claim for a deposit deduction.

Clearly from the Private Landlord Survey there is still some way to go to persuade landlords of the merits of inventories and getting them to understand that not providing one can be a false economy if the tenancy ends in a dispute.

Deposit values in line with our experience

The report suggests that the deposit value was either equal to four weeks rent (51% of cases) or higher (in 39% of cases). Only in 9% of cases was the deposit less that 4 weeks rent. This tends to reflect our experience at TDS where the equivalent of four to six weeks rent tends to be the average deposit taken.

Tenancy Deposit Protection schemes; why are landlords still not protecting deposits?

The survey asked landlords and agents about the statutory tenancy deposit protection schemes and pleasingly a large majority of all landlords/agents (84%) were aware of the authorised deposit schemes. However just over two-thirds (67%) of individual landlords were aware of the scheme, with 17% deciding not to use it. A staggering 33% of landlords were however not aware of the scheme at all. This compares with 93% of agents using the scheme, with 6% aware of it but not using it and with only 1% saying that they were unaware of the scheme.

Whilst the numbers are pleasing in terms of overall awareness of the Scheme, it does suggest that there remains a high level of ignorance about the existence of the scheme in a significant proportion of landlords and potentially therefore a level of non-compliance with the legislation.

Indeed of the 61% of landlords who said they did not use the or were unaware of the scheme the reasons given were that the tenancy was pre 2007 (21%) and 37% said they did not take a deposits. But 30% gave unspecified “other” reasons. I do wish the survey had probed somewhat more about what these “unspecified” reasons really were. In spite of the penalties involved in not protecting deposits (of up to three times the deposit) this level of non-compliance is worrying and should give us all pause for thought.

Next steps?

For me the key issue highlighted in the survey is the lack of understanding by Landlords about the existence of tenancy deposit schemes. Those of us involved in this do need to think through what more we could do to promote awareness of the scheme with landlords and tenants. What more could government do to promote awareness of tenancy deposit protection in general? What role for the various landlord and agents bodies? What should Shelter and the National Union of Students be doing? What about a more joined up approach?

Any takers for a joined up campaign?

The quiet increase of the Welsh AST threshold

Mon, 07 Nov 2011 11:33:51 +0000

The AST threshold in Wales will increase to £100k p.a on December 1st. More detailed information can be found in our updated guidance document which can be downloaded here.

In October 2010 the Assured Shorthold Tenancy Agreement annual rent threshold for tenancies in England increased from £25k to £100k. At that time no changes were made to the Welsh tenancy threshold. Statutory Instrument 1409, which was laid before the National Assembly for Wales on the 6th June 2011, means that the Welsh threshold will now also be increased to £100k. This change takes effect from 1st December 2011.

It may come as a surprise to many as there hasn’t been a great deal of publicity or confirmation in advance of the changes – in stark contrast to when the change was implemented in England.

As a consequence of the increased threshold, more tenancies will fall under Tenancy Deposit Legislation and members with effected properties must be sure to comply with TDS’s initial requirements (as with other authorised tenancy deposit protection schemes).

What do Members need to do?

Any tenancy affected by the legislative change needs to be protected quickly, and certainly before the 1st December 2011.
This concerns existing non-ASTs which:

will become ASTs on 1 December 2011 in Wales due to the change in rent threshold;
will continue beyond 1 December 2011 in Wales; and
are protected by TDS rather than another TDP scheme

Members must have registered these tenancies on the TDS tenancy database no later than 1st December 2011 for tenancies in Wales. However, Members need not wait until the law changes to do this. Timely registration will minimise the prospect of a successful challenge on the grounds that the tenancies have not been registered within the statutory 14 days.

Members will need to provide a new tenancy agreement, or an addendum to the existing tenancy agreement, which explains the tenancy’s new status and when it will take effect.

We have updated the document ‘Guidance for dealing with non-Assured Shorthold Tenancies and the Increased Rent Threshold’ which can be found on our website, here.

