Repayment of Deposits

Landlords who have been taking a tenants deposit will be aware that since April 2007 if they take a tenancy deposit then they will have to register the tenancy deposit with one of the government approved schemes.
The most popular is the custodial scheme operated by the Deposit Protection Service (DPS).

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Their latest figures show that since launch 640,000 deposits have been protected by the Deposit Protection Service relating to some £480 million in tenancy deposits.

Given the popularity of the scheme Property Hawk has decided to look at how a landlord should go about getting the tenant’s deposit back at the end of a tenancy and some of the potential problems a landlord may encounter.

Starting the process

Landlords who have deposited the rental deposit with the DPS will have already had a login name and password as a result of the registration process. They need to begin by logging on to their account. They can then initiate the process of the return of the tenant’s deposit by selecting ‘Request a Payment’.

By this stage the landlord should have already decided whether they are going to withhold any of the deposit. Remember when assessing the amount of the deposit to withhold a landlord will need to make an allowance for fair wear and tear.

A landlord should have completed a thorough ‘check out’ with the tenant and have a ‘check out’ statement completed which will be used to confirm the state of the rental property at the stage that the tenant is about to move out.

Procedure for tenancy deposit to be returned.

Having requested the return of the rental deposit the Deposit Protection Scheme will contact the tenant either by post or by email (where an email address is available). This notification will advise the tenant of the landlord’s request and will ask the tenant to go online or to fill a paper form to indicate their agreement or disagreement. This notification is only sent on one occasion and it may be worthwhile for you as the landlord to also contact the tenant to advise them of the pending claim, so not to incur any delay. It is also possible for the tenant to initiate the repayment in which case the landlord will be contacted instead.

Repayment of the tenant’s deposit should be fairly straight forward where both parties agree, with repayment made within 10 days of initiation of the process. The speed that the landlord, tenant or letting agent receives the money will depend on what method they elects to receive the money, whether cheque or direct transfer into their bank account.

If there is a disagreement with the tenant and you the landlord have sought a judgment in the county courts against your tenant and you intend that the deposit held by The DPS be paid to you in satisfaction of the judgment, it is required that you as the landlord ensure that the final Court Order includes a term which refers to the deposit, or the scheme administrator holding the deposit and a direction as to how much of the deposit/all of the deposit is to be released directly from the scheme administrator to the successful Claimant.

In the event that neither the Claim Form or the Final court order refer to The Deposit Protection Service or the deposit the Claimant may apply to the Court for either an amendment to the Final Order or a Third Party Debt Order which could direct the DPS to pay part or all of the deposit to Claimant. Alternatively, the Claimant may follow the Single Claims procedure (set out below).

SOME COMMON PROBLEMS:

The tenant disappears or does not respond

Where the other party such as the tenant has disappeared in this case it is still possible for a landlord to make what is called a single party claim. This involves a landlord having to make a statutory declaration. This can only be done at least 14 days after the tenancy has ended.

The Single Claim Process is a method of repayment for use if:-

1. the agent/landlord has no current address for the tenant
2. the tenant fails to respond to the agent/landlord’s written notice requiring that the agent/landlord be paid some or all of the deposit within 14 calendar days of the end of the tenancy
3. the tenant has no current address for the agent/landlord
4. The agent/landlord fails to respond to the tenant’s written notice asking whether the agent/landlord accepts that the tenant should be paid some or all of the deposit within 14 calendar days of the end of the tenancy.

If The Deposit Protection Service receives a Statutory Declaration Notice disputing part or the entire amount claimed by the Single Claim during 14 days of statutory notice, the DPS will write to both parties notifying them of the dispute, and requesting that all additional evidence be submitted before the case is referred to the Adjudicator. The dispute will be referred to The Deposit Protection Service’s Alternative Dispute Resolution (ADR) service, unless either party indicates that they do not wish to use The ADR service or notifies The Deposit Protection Service in writing of their intention to resolve the dispute using the county courts, or another dispute resolution service.

There is a disagreement between the parties over the repayment of the deposit.
Where there is a disagreement between the tenant and the landlord then if both of the parties agree, then they can elect to use the Alternative Dispute Resolution (ADR) procedure. If both parties don’t agree then the tenancy deposit will only be released if the Deposit Protection Service receives a Court Order or agreement is received from both parties indicating a resolution of the tenancy deposit dispute.

