Last year I reported that the Tenancy Deposit Scheme (TDS) run by the Dispute Service had announced that they were going to increase their fees. They have now announced what these are. Or rather they haven’t, because the fees information page tells us that all TDS members fees are going to be calculated individually now, and the implication is that those agents using the arbitration scheme to excess will have their fees hiked substantally.
The minimum fee has certainly had a bit of a hike, from £583 to £750, some 23%:
A third of the TDS membership has had their charges set at the new minimum. Only 12% of firms have been subject to any loading as a result of their high volumes of dispute referral. For those receiving a maximum discount, the average charge for a tenancy will be £10 or less.
Said John Hornsey, Chairman of The Dispute Service, the not-for-profit organisation responsible for the Tenancy Deposit Scheme: “Alarm bells rang last autumn but, in fact, they were set off by a small number of agents making disproportionate use of our ADR. Now we have evolved a much fairer charging system that takes full account of the way agents use the system, both in terms of the tenancies they protect and the disputes they prompt.”
To help members with the transition to the new arrangements, all new subscriptions for the year 2010/11 are being charged in two instalments. The second invoice, which will be issued in the summer, will take account of all changes to registered tenancies and any revision that can be made as a result of the numbers of disputes submitted.
Presumably after this, there will be fewer TDS agents taking a case to arbitration for disputes of £4.20.
My Deposits, in the meantime, smugly state that they are not increasing their fees at all. A press release on 22 December stated that prices would be frozen to 2009 levels, and a more recent press release on 19 January confirms this. My Deposits Chief Executive Eddie Hooker, stirs it further:
“Last year’s TDS decision to only accept ‘accredited’ agents was intended to reduce the risk and cost of protecting deposits. Their announcement yesterday of a hefty price increase suggests this approach is not working.
“Letting agents are likely to be frustrated as they can expect further price increases if they are unlucky enough to experience more disputes. This could be the first step along the road to charging for ADR.”
You can’t help wondering why it is that the (mostly for) agents service (TDS) is finding it so difficult to manage that they have limited their membership to accredited agents and are now skewing their fees so as to discourage arbitrations, whereas the (mostly for) landlords scheme (MyDeposits) seems to have no such problems. Could it be that landlords have been acting more responsibly?
What do you think?
Our firm is a licensed ARLA agent and a member of both TDS and Mydeposits.
We have just received our new membership charge with the TDS set at £750 – a 23% huge increase on what we are currently paying. We have not had any disputes referred to arbitration with TDS.
There is a widely held belief that the arbitration is strongly biased in favour of the tenant. In 2 years of trading we have been involved in just 1 dispute which was referred onto Mydeposits. The decision made, with no right to appeal the decision, was definitely biased in favour of the tenant.
Many of our Landlords have taken the loss themselves by not wishing to pursue the claim through to arbitration. As Agents, we have made several payment ourselves to rectify damages that tenants have caused. Commercially, it just isn’t worth me spending 4 hours collating the paperwork and evidence to go off to dispute, if the claim is only for £60 or so. But it just seems so unfaiir that my Landlord has to take the loss.
The legislation surrounding Deposit Protection is not fair, and is not working for Landlords and Agents.
I feel that because we are a member of a professional body, tenants are more likely to challenge any attempt to request a deduction from their deposit.
The reason that the arbitration decision was made unappealable when the regulations were being drafted was to provide a quick solution. However there do appear to be quite a number of cases where injustices are being done and the losing party feels aggrieved as they have no recource.
The prospect of an appeal to a Judge may also make incline an arbitrator who might otherwise be tempted to deal with things quickly and perhaps less thoroughly, take more care.
I would suggest that anyone who has any stories about geniuine injustices, to write to both the tenancy deposit company concerned and also to the Department Communities and Local Government. People can >> read more about this here.
We are a firm of Licensed ARLA agents & according to the information on the TDS invoice we have 1 dispute for every 187 tenancies – this very low dispute ratio is due to the hard work our management team put in but it didn’t stop TDS increasing our fees by over 1000% – then to cap it all the refuse to tell you how they have calculated this fee!!
There is an interesting article here which gives details of some of the very large increases in fees experienced by some agents.
My company are licensed ARLA agent and our new invoice shows circ 350 deposits registered, 3 disputes and the fee is going from £583.00 to £3400.00 This is just not acceptable or justified. In the current climate any business is extremley hard to come by and keeping your head above water is hard work then you get landed with a bill like this!!! It need to be looked at and changed….ARLA sit on the TDS panel and have also done NOTHING to help their members.
That is a massive increase. I agree it is not acceptable for only 3 disputes – the cost of dealing with these would hardly equate to £2,817! I suppose the only thing to do is use either My Deposits or the DPS.
Changing all registered deposits is also a huge administration cost caused by this situation.
All tenants and landlords would have to be notified in writting. Another audit would have to be conducted by a chartered accountant for ARLA as part of their membership rule, this costs £1000.00.
My deposits want £30 for every deposit registered with them, which from the offset will cost me £10,500.00 plus the membership fee.
Unfortunately I have had negative feedback from Landlords about TPS so I would not want to jepudise any potential business using a third party that is not favoured.
I can agree if TSD want to charge for disputes, this can be charged down to landlords and tenants. Even if they wish to charge an anual fee for each deposit logged but this has to be implemented not back dated!!
Thank you very much for your comments. It is illuminating for those of us who just write about these things, to see the practical implications of the changes that we write about.
For example I had not realised what a huge and expensive task it would be to change from TDS to MyDeposits.
I would be interested to know what feedback you have recieved on DPS – note that in particuarly unfair situations I am willing to publish details of individual cases on this blog.
