One of the biggest problems that seems to crop up time and time again, is the problem of landlords failing to protect deposits within the 30-day time limit. Or, if they do this, failing to serve the prescribed information.
To their horror, landlords who thought that they had done the right thing by protecting the deposit, find that by protecting it two days late:
- They can’t serve a valid s21 notice without refunding the deposit money and
- Their tenant can go to court and get a penalty award
In many cases, this seems unduly harsh on landlords.
However, there is now another way. It’s a service called Reposit.
How Reposit works
In this new service, the tenant pays a non-refundable payment of one weeks rent to Reposit. As it is non-refundable, this cuts out the tenancy deposit rules as these only apply to deposits – which by definition, must be a payment which is refundable.
- Reposit then guarantee the landlord to cover damage and loss up to six weeks rent worth.
- At the end of the tenancy, the landlord notifies reposit and the tenant of any damage. If this is not challenged by the tenant, the money is paid within 5 days.
- If the damage is challenged, then it goes to adjudication in the normal way.
- If the tenants are found to be in the wrong, they have to pay the adjudication fee of £120 and any money due to Reposit.
- Reposit will pay out the damage to the landlord as appropriate.
- Any money paid to the landlord is then reclaimed back from the tenant by Reposit.
- Any damage in excess of six weeks worth will need to be reclaimed by the landlord from the tenant separately.
It sounds like a good system and apparently they have just received seed investment of £400,000 to develop the business.
Letting agents are being encouraged to promote the scheme by receiving commission – plus it is less hassle than the traditional deposit schemes.
Has anyone used this? How did you get on?
You can find out more about the service from their website here.
Interesting stuff
Alternatively landlords could consider just doing what the law requires of them…..is it too much to ask Tessa?
@Ben,
“Alternatively landlords could consider just doing what the law requires of them…..is it too much to ask Tessa?”
Given 101 bits of paper that have to be filled out, and given to the tenant, along with the deposit protection company regs and the landlord having to be able to PROVE they did so, when the tenant is laying about not getting a letter…. Whatever the judge decides in the end, it can delay the process of removing a tenant by months.
But the system could be change so the landlord ONLY has to hand the deposit over to the protection company, and the protection company send all the paperwork to the tenant, along with updating a single database the lets anyone check witch protection company has the deposit for a given property. (Or even better the tenant pays the money direct to the protection company!)
This depends on when and how the company serves the documents on the tenant. I use recorded delivery and hand deliver and get a signature. Merely posting the documents isn’t proof of service. I am lucky in this respect because all of my properties are in East London. How ill you prove service?
These schemes have been around for some time.
I wouldn’t use them as;
1. I have doubts about the schemes paying out.
2. Tenants need to have some skin in the game.
Social housing providers also offer similar types of schemes to entice private landlords. If you look at the accounts of how much they actually pay out, they lack credibility.
Also it occurs ot me re-reading this, Who does the adjudication? Presumably ‘Reposit’ and under what rules do they conduct it?
A deposit would normally only be 1 month not 6 weeks, which if found wanting the tenant has to repay and an extra £120, having already forked out a week’s non refundable money, so it sounds at first glance (if it is possible to look at sound) that the tenant will be out of pocket with this arrangement
True, but they won’t have to shell out 6 weeks worth of deposit at the start of the tenancy.
It’s much cheaper to take a loan, even one with high APR.
I’ve just had a look at thier launch article and I’m coming around to the idea. OK the tenant loses the 1 week rent up front buut they dont have to find the rest of it unless they default.
Good news for homelessness cases and councils who often front up the deposit
On referring to Reposit’s site it confirms that the position is indeed as follows:
The tenant pays a sum equal to one week’s rent.
If the tenant fails to dispute the landlord’s claim or the landlord is successful at adjudication Reposit pays the landlord the sum claimed or awarded up to the value of six weeks’ rent.
The tenant then owes Reposit the amount it has paid to the landlord.
The above means that the tenant will effectively be paying for at least some of any damage twice. Example:
Tenant pays £150 “fee”
Damage is assessed at £200.
