Almost one in three tenancy deposits that are protected by an insurance-backed scheme are used by agents or landlords for their own cash flow purposes.
The claim has come from campaigning group Generation Rent.
It says that it is “not the case that deposits are always fully protected”.
It goes on to say: “It is thought that 30% of ‘insured’ deposits in England have actually been used for cash flow purposes by the landlord or agent holding them, despite deposit protection audits.”
The group wants a wholesale reform of the system, saying: “Schemes should be designed to be low-cost and convenient for renters, and should not allow landlords or agents to benefit from money that is not their own”.
Generation Rent is calling for insurance-backed tenancy deposit schemes to be banned completely in favour of a wholly custodial scheme, and also for tenants to receive interest on their deposits.
In a new consultation paper, the group proposes: “Tenants should receive interest on their deposit. Effectively this would mean breaking the links deposit protection schemes currently have with insurance companies and replacing them with links to retail banks.”
The paper also proposes that tenants, and not landlords or agents, should be able to choose the deposit scheme.
It also wants there to be, in the event of a dispute, “a clear presumption in favour of the tenant, with the landlord having an absolute obligation to provide proof if they are planning to deduct all or part of a tenant’s deposit”.
In another proposal likely to prove controversial, it wants to ban agents and landlords from charging tenants for inventory check-ins and check-outs.
However, if this ban is not implemented, it wants tenants to be able to choose the inventory company, saying there is “significant” evidence that agencies and landlords are earning additional revenue from inventory firms.
The paper is calling for comments by August 18.
Comments (7)
H'mm don't the banks do this with your money?
All well intended but really naive in the extreme. There is a significant difference between the 'insured' schemes anyway – Mydeposits at one end of the scale and DPS at the other. One fails safe protecting the tenant and ultimately the landlord as it only deals with 'regulated' letting agents with CMP – the other doesn't. Answers on a postcard:)
No problem with deposits being in a custodial scheme since I know of at least one agent and more than one landlord that use deposit money rather than ring-fence it. As for getting interest, do GR know how low interest rates are? It would cost more to calculate than tenants would actually be paid, but then we must make sure that all tenants are wrapped in cotton wool to protect them from the cruel world of "greedy" landlords and "rogue" agents.
Then we come to the cost of check in and out. We have the landlord and tenant pay 50% each to reinforce the independence of the AIIC Inventory clerk. We don't do in-house inventories and I don't know of any agents marking up the cost of the inventory/check out.
There is already, “a clear presumption in favour of the tenant, with the landlord having an absolute obligation to provide proof if they are planning to deduct all or part of a tenant’s deposit”. Perhaps GR should try being landlords rather than presuming "all tenants good, all landlords bad" in a bad parody of Animal Farm!
"It also wants there to be, in the event of a dispute, “a clear presumption in favour of the tenant, with the landlord having an absolute obligation to provide proof if they are planning to deduct all or part of a tenant’s deposit”.
How much do these people know about the schemes? If they had any idea they would know that the system is weighted heavily in favour of the tenant, with the onus on the landlord to prove and sometimes go beyond simple proof in order to take money. I have had a tenant dispute that they had left a dilapidated table and chairs in the garden, my photo of said item wasnt enough as they claimed a neighbour had been gifted it. As I personally removed/disposed of it this was a very strange claim, nethertheless the tenants side was accepted by the adjudicator. This is one small example. Another area of contention is 'smells', try proving to the schemes someone has left pet smells.
For 'it is thought one-third of landlords or agents are using tenants deposits to fund cashflow' read 'Uninformed inflammatory guess'.
When did we start becoming a branch of social services? The market is too tenant orientated as it is
I can see where all this is coming from, but I resent yet another proposal of the 'easy option' whereby all agents and landlords – and let's remember that the vast majority are not rogue – get treated as if they are low-life ****.
Why not work with the industry and lobby Government to enforce the many regulations already in place? A bit of licensing wouldn't go amiss either.