Tenancy Deposit Scheme Failing?

02 October 2009, filed under Tenancy Agreements

To protect tenants the government introduced the tenancy deposit scheme. Landlords and letting agents have to belong to a deposit scheme, but there is a choice. Landlords and letting agents can decide which type of account they wish to have. A full guide to the Tencancy Deposit Scheme is available in our Law Library. The downside to the Scheme is that things are changing in the programme and for the worse. Letting agents who are part of the tenancy deposit scheme will find an increase in costs. This year alone, letting agents will be facing a 42% increase in their costs.

With this announcement came information regarding why the government backed scheme had to increase its costs. According to Lawrence Greenburg, the costs are rising due to increased disputes regarding the deposits. Greenburg stated the more disputes they get the more they have to charge for the services, and it has taken many months to resolve the disputes. There is a backlog of deposit disputes based on the sheer number that are being seen.

A major downside to the entire programme affects the landlords rather than the tenants. Landlords who must make repairs based on damage from the tenants have to wait for the deposit to be released. Due to this situation they have no deposit money to make the repairs in order to get their place ready to re-let. So, they not only have to find a new tenant to continue their income source, they also have to find the money out of their pocket to repair damages. For tenants who deserve their deposit back it can also be an aggravating experience if the landlord wants to dispute it.

The government backed deposit scheme was started in order to stop the 30 percent of landlords who do not register a deposit. As with most programmes those being affected are the individuals following the regulations, which is 70 percent of the landlords in the UK. It could be that the deposit scheme will also see a registration or administrative fee to get it set up and to take care of the dispute process.

Already the landlord is charged for setting up the tenancy deposit scheme service they choose. Landlords own part of the deposit and the insurance or Tenancy Solutions company own the other part. Tenancy Deposit Solutions Ltd recorded £1.6 million in assets regarding the scheme for 2008. If the landlord does not enter into the deposit scheme they can be liable for three times the deposit amount, so it makes sense to set it up despite the fees.