Tenant has to pay Reposit £200 and the adjudication fee of £120
Total paid by tenant for £200 worth of damage = £470
If you take the same figures but the damage is assessed at £20 it is even more out of proportion. The tenant will be liable to pay £290 for £20 worth of damage.
I cannot see tenants being happy with this if it is pointed out to them in this way. I fear though that unscrupulous agents will tell prospective tenants that it is a new law.
I think that five days is a very short period for the tenant to respond. There is also the problem of how notice of a claim is to be served on the tenant.
Reposit say: “Reposit is not classed as insurance as you the tenant remains (sic) liable for all damages caused.” I am no insurance law expert, but don’t insurance companies have a right of subrogation so that the tenant would be liable to repay if it were insurance?
I wonder if this is a well thought out business plan. If Reposit are going to be paying commission it has to be enough to make it worth the agent’s while bothering. Who is going to pay the adjudication fee if it cannot be recovered from the tenant – or for that matter the landlord? How easy is it going to be for Reposit to recover payouts from tenants who have moved on? Is there any small print in the documentation which they hope will cover them? Landlords find it notoriously difficult to recover their losses from standard insurance cover against loss off rent or damage cause by tenants.
Hmm. OK.
I’m not saying by the way that it is necessarily better than the traditional route, just reporting that it is there.
It would be nice to get some feedback from people who have actually used it.
Hi Lawcruncher!
In the event of damages in your example, £200 (if agreed by the tenant that they caused it) would be all that they owe us. We don’t charge any additional fees.
It is only in the case of the tenant ‘disputing’ the damages that the case would proceed to independent arbitration (we use some of the same professional arbiters as MyDeposits.) and our platform can deal with this faster by providing real time evidence submission and adjudication.
In the case that the dispute is won in full by the landlord, we ask the tenant to pay the £120 admin fee. This is to discourage tenants who have damaged something, but want to raise to dispute to see if they can “get away with it” from trying to do so. Thats our ‘skin in the game’ approach but ultimately as 97% of deposits are returned in full with no deductions, we believe most tenants to simply want to rent a property at low cost.
We never charge the landlord and in the case that the disputed amount is split and awarded in portion to both parties, we don’t charge the tenant then either. There are no rollover fees for a tenant staying on in the same property ever and if they do move, they can simply take out a new Reposit on the property.
Depending on the weekly rent, letting agents can earn £25-£75 per Reposit sold against up to £20 cost for registering a deposit with one of the three schemes. Over 500 lets a year, this could be additional income of £37,500 against a cost of £10,000-potentially an almost £50,000 benefit to a mid-sized agent.
I hope that answers some of the points but if you have any queries, please do drop us a line at info@getreposit.uk
Kind regards,
Curran McKay, CEO Reposit
Hmmmm… it says much to me that you state ‘…to see if they (tenants), can get away with it….’ this could equally encourage L/L’s to simply claim unfair damages and due to the charge if lost, the tenant would be put off every time from disputing it. Oooh, not that this would ever happen…right?
The 5 day rule is absolutely unreasonable, and would barely even allow for 1st class posting of any notice.
Far too heavily weighted in favour of one side quite honestly, all in all it sounds pretty bad in so many ways to me…just a way to avoid complying with statute.
Just register the tenants deposit…but I agree with Ian in that the PI should be more simpler….this is easily solved, if done online for example, as the details are filled out by the L/L, the system auto-fills the PI and can be then printed by the L/L to send. It should also be in a ‘prescribed’ format to make it easier.
But nopes….I am very uncomfortable with the very idea of this ‘business’ indeed.
This sounds very much like what is known in relation to tax matters as a ‘device’, that is a means of avoiding/evading the deposit obligations.
Who has put up the £400k investment?
No idea. It is reported on Property Industry Eye here http://www.propertyindustryeye.com/new-start-up-offering-alternative-to-tenancy-deposit-protection-announces-seed-investment/
Why would a tenant pay the equivalent of 1 week of rent, plus further fees if he stays beyond the initial term, plus potentially £144 (the £120 adjudication fee is quoted as £120+VAT) rather than a deposit that he will be getting back?
The reasons I can imagine should raise red flags.
