Landlords Hold £500M Deposits Illegally
by Peter Rolph, 16 February 2016
According to research by the Centre for Economics and Business Research more than half a billion pounds of tenants’ money may be at risk because one landlord in six does not use official deposit protection schemes.
News coverage of the research which was commissioned by money.co.uk, said that hundreds of thousands of landlords are ignoring the law, leaving their tenants at risk of losing deposit money when they move.
Simone Ritchie, Senior Associate at Steele Raymond solicitors on the Dispute Resolution Team, commented: “It is disappointing that despite the legislative framework in place to try and protect all parties involved, we are still hearing of stories like this.
“The headline however only gives one view of a bigger problem - as we also see landlords seeking advice about releasing deposits to offset non-payment of rent if a tenant disappears or damages the rented property. More often than not, any monies held in deposits only go some way towards covering landlords’ losses. The cost of enforcement action to recover arrears are disproportionate and often excessive due to increased court fees and the chances of successful recovery leading to landlords often not pursuing legitimately owed sums.
“If a landlord wants to issue possession proceedings then in most circumstances they will need to have placed the deposit in a protected scheme before being able to serve the notice to quit to the tenant. Further, a failure to comply by the landlords also runs the risk of penalties being awarded by the courts to the tenant, which they are increasingly willing to do.
“Protecting a deposit is becoming synonymous with the granting of a new tenancy and letting agents are generally very good at ensuring compliance. However, if a property is not let through a reputable company, this is where problems often arise. Both the tenant and landlord should therefore think carefully about how they either advertise their property or where they look to rent a property from. A compulsory letting register can assist, however it won’t be able to resolve all the problems, especially whilst the court process isn’t designed for dealing with these forms of disputes in a cost-effective and proportionate manner.”
Peter Rolph is the head of dispute resolution team and managing Partner, specialising in property disputes and litigation. For more information, or to arrange a meeting, please contact Peter on 01202 204535.