TRO Confidential : The case of the Tenancy Deposit rant

I asked TRO Ben Reeve Lewis if he could do a  tenancy deposit post, to fit in with this weeks theme, so he got out his soap box …

The case of the Tenancy Deposit rant

Explanation: Tenancy Relations Officers (TRO) work for local council’s providing advice on landlord tenant law and investigating allegations of harassment and Illegal Eviction and prosecuting landlords. All names are false but the stories are true.

Regular readers of TRO Confidential will know that I usually stick to one case, either bizarre, funny or just plain nasty. But this week, as Tessa is concentrating on deposits I thought I would explain both my encounters with deposit issues and my personal views on the process.

I work as a TRO attached to our Homelessness prevention team. It does what it says on the tin. The aim is to ‘Prevent Homelessness’…….at all costs, My role in this is to use housing law to prevent homelessness and one of the ways we do that is to look at whether or not a landlord has protected a tenant’s deposit.

A tenancy deposit prevent homelessness?

How does that prevent homelessness? Well if a landlord fails to protect it a tenant can take the landlord to court and apply for the return of the deposit (or at least a judge ordering its protection) and payment of a penalty of 3 times the amount of the deposit.

Put simply, a tenant pays £1,000 deposit, fail to protect it and the courts whack you for 4 grand. In homelessness prevention world a tenant can use that 4K as a deposit for a new property. So we have a pack, including court forms and we help the tenants to fill them in and make their application.

Also, if a landlord hasn’t protected the deposit they aren’t allowed to use what is called the ‘Ground only’ claim for possession, namely the accelerated procedure is closed to them until they comply with the law……….job done……homelessness prevented……welcome to the brave new world.

The problem with Tiensia

I’ll be honest with you, TROs and housing advisers got shot in the foot by the Tiensia and Fletcher cases where it was finally decided that as long as a landlord protects the deposit before the tenant’s case gets into court a landlord can avoid the penalty. The only piece of ammo we have left is that most landlords don’t know about these cases yet.

Good thing or bad thing??? I suppose it depends on whether you are a landlord or a tenant ………….. or more accurately, a homelessness prevention officer

The spiritual home of the psycho and the scammer

I post on a number of websites and I regularly get accused by readers of demonising landlords by simply re-telling my experiences on the front line. That is inevitable.

My job is to threaten legal action against landlords when they aren’t following the legal procedures and I operate in South East London, the spiritual home of the psycho and the scammer, so I am exceedingly busy But believe it or not, despite my depressingly frequent encounters with people who make Blackbeard look like Ghandi I am not actually anti-landlord at all.

Ignorance of the law is no excuse

The vast majority of cases I see where a landlord has failed to protect the tenancy deposit is because the landlord was unaware of the legislation. Everyday I advise perfectly nice people who have got themselves into a tricky situation because they just didn’t understand the law. That’s actually the bulk of my work.

When I explain the penalties for failing to protect the deposit to them they have an expression of horror and often correct the situation as soon as they can. This is because a high proportion of landlords are complete amateurs and simply aren’t aware of the laws governing renting.

Small is more

Today I attended a meeting whose subject was ‘How can we incentivise private landlords to work with us?”. One view that was discussed was that we should only concentrate on the landlords with the biggest portfolios and ignore the small landlords. The theory being, a landlord with 50 properties provides more properties for us and we only have to liaise with one person, whereas 50 landlords with only one property each are an administrative headache and therefore, to be avoided.

But in my experience it is the small landlords who provide the most properties overall that are in the most need of assistance. My heart breaks sometimes when I talk to lovely people just trying to get by in the world who are about to lose their house because the tenant, for a variety of reasons, lawful and otherwise, isn’t paying their rent.

An army of amateur landlords

Three years ago everyone was trumpeting buy to let mortgages……….and rightly so in my opinion coz we need ‘em,. The problem is, the scheme brought into play an army of new landlords who just aren’t aware of what rules and regulation govern their new income stream.

These new amateur landlords, like many others, got stuffed by the recession and were left managing properties that they didn’t have the first clue how to run. Deposit protection is a lawful requirement that was worded so badly that it left housing law professionals scratching their heads trying to figure it out, what chance did these people have????

Tenants on the take

Stacey comes in to see me, a student in a house share. She has two years left on her course and asks me about the deposit protection scheme that she has heard about through the accommodation officer at her university. We do a ring round of the three schemes available and find that her landlord hasn’t protected it. I advise her of the penalty and claim procedures. She is particularly interested to hear that pursuance of the non-protected amount is available for claim up to 6 years later.

She tells me that she really likes the house and thanks me for the information saying she will complete her two years and then do the landlord for failure to protect. In reality case law is leaning against what one judge called ‘Ambushing the landlord’ but the principle is there and I felt really uncomfortable about her decision and my role in it.

The penalty for non-protection is a regular, eye-brow raising bit of information for my tenants and the light of opportunism often replaces the look of righteousness indignation on their faces when they hear it. Is that the purpose of the legislation?

Conversely I often get calls from landlords asking my advice on how they can avoid deposit protection, which is equally depressing. I have no qualms about putting them straight.

How it all started

The law was brought in because a humungous proportion of tenants, 84% by one reckoning, were not getting their deposits back when they left. Too many private landlords treated a deposit as an extra financial stream when the truth is, for the entire period that a tenant occupies a property the deposit actually belongs to them, not the landlord.  If you are about to move into a new property you need your deposit to do so, a new landlord isn’t happy to wait for weeks for it to be sorted, they have a queue of new tenants lining up.

Ben comes out against the 3x

I am going to ruffle some feathers in the housing world by saying that I am generally not in favour of the 3 X penalty, just because, in my ‘Coal Face’ experience most deposits fail to get protected because of naiveté and genuine ignorance, not because of a deliberate intent to defraud.

I also see cases where the agent takes the deposit and doesn’t do anything other than keep it in their own bank account earning them interest, thus dropping an innocent landlord in deep s**t. Further evidence of the need to regulate accommodation agents who are supposed to be the professionals in the field.

Just this week I was involved in a case where a home-owner’s estranged husband agreed with the new tenant to just take £100 a month extra on the rent to cover the fact that she didn’t have 1 month’s rent up front. Trouble was he didn’t tell his soon to be ex wife and there was an agent involved in setting up the letting who took their set-up fee out of the deposit. Since the split she is sleeping with her child at a friends waiting for the whole eviction process to go through and has to face the issue of the deposit when the tenant leaves. An issue she didn’t create.

Not a scammer, just a nice person trying to get by having been dropped in it by her ex and her agent.

I think the block on the accelerated procedure for failing to protect a deposit is an appropriate enough legal response and I think the 3 x penalty should only apply for landlords who deliberately try to sidestep their responsibilities. The legal question is “how do you separate those people out from the naïve, amateurs?” I am not clever enough to figure that one out I’m afraid.

Ben Reeve-Lewis

About Ben Reeve-Lewis: Ben has worked in housing in one form or another since 1987. He has variously been a Homelessness caseworker, Head of Homelessness for a local authority, a TRO and Housing law trainer. He now divides his time between doing contract Tenancy Relations work and as a Freelance housing law training consultant for the CIH, Shelter, Sitra and many more. Read more about Ben here.