Tenancy deposit disputes
This page describes the three approved tenancy deposit protection schemes, which are compulsory from 6th April 2007. Each scheme offers an independent ADR service which is free to tenants and which adjudicates on disputes about tenancy deposits at the end of a tenancy.
Further information is given below on:
What the schemes do
Advantages and disadvantages
Which complaints are eligible and which are not?
Cost
Outcomes
The Deposit Protection Service
Tenancy Deposit Solutions
The Tenancy Deposit Scheme
What the schemes do
On 6th April 2007 it became compulsory for all landlords and letting agents who take tenancy deposits to protect the deposit through one of the three approved tenancy deposit protection schemes. If a landlord has not placed a tenancy deposit in one of the schemes within 14 days of receiving it, s/he can be liable to pay the tenant three times the deposit in compensation. This was upheld in a case in Birmingham County Court in November 2008 (and has since been upheld in a number of county court judgments). The landlord only paid the £500 tenancy deposit into a protection scheme after beginning possession proceedings. The judge held that the court had no discretion to ignore this penalty, and required the landlord to pay the tenant £1,500.
Each scheme operates slightly differently, but all of them offer an independent ADR process for resolving disputes about deposits at the end of a tenancy. In each case, the ADR offered is a form of adjudication, where an independent adjudicator makes a decision about the case based on written evidence from each party. Note that the schemes only apply to new deposits after April 6th 2007.
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Advantages
- The schemes are free to tenants
- They ensure that an impartial decision is made one way or the other
- They are quick - disputes are nearly always resolved in less than a month
- They give access to an independent adjudicator
- There is provision to resolve a claim from either the landlord or the tenant if the other party is absent or unco-operative
- Once the dispute is decided by the adjudicator, the schemes ensure that the deposit is paid
Disadvantages
- It is the responsibility of the landlord, the agent and the parties concerned to provide all the relevant information - the adjudicator will not investigate the problem
- The decision is binding on both parties, so if you are not happy with the decision you can't then take the dispute to court
- If there is a dispute, the agreement of both landlord and tenant is needed to use the adjudication scheme. If one refuses, then the case has to go to the small claims court
- Although the schemes are free to tenants, they have to be paid for somehow. One is funded by the interest on the deposits which are held by the scheme, and the other two by landlord membership fees. This cost may well be passed on to tenants in higher rents,
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Which complaints are eligible and which are not?
Any dispute about the return of a tenancy deposit is eligible, providing that the tenancy began after 6th April 2007. All landlords and letting agents who take tenancy deposits are required to be members of one of these three schemes.
If your tenancy started before April 2007 but has been renewed since then, your deposit might be protected, but you will need to get advice on this.
Currently, disputes are referred to these schemes in fewer than 2% of tenancies. If you're not happy with the way your landlord or agent deals with your deposit at the end of the tenancy, make sure you find out which scheme covers you, and make a complaint! You have nothing to lose.
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Cost
Dispute resolution is free, but landlords and agents may seek to recover their costs of membership from tenants through higher rents.
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Outcomes
As these schemes are so new, there is no statistical information about outcomes yet. All three schemes publish case studies giving examples of the disputes they have dealt with, and the way in which they were resolved. There are links to the three websites at the bottom of this page.
The majority of the cases published involve a careful, proportionate split of the tenancy deposit to reflect the cost of repairing any damage caused during a tenancy. It is unusual for the whole deposit to be either retained by the landlord, or returned to the tenant.
To get an idea of the way in which these schemes work, have a look at Ahmed’s story on this site.
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The Deposit Protection Service
The only 'custodial' scheme is run by the Deposit Protection Service (DPS), set up by a company which has run a similar scheme in Australia for 8 years. The adjudication service is provided by the Chartered Institute of Arbitrators (CIArb), though their IDRS dispute resolution service.
A custodial scheme is funded by the interest from the tenancy deposits, which are held by the DPS rather than by the landlord. This means that there are no fees for landlords or letting agents.
If there is a dispute about the return of the deposit at the end of the tenancy, the scheme will continue to hold the money until the adjudicator or a court makes a decision. The scheme will appoint an independent adjudicator through IDRS to decide on the merits of the argument. Both landlord and tenant have to agree to use the scheme, as the adjudicator's decision is binding. If one party says no, then a dispute can be taken to court. However, there is also a 'single claim process', which means that the scheme can step in where the contact details of either the landlord or the tenant are unknown, or where one party refuses to respond to letters and other attempts to resolve the dispute.
Either the tenant or the landlord can refer a dispute to the scheme. A decision should be made within 28 days, and the DPS will then take responsibility for repaying the deposit according to the decision.
More information on The Deposit Protection Service website.
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There are also two insurance-based schemes, which do not hold the tenancy deposits themselves, but charge a fee to landlords and letting agents. The fee pays for an insurance policy, which will guarantee to pay out deposits once a dispute is resolved.
mydeposits
mydeposits is a partnership between the National Landlords Association and Hamilton Fraser Insurance. The adjudication service is provided by the Chartered Institute of Arbitrators (CIArb), though their IDRS dispute resolution service.
If there is a dispute about the return of the deposit at the end of the tenancy, the tenant can choose to use the free arbitration scheme. The disputed amount is lodged with mydeposits while the dispute is resolved by an independent adjudicator appointed through IDRS. The adjudicator will look at the evidence from both sides and make a ruling within 28 days. The scheme will distribute the deposit in accordance with the adjudicator's decision, which is binding on both parties. The tenant has the option of going to court if they prefer.
If the landlord refuses to lodge the disputed deposit with the scheme, then the tenant can't use the free ADR scheme, and will have to go to court to get an order. However, the scheme guarantees to pay the amount in the court order, and will take responsibility for recovering this amount from the landlord. This is the advantage over simply going to court - the scheme will ensure compliance with any court order.
More information on the mydeposits website.
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The Tenancy Deposit Scheme
The Tenancy Deposit Scheme (TDS) is run by The Dispute Service, and builds on a voluntary scheme established in 2003 to provide dispute resolution and complaints handling for letting agents. Decisions are overseen by the scheme's own Independent Complaints Examiner (ICE). He has a team of adjudicators who deal with the disputes.
If there is a dispute about the deposit at the end of the tenancy, the landlord or agent has ten working days to try to resolve it. If this is not possible, then the tenant, the landlord or the agent can refer the dispute to the TDS. The landlord or the agent, whichever is holding the deposit, will transfer it to the TDS, and the TDS will take responsibility for paying it out, as decided by the ICE. If the deposit is not transferred, then the TDS will pay the tenant whatever is decided, and pursue the landlord or agent for the money.
To start with, the TDS staff will attempt to negotiate an agreement between the two sides. If this isn't possible, an adjudicator will look at all the written evidence, which can include photos and videos. The adjudicator will not investigate the case further, so you need to make sure that you send in all the evidence needed to make your case. A decision should be made, and the money paid out, within 40 working days from when you first contact the TDS.
More information on The Dispute Service website.
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You can get advice on tenancy deposits at Shelter.
September 2009
