Tenancy Deposit Protection in England and Wales

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Tenancy Deposit Protection in England and Wales

• Phil Alker
• Head of Tenancy Deposit Protection Team
• Communities and Local Government

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Scope of this presentation

• My aim is to address four main themes
• The drivers behind the proposal
• What the legislation requires of us all
• How we are seeking to achieve this
• Timetable for and activity up to implementation

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DRIVERS BEHIND TDP
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Drivers behind the proposal

• A well managed Private Rented Sector (PRS) is
  important Govt recognises role of landlords in
  providing people with affordable housing
• Deposit disputes seen as a historic problem
  which, if dealt with, should increase consumer
  confidence
• Voluntary pilot scheme set up. But used by small
  numbers and inconclusive
• Housing Bill provided opportunity to introduce
  amendments to bring in Government-run deposit
  schemes

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Aims

• To protect tenants deposits
• To enable disputes to be settled quickly and
  cheaply through the provision of alternative
  dispute resolution
• To raise standards in the Private Rented Sector
  by promoting good practice letting, including the
  use of inventories and condition surveys

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Landlords /Agents

• Minority of landlords unfairly withhold deposits
• Have listened to, and are acting on, landlords
  and others concerns, raised in responses to
  consultation document, about rent arrears
  abandonment.
• Penalties for non-compliance
• Prohibited use of s.21 grounds for possession if
  landlord not signed up to a scheme, when a
  deposit is taken
• Three times deposit amount payable to tenant if
  fail to comply by the time of a court hearing

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Tenants

• Many landlords will testify to problem tenants
• Part of the deal for their deposits being
  protected is that were looking to them to
  raise their standards
• In tenants interest to leave property in good
  condition
• More likely to get all their deposit back
• No reason to withhold their last months rent

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• THE LEGISLATION

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When Does TDP Come Into Effect?

• 6 April 2007
• Only deposits taken on or after 6 April 2007
  will need to be protected i.e. an agreement which
  is continuing on 6 April will not require the
  deposit to be placed in a scheme

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What does the Housing Act 2004 require?

• When a deposit is taken, it must be safeguarded
  by a statutory scheme
• Requirement to provide prescribed information
  to the tenant upon receipt of deposit and to the
  scheme

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HOW WE WILL ACHIEVE THIS
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How are we seeking to achieve this

• There will be two types of schemes
• Two insurance-based schemes, supported by an
  alternative dispute resolution (ADR) service
• A single custodial scheme, supported by an ADR
  service

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Insurance-based scheme

• Landlord or letting agent retains deposit
• Pays fee to scheme provider for insurance which
  covers any misappropriation of deposit
• At end of tenancy, if the landlord and tenant
  agree how the deposit should be divided, the
  landlord returns all or some of the deposit
• Act stipulates it must be paid back within 10
  days (ie 10 days from date both parties have
  agreed what should be paid back)

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Insurance scheme providers and fees

• The Tenancy Deposit Scheme Ltd running scheme
  catering primarily for letting agents, but open
  to landlords also
• Tenancy Deposit Solutions Ltd running scheme
  catering primarily for landlords, but open to
  letting agents also
• Fees are on their websites, the addresses of
  which are at the end of this presentation

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Insurance schemes disputes

• Landlord/letting agent must pass that part of
  the deposit which is disputed to the scheme to
  hold
• Amount in dispute released to tenant (and
  landlord, if appropriate) following decision of
  ADR service (or courts)
• ADR will be free to use by landlords/agents and
  tenants
• Scheme pays out to tenant irrespective of
  whether it has received deposit from landlord

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Custodial

• Landlord pays deposit into the scheme run by
  Deposit Protection Services
• All deposits held in central pot
• At end of tenancy, if no dispute, scheme
  releases deposit to tenant - with interest if
  tenant wants it
• Open to all and free to use by landlords/agents
  
• Paid back within 10 days of agreement between
  parties, as per insurance schemes

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Custodial Scheme disputes

• ADR service (or courts)
• Custodial scheme holds that part of deposit
  subject to dispute
• Remainder paid back to tenant
• Scheme releases relevant proportions of deposit
  to tenant and landlord on conclusion of ADR
• Interest will then be released to the tenant
  again, if they want to receive it

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Secondary legislation

• Consulted the industry in Nov 05. Listened to
  and acting on concerns
• Statutory instruments to be laid in Parliament
  and the National Assembly for Wales, to cover
• information requirements
• interest rate for custodial scheme
• rent arrears abandonment
• No prescribed inventory or condition survey,
  but very much best practice

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What about communications?

