Deposit protection regulations for England and Wales came into effect back in 2007. It was introduced for two reasons: to stop dodgy landlords from finding excuses to withhold deposits without good reason, and to keep disputes about deposits out of the courtroom.
You can’t please everyone, especially where property management is concerned, and deposit protection schemes started attracting a little bit of criticism. Among the complaints were that, whilst deposit schemes gave tenants the option to get their money back if it was unfairly withheld, landlords had to do a bit of extra work for no additional protection. This was highlighted when a London lettings agent went into liquidation and most of its £70,000 worth of ‘protected’ deposits vanished – meaning landlords had to reimburse tenants out of their own pocket.
Another problem was that, if a deposit scheme’s dispute service was used, the decision was binding. If either the landlord or the tenant was unhappy with how things panned out, there was no going to the courts to challenge it and no appeals process. Landlords could potentially find themselves unable to claim the deposit even if the tenants left early, were in arrears or had caused damage.
Such anecdotes seemed to be quite rare, though even one such story can be pretty damning. However, figures released by the Department for Communities and Local Government (DCLG) show that the schemes hold up well under scrutiny.
A total of 10,657 complaints have been to deposit protection providers across the three schemes that currently operate in England and Wales – that’s 1,800 a year. With over 7 million deposits protected since 2007, only one in every 662 has attracted a complaint about the service.
Furthermore, only 1.3% (one in every 77) of the deposits has actually needed any formal dispute resolution, meaning a cheerful 6.96 million were returned without any drama. With the value of the deposits protected last year alone amounting to £2.6 billion, it’s good to know that the process usually goes smoothly.
That’s not to say it’s all good, and a cynical fellow like myself might read a little more between the lines. Assuming that most of the complaints were made in respect of a resolved dispute (which is pretty reasonable), you could infer that roughly one in every nine disputes resulted in a complaint. This could mean that the sort of situation I mentioned above happens quite frequently – or it could just mean that people don’t like it when decisions don’t go their way (and for every resolved dispute, there’s at least one of those!).
The real figure here though, I feel, is the 99% of deposits that get returned without incident. Without meaningful data from before the introduction of deposit protection schemes, we won’t know if matters have improved – but it seems a safe bet that they have. Despite the red tape, it seems that deposit protection legislation is improving the relationship between landlords, agents and tenants, or at least encouraging them to meet one another halfway. I think that’s a good thing.
Click here for more information about deposit protection schemes.