Jonny, Please forgive me if I am stating the obvious, but as I understand it, ARLA are a trade association. So as a member of that association it is within your remit, and that of the other members, to call their elected representatives to account on this matter? However, the situation here is quite unique as a brief review of the background and chronology shows:
ARLA created this mess starting back in 2005/6 when its then President (R Jordan) & then CEO (Adrian Turner) orchestrated the allegiances with RICS & NAEA and in conjunction with its then insurance broker, John Hornsey (now Chair of TDS Ltd) and its then internal disputes guru, Lawrence Greenberg (ICE or Chief Executive of TDS Ltd – remember TDSRA), set out to obtain a license from ODPM to operate what became known as TDS Ltd. The original intention was to exclude the rest of the letting agent industry, to provide your trade association (ARLA) with complete control of the deposit holding sector of the letting industry. ARLA was a founding shareholder and director in TDS Ltd and until the merger with NAEA, had its own seat on the TDS Ltd Board. Under the NFoPP banner, according to the Jordan e mail 3/2/10 explaining the changes, Peter Bolton-King is one of the four directors. As such he formally represents ARLA and is legally responsible for the corporate governance, a responsibility which encompasses all aspects of the running of the business including the problem areas of finances and external communications. Robert Jordan is a fellow director of PB-K’s on the NFoPP board. So, save for the involvement of the Council, thankfully chaired by Martin Partington, the pretence that this is some kind of arms length arrangement over which ARLA / NFoPP has had no control is purely an illusion.
ARLA were involved with the pilot scheme funded by government, but curiously and despite my best endeavours, I could not obtain any statistical information from ODPM and neither could anyone else.
As for the increases, I am afraid that no one could ever comprehend the basis on which TDS Ltd justified their contributions. The number of disputes related to the volume included under the scheme was the only way this could be ‘underwritten’ as demonstrated by mydeposits. I am sorry to have to tell you that you have been very lucky for the past three years.
On the positive front DPS is free – why pay anything?
Just as background, I advised the ODPM’s TDP procurement consultants on the insurance related aspects, and orchestrated a competing bid which was sadly withdrawn.
Jonny, last comment – apparently your (ARLA’s) AGM is being held at Hammersmith on the 2nd March. The ideal time to exercise your democratic freedom?
My letting agency is a NALS member. Our TDS fee last year was £818. It has been increased to £3206 based on 274 tenancies and 1 registered dispute according to our invoice. Our property management team work extremely hard to resolve any disputes and the one mentioned above was submitted by a tenant for a £150 cleaning bill, whilst knowing that she didn’t have a leg to stand on due to our highly detailed inventory and checkout reports, she said she had “nothing to lose”. She did lose, but it seems we were the losers as it is the only thing we can attribute to our massive hike in TDS fee. Whilst I agree that paying off our landlord/tenant disputed amounts is the way forward to prevent cases going to dispute wherever possible, if our tenants got wind of the fact we will pay over any amount they dispute, we are going to be at an even greater loss.
That is a very good point. If tenants get wind of this they are highly liikley to ‘try it on’.
In view of this massive hike in fees are you likley to stay with TDS or are you thinking of moving to one of the others?
We are very tempted to, but according to DPS they are unable to accept bulk uploads so there would be considerable admin costs in transferring all our tenancies to them. Not to mention the amendment to the contracts of all our current tenancies (now over 300) to change over the Prescribed Information, which would have to be signed by all the tenants to make it legal, along with the distribution of new registration certificates.
There is obviously the factor of interest we receive on our client account to consider, not knowing what rates will amount to over the coming year, and the fee income we receive from landlords for registering their deposits.
TDS have been unable to tell me what our new fee is based on, considering they state that agents who have made little or no use of the Scheme have received little or no increase in fee – this doesn’t seem to correlate with our 292% increase for 1 dispute! All these factors have made it a very complicated decision to make.
And what about the disputes between “Let Only” landlords and tenants? Those landlords who don’t manage their tenancies properly, provide poor (if any) inventory and checkout reports, and are more than happy to take the tenant to Dispute for £25 which, because we haven’t handled the end of tenancy arrangements, we won’t know about and have no control over.
It is ironic that the Tenancy Deposit Schemes were set up to protect tenants, but in doing so have created new victims – letting agents!
I suppose there is always the option of a gradual change over. DPS is of course the cheapest option (leaving aside the interest on client account money), however one of the commentators above indicated that he had had bad feedback from landlords.
It would be intersting to know what sort of feedback that was.
Not that this gives any comfort but a) conventional wisdom seems to suggest that interest rates are unlikely to increase dramatically in the near future and b) from the information available in the public domain the financial integrity of TDS Ltd and thus its ability to deliver the service during the next 12 months is increasingly under question. (see Robert Jordan comment ARLA conference last week)
The fact that there is no transparency as to the TDS Ltd fee calculations, arbitrary loadings of 20% (£15 – £18) in cost to NALS and Law Society participants, who incidentally, are known to have better CMP arrangements in place than the ‘shareholders’ (ARLA, RICS & NAEA), makes this a scheme to avoid at all costs I would suggest? i.e. take the hit in the short term.
Just to update Natalie’s post, the DPS does now offer bulk uploads – if you email the scheme we will send you the template. It’s very straightforward, you just download your tenancies into the template and send it back to us with your DPS Agent ID and we will upload the data into your account. Once you have transferred the cash all deposits will become active and deposit confirmations will be emailed to all parties – so there will be no gap in protection.
Thank you very much, everyone who has posted here. I have done a new post, based in part on the comments here, which you can read via >>this link.
I am therefore closing this thread to comments now. Anyone wishing to make a comment should not go to the new post done on 5 April 2010.