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The start of the dispute process begins with the notification of a dispute to the Deposit Protection Service via a duly completed Joint Deposit Repayment Form. The DPS will issue an Agent/Landlord’s Evidence Form to the agent/landlord. This Form must be fully and properly completed and returned to the Tenancy Deposit Service within 14 calendar days of it being issued. On receipt of this form, the TDS will summarise the evidence and send the summary to the tenant with a blank Tenant’s Evidence Form. This Form must be fully and properly completed and returned to the Tenancy Deposit Service with 14 calendar days of it being issued. If there is a lead tenant, they must complete the Tenant’s Evidence Form on behalf of all tenants.

Finally the Deposit Protection Service will provide the agent/landlord with a summary of the tenant’s evidence and allow the agent/landlord seven calendar days from the issue of the summary of the Tenant’s Evidence Form to either accept or disagree with the contents of it and to submit any additional evidence which they wish to be taken into account. If the Deposit Protection Service does not receive a response from the agent/landlord within seven calendar days, the dispute will be referred to the adjudicator. If either party wishes to have copies of the other party’s evidence, a written request must be made to The DPS.

The dispute relates to only part of the tenancy deposit.

It is likely that if there is a dispute between the landlord and the tenant then it will only relate to part of the tenancy deposit. In such cases not all the tenancy deposit is withheld by the Deposit Protection Service. If it is agreed by both parties then even when part of the tenancy deposit is in dispute the undisputed amount will be released within 10 days of notification of the DPS.

The letting agent has paid the money in, but refuses to get involved.

A common problem with the deposit process is where the letting agent protects the deposit initially but has entered into a let only agency agreement with the landlord. In these situations responsibilities often become blurred as to what the responsibilities of the landlord and their letting agent is in dealing with the return of the tenant’s deposit. The starting point for any confusion on this point should be the exact terms and obligations of the agency agreement between the landlord and their letting agent. This is one of the reasons why a properly drafted agreement should be insisted on by the landlord when appointing a letting agent. If the letting agent has submitted the deposit but refuses to act then also see the single party claim process above.

Have you had any bad experiences in getting the tenancy deposit back? Share your experiences by posting a comment here.

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Dear PH – Thank you for the latest news on the property front

When the Tenancy deposit came into force I gave the whole thing a lot of thought and I came to the conclusion that it looks great on paper but I could see a lot of problems if all doesn’t go well.I now never take deposits what’s a months rent worth if you have a bad tenant £500 goes nowhere to cover the cost of damage ect ect
I took the route of third party Guarantors and very strong vetting and references I personally do home visits to the potential Tenants address and a home visit to the guarantors address when possible
I find taking time on finding tenants pays great dividends in the long run
I have never had to take a Guarantor to court yet but have used them when I have has arrears
It works very well and a lot more powerful than a deposit
I only wish some agent would come up with the same sort of thing as a credit card in the same way that when you rent a car they have your credit card details
I think this sort of arrangement would be great if it was legal and available
Thanks again – Dyslexic Landlord

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Hi – You wished to know about any bad experiences with the tenancy deposit scheme. I am a landlord which used an agent that recently went bust. My tenant is in his eighties and had not receicved any notification of where his deposit had been put even though the agent assured me that he had placed the deposit in a scheme. I was foolish enough to believe the agent without getting the details for myself at the time. Now the agent has done a runner, and none of the schemes have any details on file for my tenant. The tenant is in no fit state to pursue the agent through the courts and so I am going to put in a new deposit out of my own money for the tenant. Although I am considering just giving him the money back and not taking any deposit at all.

I understand the reasons for the scheme but it has been nothing but a major hassle and worry for me and my tenant. The agent has blatantly used it as a device to extract money illegally from the owners and is now in hiding and uncontactable. The police will not touch the case saying that it is a civil matter. – Best regards Jayne

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Landlords beware!!!

Burlingtons have been letting a property for me for the past 7 years, since the law came in they have put the deposit in a scheme with my deposits to protect it. The company have now disappeared from the face of the earth and although to my knowledge and that of the tenants as it says in the contract that it is protected Burlingtons kept the money and it although so called protected, I as the Landlord I am responsible for the return of the deposit. So now I have no deposit to cover any damages that the tenant may cause, and further more I legally obliged to find over £1000.00 that Burlingtons took to give to the tenants!!! So much for the law…always trying to protect the tenant and now neither the tenant or myself have been protected. My deposits will not pay out, although they were paid to so call protect the deposit!!! I personally suggest that all Landlords keep the deposits themselves and pay for protection at least then you know the money is safe, or ensure your agent is using a ‘custodial scheme’ in case the agent go bust or run off with the tenants deposits.