What is the process if there is a dispute? Can it be trusted? Does the landlord still have the option of going to court instead and the judge ordering what is done with the deposit?
Also, by taking a deposit, it give the landlords a lot of control by saying things like “if you leave before I have to paid the court eviction charges I will give you 100% of the deposit back, and forget about the damage to the carpets.”
I see 95% of the benefit of a deposit, is not being able to take money from it, it is making the tenant think that how they leave the property may cost them money, and that even if they win the dispute it will take them many weeks to get that money.
Also if a tenant has no friends or relatives that trust them enough to lend them the money for a deposit, why should a landlord that knows the person a lot less trust them? (And if they have no friends or relatives with money, that tells you a lot about them…..)
Curran
As asked I think by Ben who does the adjudication?
Have seen loads of these schemes and it never ceases to amaze me the energy people put into circumventing obligations and creating contrivances.
As Ben said originally why not just comply? TDP is easy if you get it right
Hi,
We’re not trying to circumnavigate. Simply trying to offer an alternative for tenants. This system works in no other industry. You wouldnt be asked to pay £1,000 up front in case you broke the laptop at your new job, why shouldnt responsible tenants (97% of them) be allowed a new option?
The company we use for arbitration previously did so for one of the schemes for 11 years. Our process is faster and automated.
Hope that answers your queries!
Curran
@ Terry NEVER use any method requiring the tenant to sign for anything as if they don’t then they have not received it – or been served. Heard of a case yesterday on a course I was delivering where the postman simply put a recorded post item through the letterbox, Beware
@Ian – afraid that 100% back if you leave quietly approach is harassment. Hope you have deep pockets
@Curran – so why did this arbitration company leave a Scheme after 11 years (when the Schemes have only needed adjudicaters for 9 years and to the best of my knowledge they are individuals, not companies that they use
Harassment – I fail to see how attempting to negotiate a settlement where tenants get a better deal if they leave early can be harassement.
The CAB defines harassement as ‘when someone behaves in a way which makes you feel distressed, humiliated or threatened’. This is not the same as agreeing to waive damage and giving them the whole deposit!
I may do a post on it later so it can be argued out.
Even if we accept the CAB definition it is entirely subjective. I have found that, especially in view of just how quickly arrears can accrue, that negotiation is very often the cheapest option for the client and that faced with a cash offer tenants, being in the position they are because of a shortage of cash, usually accept an offer and move out. Make sure your paperwork is in order in case of complaints later.
I get the tenants to sign in my presence. I then include that document in a statement that I make which I then swear before a solicitor, I save up a few and do them in bunches. This then becomes a document of the court. There is case law that I will dig out that the proof of delivery is also sufficient but I always do what I have described above. It can also be useful to let the tenant make whatever statements they want to about not receiving this or that and then produce their signatures. Also get evidence that their signature is the correct one, driving licence, passport, as I have had people deny that the signature on the receipt of documents wasn’t theirs. That also serves to undermine their credibility, courts don’t like being lied to.
Definitely dodgy Tessa. “If you do this then I won’t do that” sounds like coercion to me. Use that word instead of harassment if you like, but it sounds like a threat rather than an offer. Semantics possibly, but Ian would be well advised only ever to do this verbally, not in writing. I’d wager money CAB would see this as leading to distress
@ Terry
Best bet on signature denial is to have all agreements witnessed even if they don’t need to be.
@ Ian and Tessa
On this negotiating and harassment just briefly I have remembered why I urge caution. It relates to an incident 20 years ago so took some remembering but the company I then worked for had an arrears letter, the last the tenants got before action, advising them that was the next step, if they did not vacate then the action would follow, it was a mandatory action so they were bound to lose (long as we were legally correct which in 25 years my clients always have been) and they would get costs and if they didn’t pay them a money order for them which would then turn into a CCJ.
We also advised them out of kindness that if they ended up with a CCJ then that would impact on their future ability to raise credit, rent again in the PRS etc.
In return I got a letter from Hastings Borough Council quoting all sorts to me including harassment under the 1977 Act (there have been several more and tougher ones since).
Have seen similar responses from CA and La my advice is be careful and negotiate verbally.