TDS – Five Mistakes To Avoid

This week we have some valuable advice on avoiding mistakes when using the TDS when trying to protect their tenants’ deposit, from Tom Derrett, a former arbitrator with one of the Tenancy Deposit Schemes (TDS).

Tom has a wealth of experience in housing and housing law. He now runs ADR Solution which provides landlords with professional assistance when dealing with the Deposit Protection Schemes Alternative Dispute Resolution (ADR) services.

The five biggest mistakes that landlords have made when protecting their deposits using the DPS are:

1, Not protecting the deposit within 14 days.

A failure to protect the deposit within two weeks of receiving the funds leaves landlords exposed to a risk of court action. Although the current view of the courts is that an initial failure to comply doesn’t attract liability provided the deposit is protected before a claim under the Housing Act is filed, landlords would be well advised to comply with the 14 day deadline as this interpretation is by no means universally accepted and is likely to be tested in the near future.

The penalty for failing to protect the deposit is fixed at three times the value of the deposit, to be paid to the tenant, plus the proper protection of the original deposit. If that isn’t reason enough to comply with the legislation, some deposit protection schemes won’t accept late deposits, and simply giving a false start date for the tenancy in order to register the deposit may invalidate any future claim if repayment of the deposit is disputed.

It is also worth noting that new and existing residential tenancies with an annual rent of between £25,000 and £100,000 will automatically become assured shorthold tenancies on 1st October 2010, meaning that the deposit protection legislation will apply. Landlords of high value tenancies should take note as the three times the value of the deposit penalty for non-compliance will apply to those tenancies fourteen days later.

2, Not protecting the whole deposit.

Some landlords have been known to try to avoid the deposit protection legislation by referring to the deposit by another name, disguising it as rent in advance, or other fees. The Housing Act 2004 defines the deposit as any money intended to be held as security for the performance of any obligations of the tenant, or the discharge of any liability of his arising under or in connection with the tenancy. A failure to protect all or part of the security deposit can leave landlords vulnerable to to court action, and may look very bad if the deposit is later disputed.

3, Not providing the tenant with the required information.

Landlords are under a legal duty to provide tenants and any other relevant person with information on the deposit protection scheme used, confirmation that the deposit is properly protected and further information on how the deposit protection legislation works, within two weeks of receiving the deposit. The scheme will be able to provide the landlord with the information they need to give the tenant, but it is their responsibility to make sure that the information is passed on.

Failure to comply with these legal niceties may lead to difficulties and delays should the landlord later wish to evict the tenant, so it is worth getting it right the first time.

4, Not checking whether the agent has protected the deposit.

The legislation is clear that it is the landlord’s responsibility to make sure that the deposit is properly protected. While many landlords contract with agents on a full management basis, they would do well to remember that a management agreement does not absolve them of liability. Under the laws of agency, the landlord is responsible the actions or inaction of his or her agent, bound by their promises and liable for their mistakes (within the limited terms of the agency agreement).

Most agents operate efficiently but there are exceptions to the rule and landlords would be well advised to check that their agents are doing their job properly. If the deposits are protected the agent will be able to provide a unique reference number for each deposit. If in doubt, landlords can confirm the reference number with the scheme.

5, Not updating your contact details with your deposit protection scheme.

A large percentage of disputed deposit claims fail because the party fails to respond within a given deadline. The deadlines are usually tight, often no more than a week or two, and cannot be extended retrospectively, no matter how good your reason for failing to comply was.

You never know, you could be abroad, in hospital, have moved house or changed your mobile number. If you don’t make sure that the deposit protection scheme has up to date contact details and an alternative means of contact, you could easily lose a deposit dispute without even knowing it has started.

Deposit protection should be a straightforward process, but inevitably there are disagreements about how much of the deposit should be returned to the tenant. The figures show that landlords lose in a disproportionately high number of the cases handled by the scheme’s dispute resolution departments, often because of basic misunderstanding of technical legal rules of evidence that could be easily resolved. ADR Solution offers a quick, efficient service to landlords and letting agents who are submitting claims to the deposit protection schemes.

For more information about ADR Solution and how they can help you and about their money back guarantee, visit www.adrsolution.co.uk or call Tom on 0845 519 4597.

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