Here is a question to the blog clinic from Alice (not her real name) who is a landlord.
I live in Australia and the DPS is refusing to return the deposit to us because the tenant who refused to use the ADR process informed them she was initiating court proceedings. This was 12 months ago, which was 12 months of trying to negotiate with a tenant who would not communicate with either us or our solicitor.
Under their terms & conditions if the tenant had not provided evidence of serving court proceedings within six months and had refused to use the ADR service, we were entitled to request the deposits return. The tenancy ended in 2013 and we have tried to no avail to either deal with the tenant or the DPS.
The tenant left the house needing a good clean and as it was professionally cleaned before she took the tenancy, it was made clear to her on taking the house that this would be required when she left. However, she moved in her boyfriend who was bankrupt and had convictions for fraud which was contrary to what we were told i.e. her ‘husband’ worked in Spain and would only be visiting and would not need a reference check. My agent failed us badly and we later found out they were known to the agent who took the view if they paid the rent who cares.
After the six months we refused to renew the tenancy and on leaving we discovered that she had removed an integral bed head in the master bedroom causing damage to the walls and ceilings which had to be repaired. We did not give her permission to do this. On top of this, she refused to let tradesmen into the property to carry out repairs and accused one of making advances so he wouldn’t go back at all. All in all I lost well over the deposit with one tradesmen disappearing with the 2.5K I sent to have the bargeboards repaired which she wouldn’t let him do.
I could go on all day but subsequent to her leaving, she left no address, refused to contact my solicitor with regards to the repayment of the deposit (in the end I asked solely for the cleaning costs of 450GBP) but above all refused the ADR process.
2 years on I am still trying to get the deposit repaid as I now feel with solicitors costs it should be released 100% to us, though I would still be willing to negotiate. The DPS will not let us have it, it keeps quoting its terms & conditions and every six months goes back to the tenant to see if she has instigated proceedings, she tells them yes and here we go again, having to wait a further six months, when it clearly states that after six months if nothing is heard, then the deposit should be paid out.
How can you win in a situation like this. I understand the tenant has six years in which to claim a deposit – I appear to have no rights at all and I am the one out of pocket.
Answer
This is of course why many landlords are unhappy about using the DPS custodial scheme to protect deposits.
Looking at the terms and conditions however, there is a single payment process where, if you are unable to contact the tenants, you make a statutory declaration before a solicitor (or in Australia it would be some other official) after which the DPS are obliged to deal with the matter.
You don’t mention this in your question but I assume that at some stage either your solicitors or the DPS themselves must have told you about this and maybe the statutory declaration has been made.
As is usual with the free blog clinic questions (which are answered in rotation) it is now several months since you asked your question and maybe by now the money has been repaid.
However it would be interesting to hear from the various schemes as to what they would advise landlords to do in this situation. Particularly as the two other deposit schemes are due to launch their own custodial scheme in a few months time.
Response from the DPS
I am grateful to the DPS for providing this response to the question and answer:
As always, it’s difficult to provide a response to a specific case without knowing the full details, and if the landlord in question would like to get in touch directly, we’d be happy to discuss their case.
98% of the time, landlords and tenants agree over how deposits should be repaid. On the rare occasion this doesn’t happen, we offer a free, impartial Alternative Dispute Resolution (ADR) service. By law ADR can only be used when both landlord and tenant sign up – we cannot force anyone – and both parties must agree in advance that they’ll follow whatever decision is made. However, if either party refuses to take part, the dispute must go through the courts. We’re legally obliged to keep the money safely until the court tells us to release it. However, if the person who will not agree to repayment cannot provide evidence that court proceedings have begun within six months and still refuse to take part in ADR, we will pay the deposit to the other party.
As you are aware we also have a ‘single claim’ process, which can be used where a party is uncontactable or is not engaging with the repayment process. However, this can only be used in those specific circumstances and, if both parties have been in contact, and one has refused to use the ADR service, then this process cannot be used again.”
Worth adding of course that the tenant cannot be liable for the £2,500 that the tradesman took from Alice, there is presumably some criminal matter there (in the form of theft or fraud).
Also that Alice cannot demand a ‘professional clean’, as the tenant is only liable to return the property to the same standard as when it was received (clearly this didn’t happen< but the principle is the same).
Finally solicitors fees are not recoverable either, it's not the tenants fault that Alice lives in Australia and requires a proxy in the UK.
If one of the parties does not consent to the ADR process, the scheme cannot mandate it is used.