• Vital that all groups know about TDP when
  implemented in April 2007, therefore information
  campaign includes
• Bi-monthly meetings of TDP Advisory Group and
  communications sub-group.
• Information packs for landlords/tenants advisers
  and media, including FAQs, and leaflets
• Work with LACORS to spread the word amongst local
  authorities and LA workshops
• Journalist briefing schedule
• Roundtables with local and regional stakeholders

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Publicity Campaign

• Advertising campaign started 26 Feb, runs to
  May
• National Press, Regional Press, Trade Press,
  Foreign Traveller Press, Online and Radio.
• Posters and Leaflets are available to order
  free from the CLG website www.direct.gov.uk/tenan
  cydeposit
• Leaflets are available in 8 languages including
  English
• Radio Tour in April

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and finally

• We should now be familiar with
• The drivers behind the proposal and the timetable
  for delivery
• What the legislation requires and how it will be
  achieved
• How the tenancy deposit schemes will operate

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Support for TDP

• "The good landlords will welcome the scheme while
  the bad landlords will try and avoid it.  This is
  another element of efforts to raise standards and
  will protect good landlords and good tenants"
  (Lee Cecil, National Landlords Association,
  Wales)
• Good landlords do not support landlords who
  break the law. We all want to encourage best
  practice renting (NFRL)
• This reform will increase confidence right
  across the private rented sector (Citizens
  Advice)
• Any reputable agent will be fully aware of the
  practicalities of tenancy deposit once it is in
  place, and will be able to advise landlords on
  what to do. Agents will be able to take on most
  of the paperwork on behalf of the landlord so
  that there is no danger of them breaking the
  law.
• (Estate agent, Brighton).
• Getting back deposits from a minority of
  unscrupulous landlords puts tenants in a David
  and Goliath situation and often leaves them out
  of pocket. This scheme provides a vital safety
  net for both tenants and responsible landlords,
  which should ensure the rental system is fairer
  for everyone.
• (Shelter).

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Media comments on TDP

• The hope is that the state of renting in England
  and Wales will improve. Landlords will write
  better inventories. They will take photographs of
  the flat before the tenancy, so any damage done
  can be proved. Tenants will think twice before
  withholding the rent. Disputes will no longer
  clog up the small claims courts. Everyone will
  thank the government for a fantastic piece of
  legislation (Rosie Millard, The Sunday Times)
• Deposit scheme change allays landlord fears. The
  Government has agreed to change its tenancy
  deposit protection to allay private landlords'
  fears that they would be left out of pocket if
  left unable to contact their former tenants
• (Inside Housing)
• But-to-letters will breathe a sigh of relief to
  see that The Government has kept its word and
  simplified the formula of the Tenancy Deposit
  Scheme
• (The Daily Telegraph)
• Its already been welcomed by just about
  everybody involved
• (Inside Property London Tonight)
• One of the biggest bugbears of renting should
  get easier to resolve with the introduction of
  tenancy agreement deposit protection for all
  assured shorthold tenancy agreements
• (Jayne Atherton, Metro)

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More information

• www.tenancydeposit.gov.uk
• www.direct.gov.uk/tenancydeposit (from 24 Feb)
• phil.alker_at_communities.gsi.gov.uk
• Tel [phone]
• Scheme providers
• Custodial scheme
• The Deposit Protection Service
• www.depositprotection.com 0870 707 1707
• Insurance schemes
• Tenancy Deposit Solutions www.mydeposits.co.uk
• The Tenancy Deposit Scheme www.tds.gb.com 0845
  226 7837