March 2007 - A major shake-up in legislation is soon to affect landlords
Thu 01 Mar 2007
The Government has introduced amendments to the Housing Bill which mean that landlords and agents letting under an Assured Shorthold Tenancy will no longer be able to hold onto the deposit during the tenancy unless they are part of an approved scheme. Currently, many landlords who let privately hold onto deposits and even those who let through an agency choose to hold the deposit themselves during the tenancy. Under the new rules, this will no longer be possible.
The system aims to be fairer to tenants by guaranteeing that the deposits are securely held and that disputes about their return are resolved quickly and at minimal cost to all parties. It will also ensure that deposits are returned to tenants quickly provided that they have met all the terms of the tenancy agreement. This is a significant departure from the present state of affairs. Presently, if an unscrupulous landlord makes unreasonable deductions on a tenant's deposit, the tenant has little recourse other than a costly court case.
Once the legislation comes into force, deposits will either be held by a lettings agent who is part of an approved scheme (such as The Dispute Service the new name for the Tenancy Deposit Scheme for Regulated Agents) or in a statutory custodial scheme, a government scheme into which landlords letting their properties privately can transfer the deposit.
After 6 April, if a landlord lets a property and fails to place the deposit into one of these two approved schemes, they will be subject to penalties and fines. The tenant will have the right to demand that the deposit is transferred back to them, leaving the landlord in a very vulnerable position. The landlord will have absolutely no protection against damage and non-payment of rent during the rest of the tenancy. Furthermore, the landlord will be ordered to pay the tenant a fine of three times the deposit amount.
The Dispute Service and other approved schemes will encourage disputes to be settled privately between landlords and tenants. If an agreement cannot be reached, the case will be referred over to the Independent Complaints Examiner (ICE). He will adjudicate within 10 working days of receipt of documentation. The Dispute Service will then pay out the relevant amounts to each party based on the ICE's adjudication.
Landlords need to ensure that they arrange for a professional independent inventory or schedule of condition. If this is not done, the ICE will take this into account and will most likely determine in favour of the tenant. It is, therefore, crucial that every landlord has an independent inventory and schedule of condition done at both the start and end of the tenancy and that these documents be signed by both parties.
Wherever possible, landlords should endeavour to settle matters privately with their tenants. Recently, one of our landlords tried to claim over half of a 2000 deposit. The tenant disputed the landlord's claims but offered a settlement of 250. When this was rejected, the matter was referred to the ICE. The ICE ruled that the landlord's claims were unreasonable and that of the 1029 that the landlord was attempting to claim, he should only be awarded 20.