Citizens Advice believes that the forthcoming Housing Bill provides the best opportunity to end the problems of tenancy deposits being unreasonably withheld by landlords and agents, by introducing a statutory Tenancy Deposit Scheme to protect deposits and resolve disputes.
Introduction
Over the last decade, disputes over the non-return of rental deposits have consistently been amongst the most common issues of concern reported by CABx about the private rented sector. Problems include:
- disputes over cleaning costs, or whether any deterioration is more than reasonable wear and tear,
- cases where the deposit is withheld at the end of the tenancy without any reason being given, or where cheques are issued and then stopped,
- cases where the landlord simply says he hasn’t got the money available or where agents cease trading and disappear.
The CAB Service finds it extraordinary that private tenants handing over sums averaging over £500 have such limited and inadequate redress against their landlords, whereas a consumer with a complaint about the way a bank handled a far smaller sum of money has available an extensive system of regulation and redress including automatic access to the Financial Ombudsman Service
Some recent examples are included at the end of this briefing.
The CAB Service has therefore been campaigning for statutory protection of tenancy deposits for a number of years. And since 1998 successive Housing Ministers have acknowledged that reform is needed.
- In 1998 Housing Minister Hilary Armstrong acknowledged in response to the CAB Service report Unsafe deposit that reform was needed but stated that “before embarking on legislation”, she wanted to see whether a solution could be achieved through a voluntary approach. So the pilot Tenancy Deposit Scheme was set up, administered by the Independent Housing Ombudsman, to protect rent deposits and resolve disputes.
- In 2002, Housing Minister Lord Falconer, in extending the pilot, again acknowledged the case for legislation, stating that the “slow take-up (of the voluntary scheme) makes a strong case for legislation on tenancy deposits”.
It is therefore frustrating that, despite the fact that the poor take up of the pilot showed clearly that a voluntary solution to this problem was not an option, there is still no clear timetable for putting a statutory scheme in place.
The case for including measures in the Housing Bill
The CAB Service believes that there is a very strong case for including measures in the forthcoming Housing Bill to finally tackle this problem, which results in serious financial detriment for tenants, and which damages the image of the private rented sector.
Firstly the Government’s own figures indicate that the sums involved and the potential level of abuse are significant, whilst the remedy could be self-financing from the interest on deposits held:
- some £790 million of rent deposit money is held by landlords with no regulation over how it is held and how it is returned;
- 1 in 5 private tenants considered that their landlords had retained too much of the deposit from their last tenancy
- up to £21 million is wrongfully withheld by landlords and agents.
- if deposits were held in a single custodial scheme for a year, it would raise some £31.6 million in interest (at Bank of England base rate), which would be more than sufficient to fund a scheme to protect deposits and resolve disputes.
Secondly the ODPM has already undertaken the necessary pre-legislative steps:
- A pilot scheme, which was developed by a steering group representing landlords, agents and tenants, has enabled a workable model to be developed. Although the evaluation was hampered by the slow take-up of the scheme, the ODPM Head of Housing Private Sector Division commented to the Select Committee that:
“It has been a very worthwhile pilot for us because it has proved that the principle of tenancy deposit protection through either of the two methods used - guarantee or the third party custodial approach - does work and it has also shown to us that a voluntary scheme is not going to work and pick up the problem landlords, which is what really ought to be tackled.”
- The ODPM has already consulted on options for reform, earlier this year. There were 98 responses to the consultation. The Government has not yet published the responses to the consultation, which closed on 28 February 2003. However an analysis by Shelter indicates that, of those respondents who were not directly involved in letting property and who may therefore currently be benefiting financially from the interest on the deposits they hold, the vast majority supported a legislative solution to the problem.
Thirdly there is widespread support both within and beyond Parliament for legislative measures on this issue. 171 MPs have signed EDM 843, which calls for a statutory Tenancy Deposit Scheme to be established. The ODPM Select Committee report on the draft Housing Bill recommended that such measures should be included in the Housing Bill. This approach is also supported by a wide range of bodies including Shelter, the Association of Residential Lettings Agents, the Consumers Association, the National Consumer Council, the Local Government Association and the National Union of Students.
Government reluctance
It is disappointing therefore that Ministers appear reluctant to include measures in the Housing Bill. They have argued that there is no room in the Bill to include these additional measures, and that in any event they would more appropriately be addressed in the Bill which will deal with the Law Commission’s forthcoming proposals on tenure reform.
In our view, neither of these reasons is compelling:
- The measures needed would only require a few clauses and would not add significantly to the length of the Housing Bill. Much of the detail of the scheme could be implemented through regulations, which could be based on the experience gained from the Tenancy Deposit Pilot. It is also noteworthy that in his evidence to the Select Committee, Peter Hain MP Leader of the House indicated that the Bill would not be jeopardised by the addition of recommendations made by the Select Committee to improve the Bill.
- The Housing Bill focuses on raising standards in the private rented sector and therefore is an appropriate place to tackle this issue. Moreover its timing is crucial in that it makes it possible to build on the momentum achieved by the pilot scheme which is currently winding down. Most importantly it provides the earliest opportunity to prevent yet more tenants from losing their deposit money unreasonably.
- The Law Commission Bill, in contrast, is not yet at draft stage, and it is unclear when parliamentary time will be available. Moreover its proposals are primarily about increasing simplicity and transparency rather than shifting the balance of interests between landlords and tenants and improving tenants’ rights. Nor would it appear that arguments of size would favour the Law Commission Bill as the vehicle: its consultation ran to two volumes, containing over 300 proposals.
Conclusion
The CAB Service believes the Government should act now to put in place measures to prevent any further abuse of tenants’ deposits. There is a compelling case for including measures in the Housing Bill to protect tenancy deposits and resolve disputes, by means of a fast and fair system in which both landlords and tenants can have confidence. This would do much to enhance the image of the private rented sector as one of professionalism and transparency, in which tenants are confident to rent and lenders are confident to invest.
Recent CAB cases
A CAB In Derbyshire reported a client whose daughter rented a property in London during her first year at university. At the end of the tenancy the landlady failed to return the deposit although she has never disputed the fact that it is owed.
A CAB in Essex reported a client whose student daughter rented a property with a friend. When she vacated and asked for the deposit of £300, she was met with a tirade of abuse from the landlord. She was subsequently sent a cheque, but it bounced.
A CAB in Surrey reported a student who shared a flat in London with two other students. When they left, the landlady withheld the rent deposit of £1213. When they queried this they were given a list of trivial reasons including the fact that they had left some old towels behind and had switched off the freezer which had resulted in a puddle on the floor. They cannot afford to spend further money pursuing the claim through the small claims court.
A CAB in East London reported a client who had left a property two months previously. The landlord had agreed to return the deposit of £1200 within three weeks of the client leaving. However since then he had heard nothing and the landlord refused to answer his calls.
A CAB in West London reported three friends who had rented a flat from an agent and paid a security deposit of £1600. An independent inventory was carried out at the beginning of the tenancy. When they vacated, the tenants employed a professional firm to clean the flat at a cost of £224. They also had an inventory carried out by another independent organisation, which showed the condition and contents were virtually the same as when the tenancy began. The agents however informed the tenants that they could not release the deposit without the agreement of the landlord. After 5 weeks the landlord sent a letter saying that he was withholding £250 for various repairs and redecorations. The tenant replied challenging this on the grounds that the items were either already mentioned in the check in inventory or not covered in the check out inventory. Since then there has been no response from the landlord. Nor has the undisputed £1350 been returned.
A CAB in Shropshire reported a tenant whose landlord withheld his deposit of £150 because of marks from blu-tack left on the walls.
|
