Landlords ‘haven’t a clue’ about deposit rules

Residential letting agents are struggling to bed down new laws aimed at protecting tenants’ deposits following 11th-hour changes to government legislation.

Many agents are also reporting widespread confusion and high levels of ignorance among private landlords, and fear that large numbers of landlords are failing to comply with the new legislation.

From April 6 landlords have had to belong to one of three designated tenancy deposit protection schemes. These safeguard deposits for tenants and formalise the procedure of claiming back the deposit at the end of the tenancy. Landlords can enter these schemes privately or via a letting agent, who will manage the process for them.

But letting agents say many landlords still seem to be unaware of their responsibilities under the new rules and that some of the schemes are failing to cope with demand.

Michael Toogood, managing director of Square Mile Property Management, says: “Private landlords don’t have a clue what is going on. The legislation has been impossible to comply with as the government keeps introducing new rules.”

Kate Whotton, London lettings director at Hamptons International, says the group has had many calls from worried private landlords. She says that some are so confused about what is going on that they have taken on an agent to oversee their lettings for them.

Any tenant who has signed up to a new rental agreement since April 6, and paid a deposit, can sue their landlord for three times that deposit if they discover the landlord is not registered in a deposit protection scheme. Also, landlords cannot evict tenants if they are not registered in a scheme.

It is not just private landlords who have delayed registering their tenancies with a deposit protection scheme. Many letting agents say they have been forced to put applications for schemes on ice as the final paperwork has only been received in the last couple of days.

Virginia Skilbeck, lettings director at Douglas & Gordon, the estate agency, says that after the rules came in the company was unable to produce tenancy agreements for a number of days. “It has been a bit of a shambles as people have had to change tenancy agreements and terms of business to include new information at the very last minute. When you have lots of branches, this is not easy,” she says.

The schemes are meant to offer a better way of arbitrating deposits for tenants. They eliminate the risk of the landlord running off with tenants’ funds at the end of the tenancy and put in place a formal procedure for disputes over how much of the deposit the landlord should retain to cover damage.

The three schemes are outlined below. Many private landlords are expected to join the Deposit Protection Service. This is free but landlords have to hand over tenants’ deposits. The other two schemes allow landlords to keep deposits for a fee.

However any tenancy that costs more than £480 a week is exempt from the new rules. Mary Ryan at Property Vision, which advises people looking to rent a property, says this would typically be the cost of renting a £500,000 house. “This exemption removes a large chunk of the UK rental market from the protection schemes,” she says.

Landlords who have not yet joined a scheme have 14 days from accepting their tenant’s deposit to register. At the end of the tenancy, landlords – or their agents – have 10 days to tell their tenants about any deductions from their deposit. Tenants then have 10 days to dispute this – and the agent or landlord then has a further 10 days to resolve the dispute. If it is still not resolved the dispute will automatically go to the official dispute service.