Why self regulation just won't work

Wed, 26 Oct 2011 09:00:18 +0100

"In an era when young kids get sent to jail for stealing a t-shirt and MPs get imprisoned for fiddling their expenses what makes fraudulent lettings agents get away with a smack on the hand? Self regulation just won't work."

I have spent most of my career in the heavily regulated social rented sector which the Housing Corporation, Audit Commission and now the Tenant Services Authority and Homes and Communities Agency have all been involved in regulating.

These agencies have some draconian powers if you fail to meet their regulatory standards - from fines to effectively closing down the business and transferring the homes managed to another housing association. So why has the government been so reluctant to bring about regulation in the private rented sector?

In my view there needs to be some sort of level playing field in the rented sector in the UK. It’s recognised that social tenants need the protection of regulation and it’s clear that tenants and some landlords in the private rented sector also need the same type of protection.

We have had direct experience of this with the recent shocking case of Premier Places (Redditch Letting) Ltd where the MD and accountant admitted to fraud, which led to the loss of hundreds of deposits as the two effectively stole their clients’ money. TDS paid out over £63,000 to tenants, and landlords may have been left without their share of the deposit money or any rent monies held by the firm.

What shocked me most was the sentence of just 250 hours of community service and a 12 month suspended jail term (see ‘TDS hits out at lenient sentencing’ The Negotiator, 28/09/2011).

Until the courts start to give tougher sentences or the government decides to introduce stronger regulation then these cases are likely to increase. That’s not scaremongering because every month we are dealing with cases similar to the Premier Places case.

We simply have to have better protection of tenants’ and landlords’ deposits and rent monies. Regulated agents do have client money protection insurance and these agents recognise the benefits that this can bring in terms of consumer protection. .

In an era when young kids get sent to jail for stealing a t-shirt and MPs get imprisoned for fiddling their expenses what makes these fraudulent lettings agents get away with a smack on the hand? These types of punishments will simply encourage those unscrupulous agents who want to cut back on fees and steal the clients’ money when things get tight. We saw what happens with the banks when self-regulation was ineffective but there is no sign of government wanting to regulate.

What we need is a nationwide alliance of regulated agents, the professional bodies, the ombudsmen and the Tenancy Deposit Schemes to come together and agree a form of effective self-regulation that will really work and which can be brought to the consumer’s attention. Wasn’t this what the Property Standards Board was about? Perhaps it’s time to resurrect that idea?

Welcome to the new Tenancy Deposit Scheme blog

Tue, 18 Oct 2011 12:35:20 +0100

Those of you that attended the NALS 2011 conference will remember the presentation on the importance of social media given by Nick Tadd of Property Tribes. You may or may not have noticed that he was one of the only speakers at the conference not to use PowerPoint or any kind of visual aids. Isn’t it a bit self-defeating to preach the necessity of digital media to businesses with the most technologically basic presentation of the day?

No. I think it actually sums up his argument perfectly. If you can engage with people just by talking, why bother with PowerPoint? Technology shouldn’t be used for its own sake but with specific objectives in mind, so when you have over 2,600 members and resolve nearly 1000 disputes each month as TDS does, digital media is a fantastic way to talk, to listen, and to share information with all involved.

This is why we are developing our use of social media. We’ve been working hard over the past year to improve the service TDS provides; by opening up new channels of communication we can keep you better informed of what is happening here, and you will have more opportunities to question, comment on, and scrutinise what we are doing.

Alex Britchfield (Deputy Independent Case Examiner) and Michael Jones (Member Relations Assistant) talking with delegates at the NALS 2011 conference

We also know that awareness of deposit protection is still far too low. We have already made our literature more user-friendly and key documents are certified by the Plain Language Commission for the Clear English Standard. By being more proactive in our communication we can better inform tenants and landlords of their rights and responsibilities before the need for dispute resolution even arises. As a not for profit organisation, this is in everyone’s interest.

So please follow the blog; you can keep up to date with the events we will be appearing at, and members of staff from across TDS will be giving regular insights into what they are doing and what’s happening in the industry. You can follow our tweets @TenancyDeposits and a LinkedIn group for property professionals will be launched next week.