Where this happens, the onus is on one of the parties to instigate court proceedings. If the tenant isn’t doing it and the landlord wishes to resolve, the landlord could take the matter to court and obtain a court order that instructs the scheme how the deposit is to be released.
I’m not sure a statutory declaration will resolve the problem as this is used where one of the parties isn’t contactable and this doesn’t seem to be the case in this matter.
Ben Beadle
Director of Customer Relations
Tenancy Deposit Scheme
Alice,
Reading between the lines (and apologies if I’ve done so incorrectly) it seems as if you’ve been trying to manage your property from Australia(?) If so, and I know I would say this, wouldn’t I, but a good letting agent would have saved you all of this grief. They would have insisted on the boyfriend/husband being properly referenced, have undertaken regular inspections, have organised an inventory check in/check out, held your money in escrow for payment to the contractor once the job had been undertaken satisfactorily and so on. And, so far as the deposit is concerned issued a single claim on your behalf well in advance of the timescale you’ve experienced.
I well understand that some landlords hate letting agents and resent paying their fees but a good one will save you and make you more than you’re ever going to pay them. Moreover, letting a specialist manage your risks for the peace of mind you get has got to be the way forward.
Except there is no reason for a tenant’s guest to be referenced. A letting agent cannot insist on this. The tenant is free to have their partner (or partners, or anyone else) stay.
‘The tenant is free to have their partner (or partners, or anyone else) stay’ I agree as in Visit but not as in Reside. It was clear in this case that the partner was intending to live there and the landlord is perfectly entitled to require all prospective residents (whether as formal tenants or permitted occupiers) to be fully referenced.
You can disagree if you wish, your disagreement has no legal standing though. The tenant has sole and exclusive use of the property, if they wish to have anyone ‘reside’ there, they can do.
The LL can ‘require’ whatever he or she wishes, but neither the tenant, nor the new resident needs to oblige.
The LL is of course free to evict using the various grounds (which Tessa is handily posting about currently)
Doesn’t the right to rent scheme mean that the landlord has a legal obligation to check, at least, the immigration status of every person who resides in a property. The new LL agreements specify who can reside in the property.
It will be interesting to know how the other custodial scheme cope with this.
I have asked the other schemes to comment.
I must say, if a landlord takes a deposit but is required to initiate court proceedings in order to use it due to the tenant refusing to co-operate – that is a big disincentive to landlords for using a custodial scheme.
I agree with Alice that it is very unfair. Thankfully few tenants are obstructive in this way, but there is always one …
My daughter was in the opposite position with a deposit company, my daughter left a property and tried to negotiate a deduction from the bond to cover legitimate costs the landlord refused wanting al l the deposit plus more. She asked for ADR and we sent our evidence contradicting the landlords claims to the scheme as required. The scheme sent all this (defence) material to the landlord who then refused ADR saying they were going to Court (now fully aware of our defence before they prepared their Court Claim).
This never happened and 1 year later she asked for the return of the deposit in full. Scheme refused as Court Action was threatened and they would not release the money until a Court decided who to pay the money to.
She persevered and was eventually told that the Scheme rules had been changed to that mentioned above – 6 month limit. She asked for the deposit as 12 months had passed but was told that she would have to wait for another 6 months from the rule change. 6 months later she wrote again and they said no, they were going to write to the landlord reminding them they had to start their Court claim – she objected on the grounds it was not the schemes remit to give the landlord legal advice. Eventually she recovered the money by threatening to take the scheme to the small claims court to recover her money.
Somewhere in the process she was told by the scheme that she would have to take the landlord to Court to get a Court order in her favour before they would release the deposit.
A huge faff and in my opinion the Scheme had not thought the whole process through and anticipated that a landlord (or in this case a tenant) may just make noises but not actually do anything, thus penalising the other party.
Oh, and they refused to pay 18 months (or maybe 2 years) of interest as the scheme did not pay out interest on deposits they held, even when in my daughters opinion they were holding the deposit without good reason, so the delay was financially beneficial to the scheme as well.
There was nothing stopping your daughter taking the Landlord to court. Why would you wait two years to do this?
The scheme was absolutely right, there was a dispute and it required a court to resolve
So it looks as if malicious or maybe feckless landlords / tenants who wish to be obstructive can do so and effectively withhold payment being made to the rightful party, simply by saying that they want the case to be dealt with by court action – and then not taking court action.
Is this correct, tenancy deposit scheme people?
Is there any solution to this issue? It seems very unfair to me.
Will the new custodial schemes from My Deposits and the TDS operate in the same way?
