Tenancy Deposit Protection Five Years On - And Forward

LONDON, April 25, 2012 /PRNewswire/ --

Five years after it became a legal requirement to protect tenants' deposits in the private rental market, much of the 'cultural' antagonism between landlords and tenants may be reducing. And, now it is forecast that the number of authorised deposit protection schemes may increase both this year and again in 2016 and the use of Alternative Dispute Resolution widened.

Speaking at the Property Business Show at Excel last week (Thursday 19 April), Steve Harriott, Chief Executive of the Tenancy Deposit Scheme, said that he believed that five years of deposit protection has effectively banished the commonly held belief that there was a culture of serious antagonism between landlords and tenants over deposit matters.

"No longer is it automatically believed that private sector landlords will regard the deposits they hold as part of the rent, nor that tenants will withhold the last rent payments for fear of not getting their deposits back. And, both landlords and agents have become much better at managing disputes at the end of a tenancy," he said.

Steve Harriott cited the low level of tenancy deposit disputes of around only 1% over the last five years as evidence of this.

Today, the English Housing survey suggests some 2.75 million households have assured shorthold tenancies and the latest CLG statistics show that some 2.36 million deposits are now safeguarded.

Looking to the future, Steve Harriott said that this year the two existing insured tenancy deposit protection schemes, the Tenancy Deposit Scheme and mydeposits, are bidding to renew their contracts with government and it is possible that additional schemes will be authorised.

Then, 2016 will see the re-tendering for the English custodial scheme. This may also, subject to the government's view, bring more competition to the market place.

"These Schemes will compete on both quality and price and the Tenancy Deposit Scheme prides itself on being value for money, not-for-profit and the only deposit scheme to be awarded the Government's own Customer Service Excellence Award."

Pointing out that three custodial protection schemes are likely to be operating in Scotland from this summer, Steve Harriott said that this might lead to the liquidation or takeover of some letting agents. "In Scotland - as in England - there has been no requirement to keep deposits in a client account and almost certainly some of this money may no longer be readily available. When the requirement comes to transfer deposits to one of the deposit protection schemes, some letting agents may find themselves in difficulty."

A further real success of the tenancy deposit legislation has been the development of Alternative Dispute Resolution as an alternative to long drawn-out County Court proceedings. The Tenancy Deposit Scheme resolves over 98% of disputes in less than 28 days.

Its success has been borne out by its own surveys that show that 87% of landlords and 90% of tenants are satisfied with the process.

In the last five years, the main areas of deposit disputes have remained constant. Half of all disputes involve a cleaning element, between a third and a half are about damage and a further quarter involves redecoration. Awards made following Alternative Dispute Resolution by the Tenancy Deposit Scheme have been nearly equal, with 53.75% in favour of the tenant, 0.89% to the agent and 45.33% to the landlord.

As a result of this success, "Alternative Dispute Resolution could be extended further in the private rented sector to include possession cases, rent arrears and housing disrepair," Steve Harriott argued.