Deposit warning for landlords

I have written numerous blogs in the past about the curious case law which has developed in relation to tenancy deposit schemes.  However, there are some practical headaches that a landlord case face in recovering the deposit from a scheme operator even where the tenant has vacated and judgment has been obtained for rent arrears or other damages.

You would have thought that a court order giving judgment against a tenant would be sufficient to convince the scheme operator to release the deposit to a landlord, as many landlords are experiencing this is not so.

There are 3 government authorised tenancy deposit scheme providers:

1. The Dispute Service (www.thedisputeservice.co.uk)

2. My Deposits (www.mydeposits.co.uk)

3. The Deposit Protection Service (www.dps.co.uk)

and each of them has their own rules and procedures about the recovery of the deposit at the end of the tenancy. 

The particular problem that I have noticed for some landlords concerns the DPS scheme and that having procured their judgment against the tenant they were not aware of the provision in the DPS terms and conditions that requires the court order to provide that the deposit can be used to satisfy the claim and that the scheme operator should be specifically mentioned.  This is a requirement of clause 29 (a) of the terms and conditions and failure to procure that statement in the court order will mean that the DPS will retain the deposit.

Clause 29 (b) suggests an alternative course of action for a landlord whose judgment does not contain the magic words, that is to obtain a third party debt order in relation to the deposit.  However, that means another court fee of £100 and a wait for the court to process the enforcement documentation.

It seems to me that the DPS in particular has set up its systems to protect the tenants deposit at all costs, when a more common sense approach based upon the evidence would make the system a good deal less bureaucratic.

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About leaseholdlawyer

Solicitor
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7 Responses to Deposit warning for landlords

  1. Chris Kendall says:

    Hi Chris
    TDS also wrote a blog on this you might be interested in. We take a more practical approach to this issue and are still considering what could be done to make it easier.

    http://blog.tds.gb.com/blog/when-deposit-disputes-have-been-to-court-pragmatism-is-the-order-of-the-day-a-response-to-painsmith/

    Do you have twitter by the way?

    • It is good to hear a bit of common sense prevailing.

      My own view is that scheme operators have perhaps leaned too far in the interest of protecting tenants deposits at all costs, in cases such as the one I outlined in my blog. It seems to me where there is already a court order against the tenant then there is no dispute for the scheme to determine. Therefore, it should revert to a fairly straight forward administrative exercise of releasing the funds, provided the landlord can confirm that the tenant hasn’t already settled the judgment.

      I am indeed on Twitter, you can find me at @Alexander_CJ

  2. Hi Chris

    As I’ve never comented before I thought I should introduce myself first. I’ve been a landlord since 1989 and I am the founder of Property118. I’m a fan of MyDeposits as I prefer the insurance backed schemes. I’ve been “Comparing Tenancy Deposit Protection Costs for Landlords” recently which you can easily find via a Google search as the new RLA scheme “Deposit Guard” which is in association with TDS does look very interesting for landlords with larger portfolio’s. My only concern is that TDS arbitrations seem to find in favour of tenants more but as I’ve never had a disputed deposit the scheme costs are a major consideration for me. Thanks for the information about DPS, I wasn’t aware of the quirk you have explained and it’s yet another reason I will not be using that particular scheme.

    You can also finf me on Twitter @iAmALandlord

    • Thanks for the comment Mark, I don’t tend to become invovlved in the arbitrations themselves as the costs involved rarely merit proper legal advice being taken. The issue for some landlords is one of cost, the TDS I think is quite a bit more expensive for one off lettings compared to the DPS. Perhaps you get what you pay for!

      Thanks for your Twitter address, I already follow you!

  3. “My only concern is that TDS arbitrations seem to find in favour of tenants more”

    You might want to take a look at the TDS quarterly statistics digest which challenges this common misconception (agents think it’s biased in favour of tenants, tenants think it’s bias towards agents). http://www.tds.gb.com/adjudication-digest.html

    The split of disputed deposit awards at TDS is almost 50-50 and agents’/LLs’ share has been steadily increasing. We put this down in part to greater awareness of deposit protection amongst agents and landlords, who are now keeping better records which can prove that a tenant is liable for costs. We’re very confident in the neutrality of our adjudication process which is why we’re now publishing these sorts of figures (the only scheme to do so as far as I’m aware).

    If you want any information about the new landlords scheme please do drop me a line (member.relations@tds.gb.com ,or Twitter @tenancydeposits)

    • Well done Chris for being so quick off the mark! I don’t really think that the statistics prove anything as each decision will be a function of the facts of each case and they way that the evidence is presented by the parties.

      The burden of proof to recover deductions from the deposit is on the landlord. Therefore, I would expect that the perception of tenants prevailing may be because the evidence obtained by many landlords in respect of condition is generally quite poor and not very persuasive.

      • Very true that we are presented with a lot of inadequate evidence, which we’re trying to help members understand through training and resources etc. Often if the agent had had hard evidence to present to the tenant, the need for ADR wouldn’t have arisen in the first place, saving everyone a lot of time and hassle!

        But with regards to the stats, you’re right each case can only be judged on its own merits, however I hear such bizarre figures regarding dispute outcomes that it should challenge some ideas people have, and let them know we are completely open to scrutiny. And, if they are having a lot of disputes which they are losing, there are changes they themselves need to make.

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