Hi Tessa,
I don’t understand though, either party can initiate court action. If one is being obstructive, then the other party needs simply make clear their intention to go to court and then carry this out.
Lets all stop right there as there is a lot of misunderstanding going on here, probably due to speaking to junior staff who at all schemes have never understood their own rules. There is a specific rule twenty something which was introduced by PS probably 2 years ago now in the Version 21 revision by DPS because they wanted a mechanism for getting rid of long dated deposits that should have gone back many months earlier, but where lack of communication from tenants prevented Landlords making the claim.
It involves waiting 6 months and then the tenants are contacted by DPs if contactable and have to PROVE within one week to DPS satisfaction that the tenant has INSTITUTED Court proceedings I.e. that they have a Court hearing date, NOT that they intend to apply for one.
It is all very simple, if delayed, and DPS encourage its use as they do not want ‘stagnant’ deposits on their hands purely because of uncooperative tenants.
Best bet Tessa is to get someone very senior at DPS to confirm all this.
The tenant CANNOT simply keep delaying by saying they are going to start proceedings, they MUST have instituted them. Common sense otherwise it defeats the whole object of the scheme rule if tenants can just continually fob them off.
Couple of other points – why should the LL have to bear initially at least the Court costs? And the £2.5K the contractor kept was probably because they had bought the materials.
I have asked DPS and My Deposits to comment.
“I must say, if a landlord takes a deposit but is required to initiate court proceedings in order to use it due to the tenant refusing to co-operate – that is a big disincentive to landlords for using a custodial scheme.”
Tenants like the Custodial Scheme Tessa for one very good reason – the money is not held at the whim of a Landlord or agent. Note all companies, relocation companies, local authorities, housing associations almost invariably insist the deposit is in the DPS Custodial scheme.
They want the money securely held by an independent body – and quite understandably too.
What is needed is one very well organised scheme with rules that deal with everything, fast payout systems and a better adjudication system.
What is NOT needed is the now 6 separate schemes
As Alice (and Industry Observer) says the DPS’s T&Cs are clear (at least the current ones are): If a party refuses ADR they have 6 months to start court proceedings or the deposit may handed to the other party.
Clause 25(c):
“… If the party who does not provide its consent for the Dispute to be resolved through the ADR Procedure does not start the required court proceedings within 6 months of responding to the repayment claim or Statutory Declaration Notice, indicating that they do not consent to the ADR Procedure, any disputed amount may be released by The DPS to the other party.”
@Industry Observer: “probably due to speaking to junior staff who at all schemes have never understood their own rules”
Indeed!
Changing the rules to require court Action within 6 months of ADR refusal is good and this occurred a year into my daughters claim but ..
There is still a bias towards landlords, in my opinion. A landlord makes a claim against the deposit, the landlord provides evidence to back up his claim to the tenant. The tenant disagrees and attempts to negotiate. The negotiation fails and the tenant asks for ADR.
For ADP the tenant must provide his evidence to counter the claims of the landlord. The landlord reads this evidence, reckons that as it stands the ADR will find against him because his evidence is weak or well countered and so decides then not to use ADR to resolve the matter.
The landlord then drafts his Court claim with the benefit of already having the tenants defence claims in front of him and so could word the Court claim in such a way as to better his original position.
I think a better process is that the landlord makes the deposit claim, the tenant negotiates, the tenant asks for ADR and provides the counter evidence to the scheme. The scheme assesses it quickly to check it is suitable and then asks the Landlord if he wishes to agree to go to ADR. If the landlord agrees then the ADR starts with normal disclosure rules.
Hi Romain
Thanks for digging out 25c – can you or someone else explain this change of mind on using ADR to me, as I don’t get it.
Once a dispute is referred to a scheme by either party that is stage one and ADR is partly under way. The other party can refuse ADR on being advised by the scheme that a dispute has been referred to them.
But if the ‘defending’ party responds and submits their evidence to counter the dispute then it is adjudicated upon. Where does all this see the other side’s evidence and then decide go to Court come from?
Generally speaking go to Court after refusing free ADR being available and a Judge will usually dismiss and send you back to ADR first.
Go to Court after submitting your evidence to ADR and then changing your mind on sight of the other side’s response I would think would get even shorter shrift from a Judge who would instruct the parties to go back and finish off ADR first.
Nothing to stop either party going to Court after adjudication, though sadly Judges are often (mis)guided by adjudications and rarely overturn them, though the quality and depth of thought behind many I have seen are often poor with far too much weight being placed on one specific aspect of an often complex relationship breakdown..
Note that we have now had a formal response from the DPS which we have added to the body of the main post.