5 years of tenancy deposit protection

The Dispute Service “TDS” has released an excellent PDF document summarising the first 5 years of tenancy deposit protection in England and Wales.

Your free copy of the document is available by completing the short form below:-

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Tenancy Deposit Disputes as a Percentage of Tenancies Protected

This particular section of the report made very interesting reading.

“Before the tenancy deposit protection legislation was introduced, the National Association of Citizens Advice Bureaux said in their 1998 report Unsafe Deposit that 48% of tenants in their survey had reported having had a deposit unreasonably withheld and only one in six of these had been successful in getting their money back. This implied that 40% of tenants may have had their deposit withheld by their landlords without the agreement of the tenants.

There appears to be little evidence available of the number of disputes that went to the county court.

An analysis of the number of disputes each year compared to the number of deposits protected shows a surprisingly low % of disputes as a proportion of the deposit protected.

Given that the evidence from the sector is that tenancies on average are lasting up to 18 months this implies a dispute rate to tenancies ending of some 1.28%. This is significantly below the figures implied by the Unsafe Deposit report in 1998.”

Conclusions

There are a number of conclusions which can be drawn from this brief overview of the tenancy deposit protection legislation. There appears to be a high level of compliance with the legislation with 92.4% of eligible deposits being protected. However this figure does need to be treated with some caution as there is no reliable data on the number of assured shorthold tenancies with deposits. Indeed anecdotal evidence from Shelter and the NUS suggests that there are still pockets of the country where landlords are not complying with the law. This may be an area where the Tenancy Deposit Scheme may commission further research to ascertain the levels of non-compliance with the legislation.

In relation to the enforcement of the tenancy deposit legislation there have been a number of high profile cases which reached the High Court and Court of Appeal (and which ultimately led the government to amend the legislation in the Localism Act 2011). However there seems to be a lack of data about the number of cases coming through the County Court system for non-compliance with the deposit protection requirements and the obligation to supply prescribed information. This may be an area where the DCLG and the Ministry of Justice may wish to discuss better recording of cases.

Even though the insurance schemes both charge a fee for protecting deposits this has been attractive to landlords and particularly agents (even when interest rates are low). Indeed at March 2012 over 63% of deposits were being protected in the two insurance schemes. There also appears to be little evidence that the development of a tenancy deposit protection scheme has led to landlords deciding not to take deposits.

Although there is undoubtedly work involved in registering tenancy deposits, amending tenancy agreements and serving the prescribed information, it would appear that 84% of all landlords in England still want to take a deposit to protect them in case of damage or loss caused by the tenants.

In the 1998 Unsafe Deposits report there was a suggestion that up to 40% of tenants may have had their deposits unfairly withheld. This could therefore have been expected to have led to a deluge of disputes being referred to the tenancy deposit schemes once the scheme was introduced. As we have seen this has not happened and it may be because the original figures were somewhat
exaggerated or because the very existence of a scheme where tenants would have access to ompartial and free adjudication has led to landlords being more reasonable in their demands at the end of the tenancy. In any event the number of disputes coming through to the schemes has been much less than was anticipated. It is certainly the case at the Tenancy Deposit Scheme that
adjudicators are seeing much less evidence of unreasonable claims being made by landlords in the disputes which come through to adjudication.

And what of the future? The government remains committed to tenancy deposit protection and will be procuring new insurance schemes from April 2013. The custodial scheme is due to be procured in 2015 for an April 2016 start. The amended legislation as a result of the Localism Act 2011 has from 6 April 2012 extended the time limits for protecting deposits and issuing prescribed information from 14 days to 30 days. But the penalties have been tightened with non-compliance leading potentially to the return of the deposit in full and a fine of up to three times the deposit. We will need to see what impact this has and whether the courts or the local authorities take steps to enforce the legislation.

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